Questions to ask about mobile banking and marketing


google-wallet.jpgRecently, Google generated a fair amount of buzz with its Google Wallet app.  Have you seen it?  It allows a consumer to load debit or credit card information into their Android-powered mobile device and pay on the go with a simple tap at “at hundreds of thousands of MasterCard PayPass merchant locations.”  Clever, right?   It should be, considering it was “designed for an open commerce ecosystem.” So is this a competitor to your bank —or a simple reinforcement that for those of you not in the mobile field, it really is time to sit up and take notice?  How might your board start down this path?  Glad you asked…

When I got my start with Bank Director in 1999, I innocently asked when a decision made it to the board’s level.  The answer came in the form of a drawing: a three-legged stool to be exact. Twelve years ago, our CEO depicted each leg with a word: Strategic, expensive, and risky.

Well, that picture remains firmly planted in my mind.  For a while, the marriage of all three applied nicely to issues like mergers and acquisitions, directors and officers liability and executive compensation. Since coming back in September, I’ve started to hear the same standards applied in terms of mobile banking strategy. Let me explain.

In April, at our annual Chairman/CEO peer exchange conference, a handful of CEOs from public banks with more than $1 billion in assets talked with me about growing their business in a recovering economy.  With a beer in hand, I consider those conversations off-the-record.  Let me just say, given our growing love affairs with mobile devices of all shapes, sizes and underlying technologies, the fact we were talking about their desire to provide a mobile banking experience to help transform the way people manage their finances through their institutions was not surprising.  In fact, one CEO offered that, with PNC “just across the street,” a strategy that challenged the status quo would be of interest to him, his chairman and his board.

With these CEOs thoughts rattling around in my mind, I thought to reach out to a few folks in the business to get their take. While most shared the standard stuff (you can attract new market segments! Increase customer satisfaction and loyalty!! Generate new revenue!!!), let me pass along a few tidbits c/o Intuit Financial Services‘ John Flora. John is the Mobile Solutions Group Product Manager—and counts banks with tens of billions in assets as customers. While we talked about a few roll-out opportunities, I think he has it right in terms of the questions that a CEO needs to ask in terms of mobile banking (no particular order):

  • How can we best grow our business using mobile as a complementary (not restrictive) asset to what we offer now?
  • How quickly can we make this happen?
  • What does the initial integration cost look like?
  • How does mobile fit into our core banking strategy?

We laughed because 12 to 18 months ago, thoughts about going mobile centered on cost reductions, retention of customers, building impressions, and more regular engagement. He said while those are still on the table, the last six months have seen most institutions realize that they cannot afford NOT to have a mobile strategy.

John also made the very good point that mobile banking requires the bank to back it up with marketing awareness. (This is where some banks fall down). In his experience, adoption rates are very high in the first month; but to sustain that momentum, leadership needs its employees to promote mobile apps and opportunities to better connect with clients on-the-go. So while putting a consistent marketing strategy into play on day one isn’t the job of the board, setting the strategy and expectations certainly is consistent with what I’m hearing today.

Will clearXchange Be a P2P Game Changer?


mobile-payments.jpgIt looks like there’s going to be a big rumble in the person-to-person payments jungle.

An announcement last week that three of the nation’s largest banks—Bank of America, J.P. Morgan Chase and Wells Fargo—had teamed up to offer their customers a new person-to-person (or P2P for short) service called clearXchangesignals that these institutions are serious about taking on the industry leader, PayPal

Although details about the new clearXchange offering are somewhat scarce at this point, the three banks’ customers will be able to send money directly from their existing checking accounts to another party using just an email address or mobile phone number. This is pretty much what consumers have already been able to do through PayPal, which has used its Ebay Inc. connection to build a customer base of some 85 million users.

Not to be outdone, Google Inc. also announced last week plans to create a digital wallet that will permit consumers with Android smartphones to pay for their purchases with their credit or debit cards by waiving their phones in front of a special reader at the cash register. The card information would be linked to a special chip in the phone.

Both initiatives will most certainly accelerate the growth of mobile payments, which my colleague—Executive Vice President Al Dominick—has written about in several recent posts. But from the banking industry’s perspective, clearXchange offers the best hope to date that the fast-growing P2P market won’t end up being dominated by e-commerce heavyweights like PayPal and Google.

Hank Israel, a partner at the New York-based consulting firm Novantas, explains that the value of any payments network “is defined by the number of endpoints that it has.” Those endpoints are in fact customers, and Israel estimates that the three banks combined have about 25 million customers (minus some overlap for, say, BofA checking account customers who have a home mortgage with Wells or Chase credit card). With 85 million endpoints (i.e. customers), PayPal is still the “big bad gorilla” in the P2P market, says Israel.

