It’s taps for your mobile apps

Bank of America publicized that it would triple its spending on its mobile banking app at the beginning of this year, and for good reason.

Every bank wants to be seen as digitally innovative and committed to serving customers as conveniently as possible. Bank of America is also shifting resources to meet customer preferences, as it reported that last year was the first time that its mobile banking traffic surpassed online traffic.

Bank of America did not disclose the dollar amount of its mobile app investment. But 15 of the top global banks, including Citi and Barclays, budget roughly $80 million combined for their mobile apps annually, according to Exicon Global, which helps develop and manage enterprise mobile apps.

How much is your bank investing in its mobile app? And are you investing in the features that will drive the best ROI?

Choices you make now will determine how relevant your bank remains to your customers.

Making mobile work for your bank

Mobile spending is still just a modest investment compared to the tens of billions that banks spend on their IT products and services every year. For this modest investment, banks have positioned themselves to gain significant benefits from their mobile apps.

Why? Mobile customers are cheaper to service, more loyal, and generate more revenue than non-mobile customers, according to a Fiserv survey released earlier this year.

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But, as bankers know, smartphone adoption represents a threat as much as an opportunity for financial institutions. Nonbank players like Moven and mobile banking subsidiaries of mainstream banks, like Customer Bank’s BankMobile, have targeted this business.

To tip the scales successfully, banks must continue to drive customer engagement with their mobile apps to reap these benefits.

That will become increasingly challenging, as new entrants want to take the lead in mobile financial services by directing consumers’ attention to their own apps, and away from banks’ apps.

Consider something critical here: Consumers only spend a fraction of the time on their mobile devices dealing with finances.

Banks must ensure that customers spend that limited time engaged with their banking app. Otherwise banks will gradually see their customer relationships slip away to nonbank and nontraditional players.

The new entrants that successfully drive customers to engage with their apps will do so by becoming the leaders in specific mobile products and services. The alternative mobile wallet providers are all trying to do this by taking the lead in mobile payments.

For example, Venmo has taken the lead in mobile peer-to-peer payments and is now expanding into in-store payments, and Mint has done the same in mobile Personal Financial Management apps. 

Banks must allocate the resources to compete with these services to keep customer tapping on their apps.

Here are the three key features I believe banks should be focusing on today.

Mobile payments

Only a handful of the largest institutions have announced plans to roll out their own mobile payments solutions to compete with alternative mobile wallet providers.

Once mobile payments adoption ramps up, customers will spend more time with mobile payments apps than their banking ones. Consumers check balances or transfer funds once a day in their mobile banking apps, but they will make several payments each day in their wallet apps.

So banks must add in-store payments to their own apps to keep customers engaged in the future. Otherwise banks will risk allowing the wallet providers to leverage their increased customer engagement to offer more financial products and services, potentially replacing banks as the primary source of financial advice.

Mobile PFM

Banks have also let other providers take the lead in mobile Personal Financial Management. Only 10% of banks even offer mobile PFM capabilities, according to a survey released by the Dallas Federal Reserve last year.

Apps like Mint and Level Money offer far more robust capabilities than anything banks offer. Banks’ mobile PFM solutions usually just categorize transactions. These tools are simply not as informative or intuitive as those offered by providers like Mint.

These alternative providers demonstrate their savvy about user lifestyles. Read some of the blogs that Moven posts on their site for a wakeup call.

The alternative mobile wallet providers are also well positioned to offer PFM tools in their apps by analyzing all of the transactions they handle. This will allow them to offer real-time personalized financial advice based on their users’ spending habits.

Banks must realize that these companies threaten their status as customers’ primary source of financial insights and advice. Banks must respond by offering robust mobile PFM tools in their apps that include predictive capabilities and recommend financial products based on users’ financial behaviors.

A static offering will not pay off for your bank.

Mobile account opening

If customers turn to their mobile banking apps for financial advice and product recommendations, banks should also make it easy for them to sign up for new products in those apps. This will help banks capture cross-selling and up-selling opportunities that arise from increased mobile engagement.

This will be particularly important as millennials become the dominant customer demographic for banks over the next few years. Millennials will be looking for financial products that help them achieve greater financial flexibility and security. And banks could lose out on revenue opportunities if they make these mobile-first customers open accounts and credit products in a different channel. [Read “Mobile banking requires focus” for a view on online applications and mobile.] 

However, a Financial Brand study last year found that less than 20% of the top US banks offer mobile account opening. 

Part of this is because banks can’t just migrate their online account opening processes over to mobile. Customers have to provide a great deal of information to sign up for financial products, and typing all of that information on a smartphone is inconvenient at best.

There’s a ready solution: Banks can optimize account opening using the smartphone camera, just as they have done with check deposits, to gather this information.

Focus on the key 3

Keeping customers engaged in the mobile arena usually requires an intuitive user experience, and banks are often at a disadvantage competing on those grounds with digitally native companies. Banks can’t match the mobile app experience that companies like Apple and Samsung can provide. These companies spend an enormous amount of time and resources on great mobile customer experiences.

However, banks don’t necessarily need to make their mobile payments and PFM solutions the easiest to use.

Banks can compete on convenience in mobile by offering everything a customer needs—mobile payments, account balances, investments, loans, account opening, recommendations, and real-time financial insights—through their own mobile apps. That way a customer only needs to open one app to see their entire financial picture.