Why The iPhone Isn’t Going To Revolutionize Banking

In banking, it seems that every time a technology development comes along, the prevailing mentality is: “We need to be on the forefront of this new development, and lead the way instead of follow.”

The “we” in that sentence, of course, is the bank that that person works at. Rarely (if ever) do you hear, “Let;s wait and see what impact this development has, and it’s rate of adoption — after all, we still have issues deploying the last generation of technology.”

And so it’s hardly surprising that with the release of the new version of the iPhone, comes the claims that the iPhone will revolutionize banking. (Sidenote: Is there anybody on Twitter that isn’t an iPhonatic?)

My take: The iPhone isn’t going to revolutionize banking.

Why not? For one simple reason: More convenient access to getting account information and conducting account transactions is evolutionary, not revolutionary.

The industry has seen one form of account access improvement after another — ATMs, phone banking, home banking, online banking, mobile banking — and not one of them has produced a revolution. Sure, new players like ING Direct have upset the apple cart, but they did so through product (or perhaps more accurately, pricing) innovation (i.e., online high yield savings accounts).

Real revolution in banking isn’t going to come from technology devices. Revolution will come from business model innovation. While I don’t believe that P2P lending or auctions are going to produce that revolution, these models are at least more in line with what will cause (yes, Colin) disruptive changes.

While you might argue that these new models are fueled by technology developments, remember this: Technology enables change — it doesn’t cause it. For any technology development to be an enabler of change, however, it takes either new industry entrants to make some big bets to cause change, or existing firms to make some radical changes to their existing way of business.

Will the iPhone be at the center of either of those scenarios? No way.

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14 thoughts on “Why The iPhone Isn’t Going To Revolutionize Banking

  1. “Sidenote: Is there anybody on Twitter that isn’t an iPhonatic?”

    Yes. Moi. I will not buy an iPhone. I have never owned an iPod. I don’t use an iMac. I think Apple products, while iCute, are iOverpriced and iOverrated.

    By the way, I think you’re right on here. It’s a small portion of the population that will buy an iPhone, and they aren’t lining up at 3AM to get a kickass mobile banking platform.

  2. If institutions are merely just going to implement traditional online banking inititiaves on the iPhone; I would agree that it’s the same old dog with new tricks.

    I would agree that the iPhone itself is a device but there is a very strong platform behind it that is like no other. There are opportunities with iPhone platform that offers some revolutionary concepts. I believe the bigger opportunties with the iPhone lie within the branch network than outside. I believe if you can seamless integrate the online channels with the traditional channels could produce some interesting and dare I say….innovative results.

    What institutions do with the iPhone remains to be seen. We’re certainly not going to ignore it. There are some awesome tools in the iPhone toolbox that can’t be ignored. Whether they’re revolutionary or evolutionary is not hinged on the device itself. It’s within innovative spirit at the institution. It’s all in the “E” word. Execution.

  3. @Cam: Seamlessly integrating channels would definitely produce innovative results. But revolutionary?

    And I’m certainly not advocating that any FI ignore the iPhone. But I would suggest that they put it in perspective. Service capabilities in many FIs suck (that’s a technical, quantitative term). Why in the world would these firms focus on iPhone apps before fixing more fundamental problems?

  4. @ron: So just for benchmarkings sake, can you give me an example of what’s revolution vs. evolution?

    So I know the extreme of what you’re talking about.

  5. @brad: Revolution: The overthrow, repudiation, and thorough replacement of an established system.

    When the top ten banks are no longer in the top 10, the revolution will have occurred.

    When an overwhelming percentage of banks make their money by charging for advice instead of transaction fees and penalties, the revolution will have occurred.

    When the bank branches shut down because iPhonatics no longer need to go there, the revolution will have occurred.

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  7. Ron,
    I wrote something similar a few months ago. While I do admit to wanting an iPhone, it isn’t for mobile banking. Interesting enough, the only vendors that announced mobile banking on the iPhone are ones that only have web clients. Which means they most likely have a special style sheet to make it look all pretty.

    I don’t know of a single vendor that offers a client application yet. At least it certainly isn’t offered in the AppStore. B of A basically offers a web client. Even though Apple dropped the price, AT&T raised the prices for data plans, which makes it even more expensive than a year ago. And expensive data plans is one of the biggest obstacles for mobile banking adoption.

  8. iphone will totally revolutionise banking for one simple reason. iphone brings the real mobile web to us for the first time. We have become used to looking at the mobile web in the 2cm * 2cm phone screen. I won’t buy an iphone, but onl because they haven’t figured out the keyboard. However the browsing experience is truly magnificent, and no other device can compare.

    So my bet is that iphone will revolutionise banking because it will drive competitor device innovation. Rumours are that the Blackberry Thunder will have a tactile keyboard effect on a glass screen.