But by all indications, clearXchange intends to open itself up to other banks in an effort to create as large a network as possible—which will be critical to its success. “It wouldn’t be in [clearXchange’s] advantage to say there’s a group of banks that it doesn’t want to be in the network,” says Steve Ledford, also a partner at Novantas. “The value of a network to everyone becomes greater—exponentially greater—the more participants you have.” A BofA spokesperson confirms that clearXchange is in discussions with other banks about joining the network.

Indeed, there are approximately 280 million individuals with checking accounts in the United States, according to Israel. And the average checking account has 360 transactions a year, compared to just 13 for PayPal—which means that a large bank owned network could eventually generate a sizeable customer base and very significant volume.

According to Israel, clearXchange would do well to embrace the digital wallet concept and incorporate additional payments options including credit cards since this would greatly increase the service’s utility. PayPal already allows its users to send P2P payments using a variety of mechanisms including multiple credit cards and transaction accounts.

While PayPal and Google would be formidable competitors for any fledgling e-commerce venture, clearXchange has other important advantages. PayPal requires its customers to set up a separate PayPal account in order to use its P2P service, while clearXchange’s bank customers will simply be able to use their existing credit and debit card accounts, which would appeal to those P2P users who prefer to deal with a single entity. And initially at least, Google’s new offering will be restricted to smartphones that use its Android operating software, and will also require merchants to install new point-of-sale technology. These factors may limit how quickly Google can build a customer base for its digital wallet.

Despite PayPal’s clear lead in the P2P market, Israel believes that clearXchange has a good opportunity to catch up. “To the extent they can work collaboratively, I think they’ll be very successful.”

Your Mobile Catalyst


In my last two posts, I’ve written about the applications of mobile technologies & strategies (“Disruptive? Mobile? Regulated? Check, check, check“) and new opportunities for financial institutions to use mobile banking as a growth strategy (“In search of the next great customer experience.”) Today, I take a look at how a few community banks have learned from their bigger counterparts after explaining why board members need to become better educated to the mobile technologies available to their institutions.

mobile-banking-3.jpgYou’d be hard pressed to find someone in our business that doesn’t know the name Deloitte. In the U.S. alone, the international accounting and consulting firm (and its subsidiaries) employs more than 45,000 professionals and counts a number of major financial institutions as clients.  At the board level, a firm like this enjoys a brand recognition normally reserved for the IBMs and Skadden, Arps of the world. So a Deloitte-authored white paper on “Priorities for Tech-Savvy Directors as they oversee IT Risk and Strategy” caught my eye this weekend and sparked today’s post.

If you’re a regular reader, you’ll know I spend most weeks on the road meeting with bank CEOs, chairmen and outside directors and/or service providers and product vendors that support the industry. From investment bankers to bank analysts, attorneys to community bankers, quite a few people have recently asked for my opinion on the board’s role in technology decisions. Let me borrow from Deloitte’s piece in sharing my response:

Just as the growing complexity of accounting and disclosure issues made financial literacy a mandatory requirement for members of audit committees, the growing complexity and pervasiveness of (information technology) is increasingly making IT literacy an essential competency for directors… 

As the organization’s use of IT expands, the board’s responsibility for IT oversight grows. Boards need to ensure that their organizations maximize the benefits of IT, both through the alignment of IT with business strategies and through the ability of IT to help identify and mitigate risks to the organization (including those associated with IT itself).

So what does this mean for those boards looking to go mobile?  Let’s start with the basics: Boards have a responsibility for understanding, guiding and governing the overall strategic direction of their banks.  Accordingly, if mobile banking hasn’t become a part of your growth plans, you need to understand how providing such access to personal accounts and your institution as a whole supports your overall business strategy.

Fortunately, you don’t have to be big to be mobile.  Heck, you don’t have to be a “young” or entrepreneurial bank to offer it. Case-in-point: More than 100-year-old community banks have made their way into the space. Chesapeake Bank is a few hours down the road from me in D.C., and offers its customers convenient and secure ways to review transaction histories, check account balances, transfer funds between accounts and pay bills. So, too, does Fidelity Deposit & Discount Bank in northeastern Pennsylvania, which recently introduced ZashPay, a product offered by Fiserv, which enables customers to send and receive money from anywhere at any time using only an email address or mobile telephone number.

Those are just two examples of smaller banks that have jumped on the mobile bandwagon. A recent report by Accenture highlights the promise available to all:

Banks generating the highest returns on their mobile banking investments achieved ROI by emphasizing customer convenience, providing rich exchanges of information between bank and customer and accurately measuring how customers use their mobile phones to bank…

As I’ve written before (and Accenture backs up), the mobile banking channel offers an opportunity for banks to create a meaningful dialogue with their customers, deepen loyalty and broaden the services to which their customers can subscribe.  In this way, mobile banking is a competitive differentiator, as it provides timely, accurate information to the bank— critical to business strategy, and a true responsibility of the board.

