Mobile users represent an attractive customer segment
When comparing those businesses that use mobile banking with those that don't, it is clear that current and future mobile users represent an attractive segment for financial institutions. They offer more potential for cross-selling than those not interested in mobile banking, and they tend to represent banks' more profitable customers.
About 47% of small businesses not likely to use mobile banking do not spend any money on banking products and services each month, compared with only 16% of those already using it and 19% of those likely to do so. Further, 45% of small-business mobile banking users spend more than $50 each month on banking products or services, making them an attractive segment.
Given the importance of mobile banking in the bank selection process, institutions not offering it risk having a less profitable customer base.
Number of accounts
In addition to spending more money with their banks, mobile banking users tend to have more accounts than those eschewing mobile. Those already using mobile banking are far more prone to have more than one account with their primary institution than those not interested in mobile banking (77% versus 46%). The early adopters of mobile banking (those already using it) are also the most likely to have at least four accounts.
Online banking savvy and adoption
Perhaps the greatest difference between businesses already using mobile banking and those not likely to use it is in their adoption of sophisticated online banking capabilities. Mobile banking users are high adopters of bank technology, especially within the online channel. They are significantly more likely to have adopted products like online bill payment (75% adoption), positive pay (46%), electronic invoicing (45%), ACH (42%), and foreign exchange (32%) than those not likely to use mobile banking. This means not only deeper relationships with customers but also a higher potential to generate fee-based revenue.
Since mobile banking users represent a profitable group for financial institutions today, they also show more promise for future revenue streams through their growth objectives, interest in future products, and willingness to recommend their bank to peers than those not interested in the channel. In fact, 51% of US businesses participating in the survey are working toward moderate growth over the next two years, and some are looking to grow aggressively. Businesses already using mobile or likely to do so are almost twice as likely to have aggressive growth plans (16%) than those not interested in mobile banking (9%).
This aggressive growth will likely lead to increased demand for more sophisticated products and services and thus additional fee-based revenue for their primary financial institutions.
Small businesses represent an untapped market for financial institutions and have become a key area of focus. Unfortunately, the attractiveness of the segment has led to not only increased competition for their business across banks, but also the emergence of several nonbank providers. These new competitors are filling gaps in bank product portfolios, thus placing banks at risk of disintermediation.
It is therefore more important than ever before for banks to understand the needs of small businesses and make the investments to address them. Mobile banking is just one required tool in a bank's arsenal, but it represents a key tool not only for retaining customers but also for attracting new ones. Now is the time to begin thinking about offering small-business mobile banking if your institution hasn't already done so.
Christine Barry serves as research director for Aite Group's Wholesale Banking practice, focusing on the strategies and technology implementations of global banks of all sizes. Her recent research has addressed global cash management trends and technologies, capturing the ... View Full Bio