Embracing a Mobile Mentality
Innovation in mobile banking can be big and bold, transforming customer activities into completely novel experiences. Or its scope can be narrow, aimed simply at automating tedious manual tasks. Either way, the effect is powerful. “Mobile features are definitely disrupting our user base and the industry,” says Jim Simpson, senior vice president and chief information officer at City Bank of Texas, a $2-billion asset bank based in Lubbock, Texas.
Under the category of big and bold is a mobile payment service currently in pilot at Minneapolis-based U.S. Bank, a unit of $371-billion asset U.S. Bancorp. Designed to eliminate even the smallest barriers to online shopping, the new service, called Peri, alters how consumers interact with print, radio and TV ads. Through QR codes as well as digital and audio watermarking, which embeds digital information into audio, digital and printed materials, consumers can simply point and click their phones at ads, leading them directly to a mobile web page where they can purchase the product. Customer and credit card information is preloaded, so customers don’t even have to enter their data. The time from when a consumer sees an ad for a product and then purchases it is practically nil.
U.S. Bank plans to roll out Peri this fall as a white-labeled product with one or more partners, and expects fashion retailers to be particularly interested. A product of the bank’s merchant processing unit, Peri will likely be embedded into other consumer shopping apps, say for purchasing fashion, with the goal of winning over new merchant customers and boosting processing volumes. Though the U.S. Bank name will not appear front and center with customers, the Peri app definitely pushes the bank into aspects of payments that go well beyond the usual back-end processing. “It’s a broader way of thinking about things,” says Dominic Venturo, chief innovation payment officer for payment services at U.S. Bank. “It’s different from where payment companies and banks have been involved before.”
Venturing into new areas and redefining the role of the bank is different from the approach taken by City Bank of Texas, where the more modest goal is to move simple, everyday processes onto mobile devices. “We’re not going to solve the payments equation,” Simpson says. “In the short term, we’re focused on everyday features.”
City Bank’s straightforward goal has not prevented it from introducing several leading-edge mobile applications. Simpson says City Bank was the first to let customers deactivate their debit cards via mobile. For customers who fear their card may be lost or somehow compromised, the turn-off feature offers immediate peace of mind. Once the card has been located or replaced, it can be turned back on again. “We’ve had a ton of success with that,” Simpson says. Similarly, users who are traveling can block or enable foreign card transactions. Another new City Bank service is the ability to re-order checks via mobile, rather than have to go to a branch or online.
Perhaps the biggest feather in City Bank’s cap is its early entry into mobile photo bill pay. Similar to the increasingly popular mobile check deposit, mobile bill pay lets users snap a picture of a bill to initiate payment. The data captured on the picture serves to set up the payee, eliminating the slow, frustrating process of typing in a name, address, account number and other information on a mobile phone. “There’s no manual set-up,” Simpson says. “That’s the magic of it.”
Easy set-up has a lubricating effect on bill pay usage. Ralph E. Marcuccilli, president of Fort Wayne, Indiana-based Allied Payment Network, which offers a mobile photo bill pay solution known as Picture Pay to 25 institutions so far, notes that users are more apt to pay one-off bills like doctor and dentist visits if they can simply take a picture of the bill, rather than do a manual set-up.
The hassle of incorporating bills, especially irregular ones, into online bill-paying routines has caused online bill payment usage to stagnate. Despite its long history, online and mobile bill payments executed through financial institutions account for only about 25 percent of all payments, according to Marcuccilli. He expects that number will expand to 40 percent within five years, as people warm to the idea of using photos to facilitate bill payments, and also come to appreciate the value of having all their bills stored and executed at a bank-owned site.
City Bank of Texas, which uses Allied Payment Network’s Picture Pay, has seen “tremendous growth” in the service after one year, Simpson says. Many customers are “just abandoning” the traditional online bill payment service for the mobile one—at a nearly double-digit percentage rate month over month, he says. New customers are also flocking. “We’ve documented case after case of customers who have come to us based on the mobile app,” he says, without revealing numbers. “We feel it’s an extreme competitive advantage.”
Mobile banking at City Bank has advanced so far, it has outpaced what the bank can offer through its traditional online services. As a result, the bank recently signed an agreement to use the extensive online banking system of Austin, Texas-based Q2 Holdings Inc., a provider of virtual banking solutions, which will allow it to deliver its new mobile-based services, like the on-off debit card switch, through the online channel, something its previous online banking provider was not able to fulfill.
U.S. Bank is similarly devoted to mobile. It is so taken by the power of mobile imaging to improve the customer experience that it has introduced a family of mobile-photo based services under the umbrella, Photo Banking. Photo bill pay, introduced in March 2013, is one of three related services available so far, along with photo check deposit and photo balance transfer. The photo-based services are part of a larger effort to inject more sizzle into banking. “We need to build amazing customer experiences,” says Niti Badarinath, senior vice president and head of mobile banking and payments. “So why not use imaging as a really powerful way for customers to get information into accounts?”
Improving the customer experience has led to hard and soft benefits, including more engaged customers and higher retention rates, Badarinath says. Clearly, the service has caught customers’ attention; transaction volumes for photo bill pay are expanding at a rate of 300 percent annually, although from a small base. In addition to strengthening current relationships, photo bill pay has unexpectedly come to serve as a switch kit for new customers, as they discover how easy it is to enter all their biller information. Even without a kit, mobile in and of itself is a good enough reason for many customers to switch banks, making U.S. Bank determined to stay ahead of the curve. “The better we get at cool innovations, the more we think we’ll be the bank of choice,” Badarinath says.
Topping U.S. Bank’s agenda for 2014 is photo account opening. As it has with all its photo banking efforts, U.S. Bank will work with San Diego, California-based Mitek, which provides mobile imaging to banks, to allow customers to open bank accounts using photos of driver’s licenses or other documents that are stored in their phones. In addition to imaging, the new app will likely take advantage of other features specific to mobile devices and tablets, such as the ability to touch, swipe and incorporate voice.
With more than 2,200 financial institutions already using its mobile check deposit application, Mitek is continuing to push the boundaries of mobile imaging. Its mobile account-opening app became available at the end of April, and while it has yet to be rolled out at any institution, interest is high, according to Mike Strange, Mitek’s chief technology officer. Early adopters are most interested in using the app to bring the feel of an Apple store into their branches. Instead of sitting at desks and typing in codes, roving greeters could swipe screens and snap pictures, opening accounts immediately. And by using mobile check deposit, accounts could be funded right away.
A streamlined method of account opening fits in with the industry’s push toward reduced branch footprints. Banks could even take the show on the road, pushing account openings out to community events, like baseball or football games. Wherever it occurs, the high-tech account-opening process sets the tone for the rest of the relationship. “Customers are thinking mobile first,” Strange says. “Banks need to have a process that mimics what customers are looking for.”
Infusing a bank with a mobile-first mentality requires a much larger commitment than simply rolling out a few applications. Support from the very top of the management structure is vital. U.S. Bank, for example, has benefitted from the creation of a 13-person group, headed by chief innovator Venturo, that is devoted to long-term, research-driven product development. “We need permission to be able to try new things,” Venturo says. “Without the right environment, it would be really hard to get anything done.”