    Long live the ‘innovative revolution’.

  9. Ron,

    I agree with you that FI’s need to and should focus on cleaning up their service downfalls prior to embarking on the “revolutionary” iPhone. Certainly, there are bigger fish to fry there.

    I’m concerned that you’ll see FI’s like BOA basically just import their traditional applications without respect to the iPhone’s strengths and weaknesses. It’s already starting to happen I’m afraid.

    Customer’s will expect FI’s to offer up online banking for the iPhone. Those are table stakes. We’re taking a slightly different take. We’re examining how can the iPhone compliment and/or enhance the experience our customers get when they visit the branch. Let’s face it, the notion of trying to get customers out of the brick an morter to online is not going to happen. So, how can we use technology to make the experience efficient and streamlined? I think the iPhone does present some cool possibilities.

  10. Great post Ron and your comments push anyone to really consider their use of words when talking about revolutions in banking.

    What I believe is happening in this smartphone environment is the concept of putting a computer in your pocket. Whatever the device, if it allows you to add specific applications that take care of specific needs then it will work. One wonders why people look at the technology and then go looking for a problem to solve instead of taking a problem and seeing what solutions are available. Sorry but sometimes a paper and pencil work better as a ‘technology’ than email, spreadsheet, calculator or a word processor.

    One example. We have an ATM network up here called the Exchange. If any CU member in BC uses an Exchange ATM they are not surcharged. If one uses a bank ATM is might cost you a few dollars. But how are you going to find an Exchange ATM quickly in some part of town you don’t know? The problem is answering the question of finding out where your are and then comparing that to where the closest ATMs are. It comes down to paper maps and paper lists. For $2 most will just pay for the convenience of using any ATM. But Apple’s iPhone can give you a geographic position with 4 lines of code. And comparing your location to say the location of Exchange ATMs in your proximity is not much work. And putting that information out to a Google map mashup isn’t difficult. So here the technology allows for a very quick and efficient method to acquire information that is useful and saves you something. Now the question is supposedly solved. You can be anywhere and receive information that allows you to make a better decision very quickly. For this instance it works well. The choice is still yours.

    When we begin to explore the possibilities of what is offered with consideration as to how it solves problems or fulfills needs then we are on an innovative path. Save time and/or money. That is what people want.

    Am I a fan of the iPhone? Yes because it does save me time. Are there revolutionary possibilities? Too early to tell but I would agree with you in saying it offers evolutionary possibilities. Can it change banking? I don’t know. Can it offer solutions to your customer/member? Very likely.

    If anything the iPhone does challenge Luddism. (http://tinyurl.com/6ys6qf)

  11. Good post.

    My 2c:

    Why is it that people rave on about the ‘big screen’ on the iPhone?

    Sure, the screen is big. No argument there.

    But unfortunately, the iPhone doesn’t fit in my pocket.

    And further to this, therefore don’t really carry a handbag around. And I don’t see myself ever carrying a handbag around, just not really my style.

    Am I the only person on earth following this train of thought? As in,

    Big Screen = Big Phone = Not Pocketable = Not for me (Sorry Mr Jobs)

    People seem to forget that while there are a small group of people that dig the whole iPhone thing and don’t mind the size, I feel that there is a much larger group that appreciate the portability that a small mobile phone (with it’s small screen and all) offers.

    I think that the iPhone will be successful, well, I mean, it would be incredulous for it not to be successfull… the amount of favourable media coverage it has had is preposterous, especially considering the devices shortcomings (2MP camera, Lack of MMS, Lack of ringtone flexibility, cost [the outright purchase cost isn’t US$199/299…])… but then again, most of Apples products are not market leading in the way of features. (Marketing is the key to Apple’s success story, that isn’t anything new.)

    But to suggest that the iPhone will change or shape our behaviour in the future is crossing one bridge too far, IMHO.

    There are the teenagers who use hiptops/sidekicks who may move across to iPhones, and there are the business people who use Blackberries who may shift across too. There will also be a group of iFanboys and iFashionistas who will move across, as well as the iMeToo group.

    (Forgive me for i-ing all of those groups, it was just too cute to ignore)

    But then there will be a much larger group who will stick to using their mobiles for phone calls, simple internet apps (I personally love the Gmail app) and text messaging.

    Why?

    Because this ‘revolutionary’ (I would probably suggest evolutionary is a far more accurate term) large screen inevitably equates to a large mobile phone, even if it is slim.

  12. A 5-day-old post on Javelin’s blog (sorry Ron) about mobile banking suggests SMS may be the real game-changer. Question: if it’s not as sexy as the iPhone, does it get called a revolution?

    Maybe it’s neither. The note at the end of the article: “[Unisys] released a survey in June showing 71 percent of U.S. consumers are uncomfortable banking or shopping online using their cell phones.”

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