Seizing the Mobile Banking Opportunity

To harness its full potential, banks must look at mobile banking as a channel in and of itself rather than as an extension of online banking, according to InfoSys's Kiran Kalmadi and Raghavendra Shenoy.

Feature-rich smartphones, high-speed 4G networks, the availability of downloadable apps and an increasingly mobile workforce have driven a huge uptick in information-based mobile banking services, such as transaction alerts and balance checks. In fact, mobile banking recently has begun to displace online banking for such information-based services.

Mobile banking is different from other channels and channel extensions in that it is accessible 24/7 via a personal gadget. This utility offers customers the ability to conduct transactions at their own convenience, irrespective of location and time. Customers can easily review bills, for example, and make payments directly via the mobile channel. (This stands in contrast to the Internet banking channel, wherein a customer has to login to his or her personal computer.) Conversely, this means banks can communicate with the customer at any time and leverage this connection for new forms of targeted marketing and fraud prevention. But to harness mobile for its full potential, banks must look at mobile banking as a channel in and of itself rather than as a "channel extension" of online banking.

1. Leverage the Ubiquitous Nature of Mobile

A key utility of the mobile channel is the ability to view information in real time, at any time. Banks can use text alerts or email notifications to create targeted advertising, deepen customer relationships and open up cross-selling opportunities. And by linking business processes across core banking, payments and cards, and wealth management units with analytics, banks can derive insights into customer behavior and provide customized offerings, which can help achieve stickiness via the mobile channel. Banks can leverage the mobile channel to inform customers about a fixed deposit contract that is about to expire, provide the most relevant offers to customers by tracking their shopping locations, and educate them about a high-yield product when their balance crosses a particular threshold.

And since customers carry their phones everywhere these days, the mobile channel also can help reduce fraud, as consumers can be quickly alerted about suspicious transactions and inform their banks if any transaction is unauthorized. Banks even can track ATM and phone locations to reduce ATM fraud and card skimming.

2. Consider Partnering to Add Value

To exploit the ubiquitous nature of the channel fully, however, banks should consider using a third-party approach toward their mobile channel strategy. This involves collaboration with payment gateways, cellular service providers, utility companies and other financial services providers to create an ecosystem that offers transaction-based services, such as person-to-person payments, utility payments, real-time stock quotes, securities transactions, insurance quotes, loyalty programs and more. Once these services achieve reasonable adoption among customers and ensure stickiness, banks can look at monetizing the mobile channel and achieving a higher degree of engagement by offering premium services such as a personal finance manager (PFM) and money transfers to foreign countries.

Adopting this collaborative, service-based approach to the mobile channel would help banks focus on product conceptualization and innovation and client stickiness, while reducing the time to market for deploying offerings via the mobile channel. As opposed to a bank-focused model, in which banks have to focus on a number of non-core activities while striving to stay ahead of other entities offering similar products, an ecosystem-based model fosters partnership and accountability, resulting in more promising monetization opportunities for banks and other stakeholders and a more feature-rich experience for customers.

3. Think Outside the App

Despite the popularity of downloadable mobile applications, banks that offer mobile banking only through apps are less likely to see huge adoption of services than banks that offer mobile banking services via apps, mobile web browsers and text alerts. In essence, banks need to focus on delivering information and enabling transactional capability the way the customer wants it, without any restriction on the mode of access.

Access-enablement through multiple modes is a must have because consumers prefer different modes for specific types of transactions. For example, most transaction-based services are best executed by logging into the app, while information-based services such as balance inquiries are best executed via text. Banks also need to understand customer requirements and overall market trends to make informed decisions on supporting a variety of mobile operating systems and access platforms available in the market, which will require banks to factor in new features that could be offered on mobile devices.

The mobile device will be at the center of how customers manage their financial relationships going forward. To avoid being excluded from these relationships, banks need to create a preference for mobile banking among customers by delivering more value and a superior user experience than is available through other channels.

Kiran Kalmadi is a lead consultant with the financial services and insurance group at Infosys and leads the FSI Research Center. He has worked extensively in the retail banking and payments domain. Raghavendra Shenoy is a senior associate consultant with the financial services and insurance group at Infosys. Shenoy's key areas of interest include customer experience and analytics.