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Mobile Banking: Weighing the Lessons Learned
Lance Drummond is the global consumer and small business banking e-commerce/ATM executive at Charlotte, N.C.-based Bank of America. Drummond manages the consumer online bank, which has more than 22 million subscribers and 11 million bill payers. He is responsible for growing online customer relationships, generating online sales and providing more-efficient processes that leverage the Internet. He also is responsible for delivering capabilities across the bank-owned network of more than 17,000 ATMs. Previously, Drummond was the service and fulfillment operations executive for Bank of America's global technology and operations.
Figure 1. Most wireless devices on the market are different from one another, and new technologies are being introduced faster than efforts to standardize.
For customers, mobile banking offers improved and convenient access to their account balances and transactions. For banks, it offers a way to strengthen existing customer relationships and expand into more-profitable areas, such as payment and trading revenue. For others in remote locations with bad roads and/or inaccessible landlines, it substitutes for travel to the local branch, access to personal accounts and the marketplace, and an easier way of doing business overall. For these reasons and others, TowerGroup reports in the same study, "By year-end 2008, 100 percent of the top 10 banks in the United States will launch a mobile banking platform."
An Embraced Technology
At Bank of America, we began investigating the viability of mobile banking as early as 2005. Based on a favorable evaluation, we decided to move forward with the development and launched our first mobile banking platform nationally in May 2007.
To better manage costs and include as many customers as possible, we opted to develop an in-house mobile browser as our technology solution. The choice turned out to be a good one. Within the first six months, we had secured more than 500,000 active users, and that number has since increased to more than 1 million users as of early July 2008.
Nationwide, mobile banking is being widely adopted across the Bank of America footprint. Metro locales that skew toward high mobile phone usage rank among the fastest adopters of Bank of America's mobile banking service (see table). Almost all of our mobile banking customers use the service to view account balances, eight in 10 review transactions, while four in 10 use their handhelds to transfer funds or pay bills. Two-thirds of our mobile bankers are under 35 years old, and four out of five are under 45 years old, as Gen Y and Gen X consumers who have embraced mobile Web technology are similarly driving mobile banking usage. Frequency of use by our active users continues to increase monthly, with more than 4 million account sessions in May 2008 alone.
In hindsight, it's not overly surprising that mobile banking was so quickly embraced. Certainly, with all the wireless users in the United States, the potential market was there -- we just had to figure out how to tap it. Customers enjoy the freedom of using their wireless devices anytime and anywhere, and they seem genuinely pleased to experience 24/7 accessibility to their account balances and transactions. Moreover, it offers a great alternative to those customers who reside in remote areas, where a mobile platform offers a better alternative than a fixed line.
At the same time, our institution has also benefited from the mobile banking channel. We have found that it has helped deepen our customer relationships due to the added value our service provides. We strongly believe this level of service will be hard to duplicate elsewhere and will be a key differentiator in helping us retain customers going forward. As we further develop our mobile banking channel, we also anticipate leveraging it for greater product opportunities.
Not Without Peril
Our initial successes did not come without difficulty. We spent a great deal of time wrestling with a number of technological, cultural and marketing-related issues. To illustrate this point, here are some of the key lessons we learned and the challenges we have yet to face going forward:
Information Security. Perhaps the biggest challenge in mobile banking is protecting a customer's financial information over the air and on handheld devices. For example, a secure mobile banking infrastructure requires (1) security for the handheld device, (2) security for the application running on the device, (3) authentication of the device with the service provider before initiating a transaction, (4) ID/password authentication of the customer, (5) encryption of the data being transmitted over the air, and (6) encryption of the data that will be stored in the device for later review by the customer. Clearly, it is a complex process. At Bank of America, we use a number of security technologies (key among them, SiteKey) to provide security via the mobile channel, so that accessing online banking via one's home computer, work computer or mobile phone is consistent -- and just as secure.
SiteKey uses a two-step process that clearly identifies both the customer and the bank when accessing online banking. First, the bank uniquely identifies the customer's device (in this case, a mobile phone) or, if using an unrecognized device, prompts the customer to go through additional security steps (such as security questions). Once the bank has established the customer's identity, it will present an image and phrase (previously selected by the customer) to identify the bank to that customer. The point is to help reassure customers that access to their accounts will be secure and well protected, and that their personal information will remain private and confidential.
Device Fragmentation. Another major challenge is connecting to multiple devices. Most wireless devices on the market are different from one another, and new technologies are being introduced faster than efforts to standardize (see Figure 1). To address this issue, developers worldwide have joined forces to build a community around a shared repository of device capability information, called WURFL (the Wireless Universal Resource File).
WURFL is a configuration file that contains information about the capabilities and the features of all wireless devices. By using WURFL, we can develop content pages using abstractions of page elements which, at run time, are converted to the appropriate, specific markup types for each device (see Figure 2). In short, WURFL helps us identify the capabilities of each device so we can serve different content to different devices dynamically. However, WURFL is not a stand-alone solution. It is still critical to work closely with the wireless operators to address a wide range of technology and security challenges.
