At a recent conference, I spoke with several bankers about the future of mobile. While they were generally optimistic, they focused on the inherent limitations.
For example, they asserted that home loans are simply too complicated to be handled on a mobile device. Parts of their arguments are valid, but they are missing the bigger picture. Every channel has limitations; sometimes those include high labor costs and inconsistent quality of service.
Consider this: For much of modern history, financial institutions have sought to reduce the cost of delivering services. In the process, consumers have been driven to more efficient channels, and sometimes against their will.
Do you know anyone who really enjoys listening to a series of automated prompts with no option to speak with a real person?
Today—perhaps for the first time—consumers are demanding self-service through the least expensive channel ever conceived—smartphones.
So why are banks struggling to deliver?
Mobile beyond the obvious
Certainly, all banks have some mobile functionality. Most have now embraced mobile deposits after a few years of resistance.
Why not go further? Perhaps some still consider mobile banking a fad. Maybe the energy to pursue new ideas is waning because regulators are draining off all of many banks’ energies.
Or perhaps, it just doesn't seem possible that consumers want the same thing banks do.
The ultimate question is whether banks will be able to get out of their own way on mobile.
Smartphones are revolutionary because the consumer is engaged with a banking channel in a whole new way.
Smartphones are usually within an arm’s length of the consumer. Arbitron and Edison Research found that 52% of mobile phone owners always keep their device within arm’s reach. (See p. 37 of their presentation, The Infinite Dial 2013).
These devices provide new possibilities for real-time interaction, and have relatively standardized features such as the ability to use the camera and GPS features to improve data capture and reduce fraud.
Compare these features to the relative immobility of ATMs or the lack of insight at call centers.
Add to all of this, the consumer pays for the hardware and its regular upgrades. There is simply no way to compete with the relative ROI.
Are home loans really too hard for mobile?
I find the unanimous agreement that home loans can’t be completed on a smartphone short-sighted. Perhaps my frustration is because the current primary channels, broker and call center, are so expensive to lenders and inconvenient to the consumer. The reality is that mobile could provide a much better and affordable experience for nearly every interaction. I’d like to explain why mobile home loans aren’t so farfetched.
There are a few things consumers really care about when applying for a home loan, after rate and fees, of course.
• They want underwriting to be handled quickly.
• They want to be kept apprised of their application’s progress.
• They want to be able to answer the barrage of follow-up questions as easily as possible.
In all of these areas, the smartphone could offer an order of magnitude improvement over current channels.
Real-time interactions, not lost time interruptions
The biggest delays on the consumer side come when the consumer receives an information request, and they then must go home to find the necessary documentation and return to work or the nearest stationery store to fax it in.
In some cases, the requests from underwriting are cryptic or confusing.
For example, I once had a request for the statement of a retirement account I would liquidate. It took two days to figure out that the lender wanted a source of funds for closing costs. That was a little ironic—closing funds were part of the loan and I was getting cash back.
Days of telephone tag can add even more delays.
With a real-time approach within a mobile app, consumer expectations could be set in advance; status updated in real time; and documentation submitted without delay. Perhaps the biggest advantage in a mobile process would be using the built-in phone to securely scan and transmit documents. Several providers offer technology that allows much better image quality than the typical fax and it is definitely more efficient.
Most loan underwriting systems obscure the process from the consumer. A mobile-enabled application could allow the consumer to see directly into the process (with appropriate limits). After the underwriting began, they could see:
• The status of their application.
• Steps remaining to be completed.
• Even an estimate of how much longer the process might take, adjusted for the efficiency of their underwriter.
Turning weakness into strength
Because mobile screens are small and consumer patience is thin, it is wise to keep the number of questions in credit applications to a minimum.
Research by a major lender found that just three questions is the sweet spot for improving completion rates. Fortunately, lenders can fill in the rest of the information with third-party data sources after the user hits “submit.”
In many cases, little more than name, address, and birthdate are all that is needed to start an application. All of that can be garnered from a photo of a consumer’s driver’s license.
Once the home loan application is underway, consumers will expect to give more info and it will still be easier than sharing information over a phone line with an agent who is struggling to spell the name of “Fontainebleau Street.”
Many consumers will appreciate that they can answer clarifying questions wherever they are, at work, a game, on the subway, without the awkwardness of discussing personal information and account balances over the phone.
Mobile account opening also brings huge advantages to the institution. Because accessing the capabilities of a smartphone will require an app to be loaded, there are great opportunities to build a richer relationship with new clients—including cross-selling other products without disrupting the process.
Think of a screen that offers a pre-approved credit card while the customer is waiting for their information to be processed. For current clients, who have already downloaded the app, you can pitch "the easiest refinance of your life."
Finally, the biggest advantage is efficiency. Mobile applications are more scaleable and easily manageable than call centers.
As Dudley Gwaltney, manager, analytical modeling, at SunTrust said regarding omni-channel banking at a recent industry event, "Servers don't charge overtime."
Barriers to mobile account opening
So, that brings us back to the barriers. If mobile is better for the consumer and better for the institution, why are financial institutions waiting for fintech companies to innovate and then reluctantly adopting the innovations?
There are certainly cases of companies funded by venture capital that over-promise their capabilities yet lack sufficient understanding of banking requirements. Perhaps it’s the budget challenge, but it would be hard to find a better ROI than enabling a consumer to apply for products more easily.
I believe it might be that bankers haven't really accepted mobile as the future.
The evidence in favor of a mobile takeover is clear. PC sales are down and many consumers use a phone or tablet as their primary computing device. (I'm writing this on a tablet in a plane).
There is no other technology on the horizon, with the improbable exception of Google Glass, to replace mobile devices. Most importantly, according to Viacom more than half of consumers are dissatisfied with their banks’ product offering and are interested in financial products from consumer companies like Google, Apple, and Amazon.
Unless you are ready to be a wholesale provider to those companies, it’s time to step up.
A better solution
If banks can more easily handle a mortgage application in mobile, isn't it clear that every other type of application would also be easier?
Many issuers offer real-time credit card approvals and leading banks are offering real-time deposit account applications and funding on mobile devices. The trend has started and consumers have shown an appetite for the service. In one bank’s study of consumer adoption, they found the number-one reason consumers weren't taking advantage of new mobile capabilities was that they didn't know their bank offered them.
Mobile represents the least expensive channel, provides the best consumer experience, and is arguably the most flexible customer interaction. Your customers are just waiting for you to show that you've stepped up.
Meanwhile, the AlixPartners Mobile Financial Services Tracking Study reports that among smartphone or tablet owners who switched primary banks, 60% cited mobile banking capabilities as important or extremely important in their decision.
Will yours be the bank they leave or the bank they chose for a better mobile experience?
About the author
Eric Lindeen is marketing director for Zoot Enterprises, a global provider of advanced loan origination, account acquisition, and credit risk management solutions located in Bozeman, Mont.