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How Banks Can Compete In the Mobile Shopping Market

By combining targeted coupon offers based on transactional data with a layered shopping experience that includes social media and gaming, banks can win big with mobile shopping apps, and position themselves for mobile wallet adoption.

Banks are in a uniquely well-suited position to attract mobile shoppers, which will be the first step towards gaining customer engagement with mobile wallets, says Teresa Epperson, a managing director at AlixPartners, a consulting firm. Customers are already using mobile shopping apps and banks have a wealth of transaction data to understand the purchase behavior of their customers. This will help banks offer their customers a personalized mobile shopping experience, Epperson says.

“Consumers are now comfortable with their bank mining their data. They know it’s happening, so why can’t they get something out of it? It’s a tremendous opportunity for shopping offers based on transactional data,” she explains.

[See Related: Mobile Shopping Purchases Reach $20 Billion in 2012, Report Says]

Some banks are already trying to attract mobile shopping customers with coupon offers, like Bank of America with BankAmeriDeals. And research released by AlixPartners this past December shows that customers - particularly young customers - are already highly engaged with mobile shopping apps. The research found that 60% of those aged 18-25 said they used mobile shopping apps that provide discounts or coupons to specific retailers. Even 50% of slightly older customers between the ages of 35-44 were found to be using such apps.

The research also points the way to designing a mobile shopping experience that truly interests customers, Epperson says. AlixPartners found that customer usage dropped off when asked about coupon aggregators like Groupon and Living Social. Only 38% of those between the ages of 18-25 said they used coupon aggregators, with similar drops across other age groups. The offers from these aggregators just aren’t as relevant, Epperson explains. But banks have the existing customer relationship and transactional data that can allow them to make more relevant offers to their customers, which will result in higher redemption rates, Epperson says. Customers want coupon and discount offers, the research shows, as only 27% of mobile shopping app users said that being offered a discount on an item they want would have no impact on their decision about where to buy that item.

Starting with the ability to offer those targeted discounts, banks can then look to add a more detailed and engaging customer experience to their mobile shopping offers, Epperson adds. She identifies three areas that any mobile shopping app should take into account: the value of the coupon offer, a social sharing aspect and an entertainment or gaming element. When AlixPartners asked mobile shopping customers how important each of these elements is to them, 19% responded that all three are very important, while 33% said that all three carry at least some significance. “Success in mobile shopping offers depends on all three areas. “You can’t just go all out on the discount value proposition,” Epperson advises.

Banks can add a social element to the mobile shopping experience by simply allowing customers to share coupons with others through their social media networks, she says. And that social element feeds into a gaming aspect since it provides a level of competition, like when a customer want to become the mayor of a specific store or retailer on Foursquare, she adds. If the customer succeeds in becoming mayor they could be offered a special discount for their loyalty through the shopping app.

All of this pre-purchase activity in shopping, sharing and gaming that the mobile shopping app can offer is really a precursor to the coming adoption of mobile wallets, Epperson says. Banks that can offer this kind of shopping experience will be well-placed to participate in the mobile wallet world. “This pre-shopping activity really captures customers. This changes the purchase experience for customers. Then when mobile wallets come around they will be able to store receipts and understand the transaction data. The mobile wallet will become my personal shopping helper,” Epperson predicts.

Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio

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