Beyond "Check-the-Box" Mobile Banking and Payments

By Calvin Grimes, Fiserv

Bank and credit union executives recently cited "the competition is doing it" as one of the top two reasons why their institutions were investing in the mobile channel. This unscientific poll of attendees at two webinar events reveals a potentially troubling tendency toward "check-the-box" decision making when it comes to mobile banking.In the current economic downturn, it is more important than ever to adopt an enterprisewide mobile financial services strategy that will deliver a significant return on investment starting with year one, reduce channel costs and enhance the banking experience of your customers.

Yet, in recent years, many financial institutions have focused on simply enabling basic transactions through cell phones and other mobile devices. This same ad hoc approach prevailed in the 1990s as many financial institutions scrambled to cobble together online banking and bill pay functionality from different vendors-often with little thought to integration, user experience, flexibility, features and scalability.

Those institutions that had the foresight to take a more strategic approach to the emerging online channel were generously rewarded for their strategic vision with significantly higher online adoption rates, improved customer acquisition, retention and profitability.

Fortunately, we're beginning to see some institutions take a more holistic, enterprisewide approach toward mobile banking and payments. Executives at these institutions recognize that mobile isn't just another banking channel to support-it's potentially a game changer that can help integrate banking channels and reduce the cost to service while improving efficiency and customer satisfaction.

Like online banking, mobile banking is a "sticky" service that can increase customer loyalty and profitability. Although like any channel, mobile banking introduces some operational costs, it is by far the lowest-cost bank channel on a per-transaction basis, averaging about 8 cents per transaction versus $4 for the branch and $3.75 for the call center.

Clearly, institutions can reduce costs by converting offline customers to the less expensive mobile channel. By providing customers with the ability to enroll in mobile banking through the channel of their choice-mobile, the branch or contact center-rather than requiring all enrollments via the online channel, financial institutions can effectively channel customers from offline to the lower-cost-to-serve mobile channel. At the same time, they can tap into a new targeted customer segment and maximize their return on investment. For example, one bank used the branch and contact center to convert more than 40 percent of its customers into mobile banking, converting nearly a third of inbound interactions to the mobile channel.

This enterprisewide strategy will allow financial institutions to start small by implementing a single access mode such as SMS (text) alerts and extend into browser-based or downloadable applications. An enterprisewide solution should enable you to take advantage of new capabilities, support new channels or lines of business and adapt to evolutionary changes in devices. Built on an integrated platform, an enterprise mobile financial services solution lowers the total cost of ownership and interfaces with core banking, online banking, and electronic billing and payment systems. The solution should provide the institution with a holistic view of customer needs through consolidated customer care and comprehensive reporting across the online and mobile channels, incident diagnosis, security monitoring and customer support.

Most importantly, an enterprise mobile banking solution should provide all the basic banking transaction capabilities you expect but should scale to meet your customers' expanding expectations. The solution should have proven built-in mobile payments capabilities and offer the ability to take advantage of new capabilities in support of peer-to-peer payments, contactless payments, downloadable applications, expedited payments and channel marketing programs, among others.

While still in the early adoption phases, mobile banking is gaining strong momentum. A recent Gartner survey showed that among the largest U.S. financial institutions, 59 percent indicated they would likely purchase or replace their mobile banking application within 24 months.

Even smaller institutions are jumping on the bandwagon. Mobile banking was recently cited as the top technology priority in a survey of community bank executives. More of these smaller institutions are turning their intentions into reality. The number of U.S. banks that offer mobile banking is expected to grow to 614 this year from just 245 in the previous year, according to Aite Group.

Mobile banking is approaching a tipping point as consumers increasingly regard their cell phones as multifunction mobile communication and computing devices. Given that the vast majority of the U.S. households own at least one mobile device, if not two or three or four, it stands to reason that the adoption cycle for mobile banking will be shorter and faster than it was for online banking.

Banks that fail to take into account enterprise considerations such as risk management, customer care, diagnostics and enrollment tools will likely end up with expensive integration challenges and technology renewal projects within 24 months of launching their first mobile banking services. In these turbulent economic times, financial institutions can ill afford such project detours and wasted capital.

However, by embracing an enterprisewide, multichannel banking strategy, financial institutions will be well positioned to drive increased customer acquisition, adoption and retention across all banking channels and customer segments.

Calvin Grimes is the mobile banking and payment product manager for Fiserv.