In search of the next great customer experience


In the mid-to-late ‘90s, when companies like InteliData were promoting online bill payment and presentment technologies, I was introduced to a wave of industry optimism that such technologies would dramatically improve our overall banking experience. While the adoption cycle for online banking proved far longer than many forecast, history may be repeating itself. Indeed, we are in another period of technological exuberance, albeit mobile in nature.

Given our growing love affairs with mobile devices of all shapes, sizes and underlying technologies, it’s really no surprise that mobile banking continues to transform the way people manage their finances. Now, I realize I’m just one of many sharing this perspective; indeed, far more experienced voices, such as Fiserv’s CEO Jeff Yabuki, has been known to tweet out thoughts like this:

jeff-tweet.jpg (*April 30, 2011) 

Much like the pre-IT bubble days of online banking, I’m inundated with promotional materials from tech vendors promising to enhance the experience of a bank’s customers while reducing an institution’s costs.

Ah, the promise of mobile banking.  All upside, right?  Well, the Boston-based Aite Group offers an interesting counterpoint.  Last month, the research and advisory firm published its analysis of the group’s mobile banking consumer behavior survey. Its big takeaway: Banks will have to make significant investments to improve or develop their mobile marketing capabilities based on:

  • The lack of retention benefits from the mobile banking channel;
  • Potential losses of overdraft fees from balance monitoring; and
  • Shift in consumer attention towards mobile banking capabilities.

Juxtapose Aite’s observation with a recent TowerGroup forecast. There will be 53 million mobile banking users by 2013, which represents an annual growth rate of more than 50 percent.  Clearly, this is a huge opportunity for financial institutions to use mobile banking as a growth strategy.  According to FIS, another leading technology firm in our industry, those institutions that are not waiting on the sidelines are benefitting in a number of ways:

  • Attracting new market segments;
  • Reducing operating costs;
  • Creating brand differentiation;
  • Deepening account relationships;
  • Increasing satisfaction and loyalty; and
  • Generating revenue.

Despite the promise of these benefits, far more financial institutions have yet to go mobile. For those who haven’t, what are you waiting for? And no, this is not a rhetorical question. We’d like to know as we prepare to roll out our new digital platform for the financial community next month, so we might better help you understand the benefits and drawbacks of products and services.

Bonus question:
How often does your board hear from your CIO, head of Transaction Services, Mobile Banking and/or Internet Banking?  I’ve posted this question on our LinkedIn group so feel free to chime in there or leave a message below.

Disruptive? Mobile? Regulated? Check, check, check


It’s funny the things that cross your mind in an airport. I snapped this picture of a classic American plane docked in Chicago pre-flight to China this morning. Patiently waiting by the gate must have been 200+ people, 95% of whom appeared glued to their iPad, iPhone or Android-powered mobile device. To say I was impressed is an understatement. Users of mobile technology are known for being many things: patient is not one of them. They want new tools, new applications and they want them today. Maybe I should have photo’d the departure lounge…

aa-flight.jpg

From the board room to a branch office, it’s no state secret that today’s mobile banking customers expect access whenever and wherever they are. With so many banks investing in new technologies that allow customers to complete transactions, manage accounts, and perform banking research via their mobile devices, one can see why. Mobile banking services — think remote deposit capture, two-way text banking, apps for locating branches and ATMs using GPS and bill payment — have become the norm. So how to differentiate your bank from your competitors?

In my next few posts, I’ll take a look at this question.  With banks (both big and small) riding the mobile wave to strengthen relationships and add to their bottom lines, I thought to set the table with insight gleaned from our friends at PwC.  Last month, the Banking & Capital Markets group published “How Retail Banks Can Thrive in a Disruptive, Mobile, Regulated World” to assess the implications and opportunities created by mobile phones and social media.  My cliff’s notes:

  • Social media continues to provide banks with new ways to improve brand recognition, expand customer reach, enhance a customer’s experience and introduce new products (for more, see these posts we ran in January about how to benefit from social media and social networking platforms);
  •  While most large national banks have slowed their pace of retail bank acquisitions because of regulatory limits, banks with access to capital continue to view acquisitions as a growth opportunity. Such acquisitions benefit banks by enabling them to (a) reduce combined operational costs by eliminating redundant back-office functions, (b) spread technology investments and regulatory compliance costs across a larger base, (c) gain access to new markets and customers for cross-selling, (d) increase the ability to invest in state-of-the-art technologies; and
  • Leading institutions are adopting a new customer-centric model to replace outdated product- centric models.

A few big takeaways for me? Bank execs need to quickly and decisively adopt new approaches or risk being left behind. Moreover, by tailoring channels to a specific customer segment or purpose, banks are capitalizing on the distinct and complementary roles of distribution channel, all while managing costs. Yes, this is the land of opportunity, and the applications of new mobile technologies and strategies bears close watching. More to come next week.