Mobile Banking Myopia

The following is from an article in Bank Director about mobile banking:

“The early adopters are not charging for their mobile services and have not placed much emphasis on achieving a specific return on investment. Rather the business plans are built around the theory that mobile banking will become commonplace, and it makes sense to prepare for it. “How do you get payback on an ATM?” says Lockwood of United Bank, suggesting that mobile devices are just another channel through which to distribute information. Payback will happen over time, as younger customers in particular become attached to the service and develop deeper relationships with the bank because of it, he says.”

My take: What’s that saying about those who don’t understand history are destined to repeat it?

The line of thinking that “payback will happen over time as [fill-in-the-blank-customer-segment] become attached and develop deeper relationships” has been used over and over, with ATM, home banking, online banking, online bill payment, eBills, etc. And never has the “attach and deepen” promise ever been realized.

But I’m not critiquing this line of thought as a way to argue against the implementation of mobile banking capabilities. The bigger issue is the myopic thinking surrounding the industry’s discussion of mobile banking.

Seven years ago I wrote a research brief exhorting banks to kill their mobile banking development efforts. I didn’t believe then that consumer demand was strong enough to warrant it, and, more importantly, I believed that there were more important priorities for banks to focus on.

Surprisingly, seven years down the road, consumer research continues to show negligible demand for mobile banking. Aite Group’s research has found that just 5% of consumers say they use mobile banking capabilities today, with 70% saying that they’re flat out not interested.

But this time around I’m not convinced that mobile banking should be ignored. It has nothing to do with consumer demand or “attach and deepen”, however.

Many industry observers views are too myopic. The naysayers point to anemic consumer interest and say “see, nobody wants it.” The supporters say “it’s the way of the future, and people will want it down the road, especially younger consumers.” The latter group then proceed on figuring out how to take online banking features and port them to cell phones.

What we have are two views of mobile banking: The marketing view and the technology view. What’s missing is the strategic view. What I don’t hear anyone asking is:

  • What would banking look like if the cell phone was customers’ primary form of interface and contact?
  • How would we reengineer business processes if the phone was the only way customers interacted?

I don’t mean to insult the technologists, but too many are wrapped up trying to dream up new features for mobile banking. Many marketers, on the other hand, either have their heads in the weeds, bogged down by market research numbers, or in the clouds, deluded by dreams of attachment and deepened relationships. And then there are the strategy folks who seem to be focused on which bank they should acquire next.

If banks want to succeed with mobile banking, it’s time for some more strategic thinking on the topic.

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15 thoughts on “Mobile Banking Myopia

  1. But Ron, “what’s possible” has never been attached to “what’s useful” or “what’s profitable”, else too many folks would be out of a job, especially on the tech side.

    Do you happen to know what the status of the cell phone as a payment device (like a credit card swipe) is in the US? I keep hearing about it happening in Asia. Seems to me one approach was using barcodes on the phone screen and a barcode reader.

    To me, this app has the potential to be a strategic driver. Then mobile banking might make some sense, you’d have a concrete reason to be “connected”. Probably won’t “deepen relationships”, just becomes the price of keeping up.

    “How do you get payback on an ATM?” seems like a very weird question for a banker…

  2. @Jim: I intentionally didn’t bring up mobile payments. Few people in banking are thinking in terms of “how do we transform the bank to take advantage of this new technology?” Instead, the question is framed more in terms of “how can we take what we do and do it faster/cheaper with the new technology?” Strategic thinking falls thru the gaps between the tech, mktg, and strategy people.

  3. Mobile banking will be moot in the near future. Every mobile phone in America will be fully web-capable someday, thereby eliminating the need to develop a separate platform for online banking.

    The concept of “mobile banking” becomes a greater priority when an entire generation of kids grows up using these new fully web-capable phones. But we aren’t there yet, with either the technology or the saturation.

  4. Not exactly answering your question, but after SxSW Interactive, I wrote a blog post on mobile web in general.

    I think towards the end, musing about texting, I end up close to your question, but from the customer/member POV: “to revisit Kathy Sierra: how does a text message from your credit union help you kick ass?”

    Thus: How do we use mobile web to transform (improve? simplify? or ?) people’s relationship to their money?

    (Which reminds me that I want to write something about the whole “relationship” thing, as inspired by the STRNLE piece on The Financial Brand. Probably will come out as a rant.)

  5. Everyone’s still scratching their heads on what mobile banking is. I believe the focus should be on what it shouldn’t be. Merely, copying and pasting traditional online banking services is not mobile banking. Trying to mash inside a very small screen is asking for trouble.

    Web capable phones such as the iPhone are cool but you’re still dealing with the same problem. Pinching can only get you so far before you get fed up.

