Managing Mobile’s Momentum

Mobile banking can be a vexing topic for boards. It’s tough to keep up with the pace of the space’s evolution and pretty much impossible to find a direct return on investment in the channel. Many don’t know what to measure to ensure they’re on the right track. Even those who think they know can feel perplexed by next-generation innovations involving “chatbots” and “geofencing.”

Yet there’s no ignoring the momentum. In total, more than 62 percent of Americans now use a mobile banking app, according to Bank of America Corp.’s 2017 mobility report, with 83 percent of those customers accessing their apps at least once a week.

At Wells Fargo & Co., the number of customers active on mobile recently surpassed those active on its website. “It speaks to the revolution that mobile devices are driving,” says Ben Soccorsy, head of the San Francisco-based bank’s digital products team.

It’s not just big banks seeing a surge. Twenty-six percent of the median midsized institution’s customers are actively banking on their handheld devices-up from 16 percent in 2015 and just 6 percent two years before that, says Tim Daley, a director and channel specialist with Cornerstone Advisors, a Scottsdale, Arizona-based consulting firm.
With many customers, “if you don’t exist on mobile, you don’t exist,” Daley says. “If you’re not leaning into a mobile-first strategy, you’re an acquisition target, plain and simple.” What’s a smart board to do?

As with everything else, it’s mostly about staying abreast of developments, benchmarking against the competition and asking a lot of questions. It’s best to keep an open mind, because some of the traditional metrics used to track success in other areas might not work.

The Impossibility of ROI
“The best way for a board to ensure that their institution is irrelevant in mobile is to insist that you get some sort of revenues or immediate cost reductions from it,” says Jim Van Dyke, owner of Futurion, a consulting firm.

It might sound like heresy (and certainly there are limits), but holding mobile managers to the same profitability standards as business-line managers is a recipe for failure. Banks that try to charge fees for things like mobile check deposit, for example, often find themselves deluged with angry emails and Twitter posts.

“You can’t show a direct ROI,” Van Dyke says, “but you know it’s there because it’s now considered a given among millennials and high-net-worth older customers, and they will leave you” if it’s not offered.

How Do You Know if Your Bank is Competitive?
Smart boards benchmark their offerings against other banks. Is the bank’s tally of active mobile users keeping pace with the industry and local competitors (especially big banks)? Is the functionality competitive?

They have management conduct focus-group research and solicit feedback from customers. Some hire outside consultants to examine Net Promoter scores, which were developed by consulting firm Bain & Co. and others, to gauge customers’ willingness to recommend the bank’s offerings.

Directors shouldn’t be afraid to get their hands dirty by using the app and testing its limits. Reading reviews on the app store can provide valuable insights. A frequent target of criticism, for example, is the ability to use a phone’s camera tools to facilitate mobile deposit-taking and bill-pay.

“The things that are most important to our customers focus on using the features of the phone-touch ID, the camera, even GPS-to simplify arduous tasks,” says Brent Tischler, executive vice president of retail banking for $35 billion asset Associated Banc-Corp in Green Bay, Wisconsin. “People want it to be easy and intuitive.”

The case for having a good mobile app is no different from the argument for good branch locations or a clean website. Users increasingly judge their banks on the functionality and features of their mobile apps. Get it wrong, and the criticism on social media and in app reviews can damage the brand.

Those who think the message doesn’t apply to their institutions should think again. In recent research, Van Dyke found that mobile deposit capture was used more by customers of banks in sparsely populated areas than by urban hipsters. “The further your customer is from a branch, the more likely they are to use mobile deposit,” he says.

Analysts view 2018 as a critical year for mobile banking. While most midsized and community banks rely on their core processing vendors for basic mobile banking apps, the big banks and fintech firms that set the pace on innovation provide a useful glimpse of the future.

They are toying with bells and whistles to make their apps more convenient, powerful and meaningful. JPMorgan Chase & Co., for example, has its “Finn by Chase” app, which includes financial management tools and allows customers to rate transactions with emojis.

Bank of America’s chatbot digital assistant, “Erica,” leverages artificial intelligence and predictive analytics to answer questions by voice or text, and offer advice on savings or paying bills.

If they aren’t already, mobile account openings, deposit capture, bill pay, digital wallets and P2P payments, under the banner of the industry’s Zelle app, should become part of your app in 2018, analysts say.

Money sent via Zelle from one member bank’s app to another moves in real-time, unlike some other payment apps like Venmo. “There’s no delay [in getting paid] if your bank is on Zelle,” Soccorsy says. “It’s a powerful value proposition.”

There’s a big push for what’s called “functional parity”-providing a uniform customer experience, no matter the channel. Many banks now start constructing new functionality on mobile, and then add other channels.

“We’re really trying to create a mobile-first experience,” Associated’s Tischler says. “Customers want this to be their primary interaction point with the bank.”

As functionality grows, the more sophisticated apps are leveraging machine learning to recognize usage patterns and customize the presentation of features to a given customer. “If I typically go to four things, the platform recognizes that and shapes the way the app presents itself,” Daley explains.

More than anything, banks are working to turn what has, until now, been primarily a service vehicle into one capable of generating sales. In-app advertising, push notifications and chatbots, all meant to take advantage of the 90 seconds or so the average customer spends per visit on an app, are becoming more pervasive.

Mobile apps offer the potential to gain valuable insights into customers’ relationships and habits. Daley tells of one bank that mined its mobile bill-pay data and found 4,000 mortgages being paid to other institutions. “Now they have 4,000 refinance opportunities, based on that history.”

But the real magic bullet of mobile is the potential to know a customer’s location. Geofencing leverages the phone’s GPS system to let a bank know when a customer is on an auto lot or in a competitor’s office, which could trigger a loan offer or other action-if the bank decides to do that.

As mobile banking’s capabilities grow, the board must devote more time to policies around security, usage, strategy and the like. Banks might be able to track and respond to customers’ physical movements, for example, but should they?

“If you say, ‘Hey, I see you’re on an auto lot. Do you need a loan?’ consumers could think they’re being preyed upon,” says Stephen Greer, an analyst with Celent. “There’s a creepiness factor that boards might want to avoid.”
Many banks set dollar limits on checks they’ll accept for mobile deposit and require customers to hold onto the paper check for as long as two weeks. Those are policies that scream to customers that the bank doesn’t trust the service, impeding adoption.

“The dollar limits should be the same as they are for an ATM or a branch,” Van Dyke says. “You can’t get people to migrate to mobile if you place arbitrary limits on its usage.”

Mobile banking promises to create new strategic opportunities and new challenges. It’s up to the board to monitor the institution’s progress and set the rules for navigating the space.