Smartphone technology is forcing rapid change and is challenging traditional business models across scores of industries. But nowhere is the pace of change more evident than in the world of banking. And while much of this rapid evolution is being embraced by the financial institutions, some popular mobile apps represent a competitive challenge against which the banks are fighting back.
As of September, 192 million Americans owned smartphones according to data firm comScore. 75 percent of those smartphone users accessed the Internet on their devices, and a startling one third rely primarily on their phones to go online. Given the ubiquity of mobile access to the Internet, it is hardly surprising that banking and financial services applications have experienced dramatic growth. A survey conducted by the Federal Reserve Board in 2013 found that 51 percent of smartphone owners used mobile banking services in the previous year. That number has almost certainly increased since then. In fact, more people now conduct banking activities via smartphone than online using laptops or desktops.
This has major implications for the banks. On the bright side, mobile and Internet transactions are considerably cheaper than traditional branch interactions, so the trend is driving significant cost reductions for the big financial institutions. A recent paper from Bain and Co. made the stark assertion that the traditional bank branch is doomed on the strength of statistics like the following: customers who rely primarily on branch banking are three times more likely to switch banks than mobile users.
While banks and other financial institutions are embracing online and mobile banking, many are grappling with determining the best use of each channel for their banking customers. Many FIs are realizing that they must make branches more inviting for their expanded role as advice centers, and not merely a transaction-centric channel. Others have not made that transition yet, however, and risk being made irrelevant by those institutions with a robust digital presence and reconfigure branches.
Overview by Ed O’Brien, Director, Banking Channels Advisory Service at Mercator Advisory Group
Read the full story here