Scalability and Reliability. A third challenge we found is creating a platform that balances reach and richness. While some technologies (such as SMS) offer extensive reach, they have other limitations. Other technologies offer a richer experience for customers, but limit the number of customers who can actually use it. Finally, any technology introduced has to be up and running in a true 24/7 fashion, effectively managed and maintained, and able to support potential growth in the years ahead. As more and more customers begin to rely on mobile banking, their expectations should increase proportionally. Banks unable to meet these performance and reliability expectations may lose customer confidence and, in turn, negatively impact customer retention.
Latency and Network Interruptions. One particularly interesting challenge we faced was addressing the issues around connectivity. Mobile Web connections are usually slower than broadband connections -- by as much as 10 seconds -- even after reducing some of the clutter normally found on Web pages. Fortunately, we found that customers were good about accepting a 10-second refresh interval. We were also initially concerned about addressing the potential loss of connectivity in the middle of a transaction. For example, is the information simply lost, or should it be cached locally and then uploaded when the network becomes available? However, this concern became a non-issue over time because we found that customers were not experiencing dropped connections.
Staff Training. Any newly introduced technology is bound to cause some confusion for customers, so it is critical to have well-trained customer service associates on hand who can help smooth out the process. At Bank of America, we trained our associates in all areas of mobile banking and actively encouraged them to use the technology so they could fully understand the concerns of our customers. Through this hands-on, personal experience, we were able to more effectively address customer queries.
Customer Marketing. Our mobile banking marketing activities were sparse in the early stages of the rollout -- primarily to work out the bugs in the technology, reduce the number of potential questions they would raise and minimize any negative impact on customers. We first conducted a series of internal pilots to test the new channel and then, in March 2007, rolled out a pilot to a limited number of bank customers. After making some adjustments, we did our full launch two months later. Only after all the major bugs had been worked out did we aggressively start targeting customers via traditional marketing methods, such as advertising in branches and cross-selling through the Web, online banking and mobile operators.
Cost of Investment. Another key concern while developing a mobile banking solution is keeping costs down. With more than 25 million online customers at Bank of America, integrating a third-party solution was simply not a realistic option for us. Instead, we relied on our internal technical team to build, deploy and maintain our mobile banking platform. While we personally found this method to be a cost-effective alternative, it may not offer the best solution for smaller institutions with a limited amount of internal resources.
Future Opportunities: Over the long term, we see a wide range of opportunities that have yet to be pursued. The first is how best to upgrade mobile banking applications going forward. Due to the nature of the connectivity between customers and the bank, it would be unrealistic to expect customers to visit a branch or connect to the Web to upgrade their mobile banking application. Rather, it would be more practical for the mobile application itself to download any necessary patches in a way that is transparent to the customer. However, there are many technical issues that will have to be explored surrounding this approach, such as determining when to distribute upgrades, synchronizing dependent components and more.
Another expected hurdle is exploring ways to personalize the mobile banking application. As customers begin to trust and use the application more robustly, it is likely that they will expect it to eventually support a number of personalized features, such as a preferred language, date/time formats, different currencies, default transactions, alerts and more. Accordingly, we will need to consider how to customize the application to meet the specific needs of our customers.
A final challenge will be to develop new ways to fully leverage the benefits of the mobile banking technology itself. Ideally, the technology should represent the ability for customers to interact with their bank in real time, including receiving immediate account updates, conducting transactions or making last-minute payments. In short, the technology should allow customers to do things they cannot currently do online and it will need to be advanced in that direction going forward.
Lessons Learned
The introduction of mobile banking at Bank of America has been both exciting and rewarding. It was not an easy road to travel -- we faced a host of challenges as we navigated through virtually uncharted territory. In just two short years, we had to develop an understanding of the mobile banking market, carefully weigh the risks and rewards, build a successful mobile banking platform and support it going forward. Most importantly, we had to do all of this without eroding our core customer base.
We also had to make sure that our substantial investment of time, energy and resources in mobile banking would eventually pay off. While it is too early in the process for us to measure the full value of our platform, we have already witnessed its wide acceptance by our customers, and that should serve as a stepping-stone for us to realize even greater value in the future. However, until mobile banking transforms into customers authorizing mobile payments and interchange via their wireless devices, we might not see significant revenues being generated.
In the meantime, we are slowly and carefully rolling out mobile banking so that both our customers and our institution grow comfortable with its use. Are we on the right path? We like to think so and, judging by the growth in our user base, our customers seem to agree with this assessment.
Lance Drummond is the global consumer and small business banking e-commerce/ATM executive at Charlotte, N.C.-based Bank of America. Drummond manages the consumer online bank, which has more than 22 million subscribers and 11 million bill payers. He is responsible for growing online customer relationships, generating online sales and providing more-efficient processes that leverage the Internet. He also is responsible for delivering capabilities across the bank-owned network of more than 17,000 ATMs. Previously, Drummond was the service and fulfillment operations executive for Bank of America's global technology and operations.
Fastest Metro-Locale Adopters of Bank of America Mobile Banking Service
1. Los Angeles
2. Atlanta
3. Washington, D.C.
4. Dallas
5. New York
6. Houston
7. Phoenix
8. Boston
9. Miami
10. Anaheim
Source: Bank of America, 2008