August 3rd, 2010 - Published in Wisconsin Banker
Community banks investing in on-the-go customers
By Becky Nelson
Mobile banking may not yet be a high priority for current and potential customers, but savvy community bankers are preparing for it to happen.
Today about one-fourth, or 27 percent, of community banks offer mobile banking services, with many planning to introduce or expand the service in the next 18 months, according to a national survey by Banc Investment Group.
“Many community banks are full steam ahead in the evaluation phase, with a lot of community banks having deployed a mobile solution already. There’s very strong interest currently – I would say urgent interest in some cases, even in the current environment,” said Amy Wilkinson, a product manager for Fiserv Mobile Solutions.
As people increasingly access the Internet using smartphones – more than 50 percent of cell phone users are expected to have them by 2015 – the potential for banks to pique the public’s interest in mobile banking will only continue to grow.
An estimated 58 percent of Americans used a mobile device for non-voice activities such as texting, e-mailing, taking pictures or capturing video, or looking for directions, according to the Pew Internet & American Life Project Survey in late 2007.
“Community bankers across the country view mobile banking as a must-have to meet both retail and commercial demand,” said Chris Nichols, CEO of Banc Investment Group, in a news article. “Banks that already have a mobile platform have a temporary competitive advantage that will narrow as more banks offer the service.”
In Wisconsin, as elsewhere, banks vary widely in the pace at which they are offering mobile banking options to their customers.
PyraMax Bank in Milwaukee, with close to $500 million in assets, launched a mobile banking pilot program two years ago and has steadily enhanced its offerings. Bank of Sun Prairie, a $311 million bank near Madison, introduced mobile banking earlier this year and is focusing on adding users.
Three years ago, PyraMax Bank took a closer look at its demographics and found the average age of its customers was 58. When the mutual savings bank decided to shift its focus and try to attract more 20- to 40-year-olds, “we noticed that almost all of them were carrying cell phones,” said Karen Murphy, senior vice president – retail banking.
“We needed to make it easier for the individual sitting in the parking lot, watching their kids at soccer practice from their car, to do their banking,” Murphy said.
A short time later, the bank agreed to participate in a pilot for their core processor’s mobile banking product, which relied upon a secure ATM line to conduct mobile transactions. The four-month program was “slightly successful,” Murphy said.
Because the technology was still in its infancy, the company had to negotiate agreements with each cellular carrier in order to offer the service to that carrier’s customers. As a result, many of PyraMax’s customers initially could not use the service.
That soon changed when the bank began offering customers a mobile browser-based service.
Now, any customer with Internet access on his or her phone could check balances, transfer funds and more. In May, PyraMax introduced a branded iPhone application, available to download online.
A new account – meChecking – offers customers freebies and deals on concert tickets and iTunes downloads along with free online banking, bill payment and of course, mobile banking.
Adoption has increased significantly in 2010, Murphy said. In the first year and a half, about 100 customers used mobile banking; now close to 500 do.
For Bank of Sun Prairie, the age of its current money between accounts; or perform other transactions available via online banking. The adoption rate has “not been as fast as we hoped, but we’re slowly gaining some new users every month,” said Deb Krebs, marketing manager.
Nationally, the adoption rate was 2 percent in 2007; 7 percent in 2008; and 11 percent in 2009, according to Mercatus Advisory Group in Bank Technology News.
A New Channel
The top 200 banks in the nation, defined by asset size, have already invested in mobile banking – and the top 50 are “pushing the envelope compared to what mobile banking and payments have been defined as,” said Calvin Grimes, Fiserv mobile product manager.
Now, many of them are moving to their next phase. “Some of the earlier products that were available in the mobile space were limited in their channels,” Fiserv’s Wilkinson explained. “Now many of those that already had a solution in place are re-evaluating to consider offering all three channels.”
The three major types of mobile banking that dominate right now are expected to continue through at least 2013, according to Juniper Research.
• Message-based mobile banking, which uses text (SMS) messages to alert customers of account activity.
• Mobile browsers, which allow users to view an abbreviated version of the bank’s online banking site and conduct certain transactions.
• Downloadable applications, which are often tailored to each specific kind of smartphone and offer the ability to view account balances, transfer funds and pay bills.
Nearly 90 percent of community banks that offer mobile banking are considering an enhancement to their existing platform, the Banc Investment Group survey found, such as adding smartphone apps for the iPhone, BlackBerry and Android.
“Financial institutions really need to understand that No. 1, mobile is a separate channel. It’s not Online 2.0, and you do need to think about it differently,” Grimes said. “Think about consumers that aren’t online bankers today. Those are the consumers that are walking around with a mobile device even though they may not have easy access to a PC, which is maybe a barrier for them using the online channel.”
When online banking and bill pay were introduced, consumers were worried about security and value – the same issues that concern customers about mobile banking. Banks need to devote adequate resources to marketing to address these issues, Grimes continued.
Finally, bankers should not assume that mobile banking is all about reaching the Gen Y crowd, Grimes said.
“The economy over the last couple years has definitely increased the amount of time and amount of effort consumers spend looking at their finances. This is a tool to help you monitor your finances while you’re out on the go,” he said. “Maybe you’re shopping, and you want to know, ‘Do I have enough money to make this a debit transaction or do I need to pull out my credit card?’ ”
Or, as Jim Bruene wrote on the NetBanker blog: “If you are still unconvinced that mobile will overtake online for banking tasks, here’s a thought: Consider how often you go online now to check the local weather. A waste of time – right? – when all you have to do is press a button on your smartphone. The same near-instant response will happen for basic banking info.”
Nelson is a freelance writer for the Wisconsin Bankers Association.