2013 was a big year for mobile banking, driven by trends such as increased smart phone adoption and the popularity of mobile check deposit. Looking into 2014, we see several areas that will drive mobile banking adoption even higher.
We have only begun to tap into the possibilities of mobiles devices with camera, geo location and social awareness capabilities. The first mobile banking features were simply a port of online capabilities like check balances, transfer balances and bill payment. Mobile check deposit was the first truly device unique capability, or so called ‘image banking’. 2014 will be the year of photo bill pay. While very few banks have made this capability available, there are many that predict adoption will be faster than mobile check deposit. Another area that will see progress is in personal finance management, particularly on the tablet. Various firms are working on leveraging device-specific characteristics around voice, video and touchscreen capabilities that will create new service opportunities for the advisor/client relationship.
Cross Selling will accelerate
Mobile devices provide a new opportunity to cross-sell and promote other banking products and services. Chase My New Home launched at the end of 2012 and is one of the first applications that provide capabilities to search for houses for sales, take and record photos and videos, calculate monthly mortgage payments and yes, connect to a mortgage banker. This is a great example of a bank using the unique elements of mobile devices to provide an end to end experience, driving more upstream from the transaction element to engage prospects and customers.
Some banks have begun to roll out merchant-funded rewards program, which allows customers to receive coupons from retailers by clicking on offers sent directly to their online banking accounts. We will also start to see applications using geo-location technology to alert customers of coupons while they are in the vicinity of retailers.
Gamification continues to be a hot topic
Gamification continues to be a hot topic among financial institutions as they look for new ways to both win new customers and increase loyalty. Banks are recognizing that the Millennial Generation represents the largest demographic in the U.S. today and will comprise more than 50% of the workforce by 2017. Millennials have grown up in a digital and always connected environment, heavily influenced by social media and instant results.
Banks are looking at how they can advance from promotional marketing to employing gamification techniques to ingrain desired behaviors that make their products and services stickier. Points, badges, rewards and leaderboards used in product engagement strategies are positive experiences for the consumer and ensure profits for the bank. Several banks have rolled out initial attempts here but most are still largely at the reward level (think points or credits).
Various studies have shown that mobile P2P is being used by less than 10% of mobile banking customers. As mobile users become more comfortable with the technology, expect more growth as users adjust to using an app instead of writing a check for situations such as sending your share of the rent and utilities or cash gifts.
Forrester predicts an explosion in the mobile payments market, growing from $12.8 billion in 2012 to $90 billion in 2017. The recent data hacking at retailers like Target and the reported credit card breach by hotel management firm White Lodging has created increased recognition that magnetic strip debit and credit cards are insecure. This is sparking a shift towards both EMV card technology where cards contain a microchip that encrypt each transaction and to secure mobile payments technology. Visa, MasterCard and American Express and separately, The Clearing House (TCH) and its 22 member banks, have announced initiatives that look to leverage dynamic tokens for mobile payments instead of storing card numbers and personal information.
Mobile Wallets will get a lot of attention and make some strides
Mobile wallet usage has struggled in the mainstream primarily due to concerns around security, technologies (barcode/NFC) and confusion over what is a mobile wallet exactly. Yet the stakes are high as estimates have the U.S. market of over $4 trillion up for grabs. No single company has been able to step to the forefront as there are offerings from non-banks like Apple, Google, Amazon, Facebook and PayPal, major payment networks, large financial institutions and top mobile network operators like Verizon. According to a study done by Parks Associates, by 2017 mobile wallet use will grow 183% to over 43% of smartphone owners. The key to mobile wallet growth will be adding value to both consumers and merchants while addressing concerns around fraud and security. Convenience features such as making it easier to organize consumer loyalty programs, location based offers, the ability to skip long checkout lines and rewards for using mobile will begin to spur user adoption. Of course, broad consumer adoption will only come when users feel the digital wallet is more secure than conventional credit cards and ease of use is comparable. The continued fraud events like Target and Neiman Marcus could provide an opening.
Bob Graham is Senior Vice President - Banking and Financial Services for Virtusa Corp.