    The conversation should switch to more “on demand” types of services. If a customer just wants to know if their check has cleared, don’t cloud them up with irrelevant information such as balances, etc. Just tell them yes or no.

    Face it…email is the x-facto standard of communicating. Text messaging has not replaced email. It never will. We’re implementing email drop boxes where members can send an email to a mail box to get only the information they want when they want it. Send an email to the drop box to pay a bill, transfer funds, etc. It’s all there and secure. If the origination of that request happens to come from a mobile phone than I can safely say that we’re doing “Mobile Banking”

  6. @Elaine: You bring up a great question… it could be modified to read “how will mobile capabilities change how people relate to their money?”

    @Cam: In a mobile-intense environment, why would anyone be writing checks in the first place? Focusing on what mobile banking should NOT be is fine for the short term, but not the longer term.

  7. Defining mobile banking as online banking jammed into a tiny screen never made sense to me. If you don’t take advantage of the platform you’re on, what’s the point? I don’t want to turn my phone into a browser, I want to turn it into a wallet and a GPS device. Let me wave my phone over a terminal to pay for a product. Let me find the bank branch nearest to me if I’m in a strange city. Send me a text message to let me know that a $800 charge was just applied to my credit card in Tucson. If I need to pay a ball RIGHT NOW, let me click a link to talk to a call center agent.

    There’s a case for mobile investing because of the time sensitivity, but most people really don’t need to know their balance down to the penny while they’re sitting in a cab.

  8. @Jim Novo … I think Ron brings up the ATM, because Banks in North America are approaching their mobile strategy as if the mobile was another ATM. And the ATM was just a machine designed to eliminate tellers. What are we trying to eliminate with mobile?

    On the other hand if we approach mobile as Ron suggests from a strategic differential perspective, such as, what if it is the only access point for consumers, or as Dan says, what other uses for mobile can be developed … then something of new value might get built.

  9. Mobile banking has not been defined by those proposing it. Is it a notification system that operates in a batch mode? Is it an alert mechanism for any and all types of transactions? Is it an alert method for time sensitive issues? Is it a transaction processor? The problem is everyone is talking about mobile banking but there is no fast definition. You don’t deepen a relationship with a product you think someone needs, you offer a service/product that isn’t available that is needed.
    I see the industry garnering the mold of offering mobile banking when the product answers only one of the above questions (batch notification). That doesn’t really do it as a definition for mobile banking. For example if you go into a branch and just get information on what went through your account and that is all, is that banking? “Sorry sir we don’t offer the ability to do a transaction, yet.”
    Ron your questions have brought to focus some core discussions that need to take place before people venture down ‘the yellow brick road in search of the wizard’.

  10. Mobile banking has reached new heights these days from the time it was launched and this development surely shows that there has been a demand for mobile banking. Especially in a country like India, where there are more number of cell phone users every year, it is impossible for banks to ignore this progress. Banks like Barclays for example have come up with a new secure mode of transactions with the customers through mbanking whose demo can be seen at And as far as I am to say, I think paying bills and instant funds transfer has dragged me to mbanking.

  11. Hey Ron – I agree with you entirely on the need to focus on the business needs as well as not to ignore the return on investing or building a mobile channel – being a former technologist, I’ve seen all too often the negative return on projects that focus on technology for technology’s sake.

    I disagree with you on that it’s right time mobile banking (or really mobile anything) – at least outside of the US where operators wield less power and consumers have choice over the types of applications that they can install or access on their phones. The US has entrenched channels for delivering banking services, be it branches, ATMs or online banking. This depth of delivery channels does not exist in countries like China or India, which are underbanked even in the larger cities (try finding an ATM in Turkey easily outside the main squares in Istanbul – they’re putting them in as fast as they can). The mobile channel is a great delivery channel for banking services in emerging/near developed countries.

    That being said, I still believe the mobile channel with its unique challenges (heavy fragmentation, multiple device sizes, running multiple OSes etc.) and also unique potential (location based services, truly anytime/anywhere service etc.) is potentially a worthwhile investment to undertake in the US. Here’s why:

    1) Cost: One point in the article you did not highlight was the relative low cost for many companies for getting into the mobile game. The actual back end infrastructure to serve up most of the necessary information is already available and built for online banking. Many mobile services simply piggyback off these existing services.

    2) Usage patterns can change very quickly: penetration and usage is low right now – as it was for online banking in the early-mid 90s. And then this thing called the Internet happened for the masses. Can you imagine now getting a bank account without an online feature now? You would laugh your way out of a branch. I believe it’s entirely possible you will feel the same way in 5 years about mobile banking. In fact, in 5 years, I’m not so sure we will call it mobile banking – but digital banking – regardless of what device you use to access it (mobile or computer).

  12. @Baris Gul. Very good point on how innovation in a country with a developing payment system must be looked at differently than in countries with an entrenched and mature payment infrastructure, like the US. Ron’s comments make lots of sense for the US and Western Europe. But obviously there are new and very different opportunities in much of Asia for new and unique payment features.

    A few years ago already, I was surprised in a restaurant in Beijing when the person that used his card to pay for our lunch immediately received an SMS confirming the transaction. He explained that this made customers feel more confident about using a credit card. Fear of the card being used without one’s knowledge goes down. A very simple and useful feature for a very large market, yet at the same time something that is much less needed in mature markets.

    Unfortunately, the innovation culture in many of these markets is not as advanced and structured as it needs to be. Lots of opportunities are being missed.

  13. @Baris Thanks for your comment. You make some great points. Reading through your comment leaves with one question: How do you determine when it IS the right time.

    There’s no question that the decision varies by country.

    But in the US, at least, there’s a chicken and egg issue. Do you sit back and wait for consumer adoption or do you get out in front and try to accelerate consumer adoption?

    And I cringe to even use the word “adoption” because it implies using something different to do something you already do.

    And what I’m trying to say with this post is that maybe some banks should be thinking of entirely different services to offer that could ONLY be delivered through the mobile channel Oh — and that would be TRULY valuable to a significant set of customers.

  14. @Anacea – I tend to disagree with the assessment that the innovation culture is less advanced in developing markets. I am not sure I’ve seen innovation be “structured” per se. On the contrary, many countries are leapfrogging land lines to use wireless devices to solve real problems – for example a bank in Turkey, Garanti Bank, allows you to send money via a text message to a non-Garanti customer, which they can use to withdraw cash from a Garanti ATM. It’s very simple and non bureaucratic – a net time saver and convenience for Garanti clients and a potential cost savings and acquisition tool for the bank. In another example, Mobipawa, is bring severely underbanked Tanzanians heretofore unavailable banking services. These are very innovative solutions. Maybe they solve, as you alluded to, somewhat different types of problems than those we encounter in higher GDP countries.

    On a side note I do believe SMS messaging confirming transactions would be popular if it was offered in the US. It would be useful to consumers and solve a real latency problem for banks. Credit card fraud runs in the billions in the US annually and if banks could have a customer call in the moment a fraudulent charge first occurs, versus 24 hours later, the savings could be huge The ROI on something like this would be easy to demonstrate. American Express and Citibank already offer e-mail alerts of various types, which are not all that different from the text based alerts you’re referring to. Of course, part of the issue in the US (but not in Europe) is the operator model. In the US, it costs money to receive a text message or a call (deducted minutes) unlike – well – anywhere else.

    @Ron – I would have to be a soothsayer to answer your question of “when IS the right time?”. Given my line of business, I sincerely hope the answer is..very, very soon :-). Seriously though, I know you quoted the Aite Group on the general ambivalence of consumers towards mobile banking, but there are countless reports (from NetBanker and Compete to name a couple of respectable sources) that show real interest in getting non “gee-whiz” access on a mobile device for real simple actions, e.g., checking balances, paying bills, transferring funds.

    On the set of services that banks could use that use a mobile device’s unique capabilities, the one that everyone is talking about is location based services (“LBS”). For example, an ATM locator via GPS or cell phone tower triangulation. That for example is a “gee-whiz” on mobiel service that I personally could not give a flip about but it would be unique to a mobile device.

    The bottom line for each bank is going to be looking at this as a business decision – banks who have been diligent in how they’ve set up their technology infrastructure can probably get their feet wet in the mobile game for very little (relatively) and can probably use it as a differentiator for the next 1-3 years.

    The key challenge right now in my opinion, if you’re an institution wanting to get into the mobile space, is to ensure you build mobile applications that people actually want to use. Currently usability on a mobile device is really both art and science given the variety of handsets and technologies that are out there (maybe similar to web site design 10 years ago, when you had to be mindful of 56K download speeds and 640X480 resolutions)..

    As I mentioned before I think we may wake up some time from now (call it 3 years), and it’s going to be odd for a financial institution to not have a mobile channel – getting from here to there, is going to be a journey filled with false starts, competing standards, a fair amount of evangelism and fundamental changes in how we interact with mobile devices and their capabilities. Chicken or egg indeed!

  15. @Baris: My question “when is the right time” was semi-rhetorical. I wasn’t asking for your crystal ball, but really posing a more general question about how to know when the tipping point is approaching.

    Regarding consumer demand, what I find hard to understand is the seeming disinterest on the part of consumers balanced against all the press, and stats like those from BofA.

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