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Banks' Mobile Challenge

A Snarketing post by Ron Shevlin, Director of Research at Cornerstone Advisors

At the risk of ticking off or alienating any of my friends (like I have any) or other people that I have a great deal of respect for, I have a confession to make:

I am sick and tired of hearing people warn banks that if they don’t [innovate/use social media/etc.] they’re going to disappear, or be disrupted, or whatever.

Sorry to be blunt, but any idiot can come up with that claim. And plenty of idiots do. Sadly, a lot of smart people make these claims, and that’s what ticks me off.

What banks (and credit unions) need is good advice, not apocalyptic warnings.

I may or may not be able to provide valuable advice (after all, I didn’t say I wasn’t an idiot). But what I do think I can provide is a little more focus on the problem than simply spouting dire admonitions.

The question that banks need to answer is simple (not that there is a simple answer):

Where in the mobile customer experience do banks add value?

Take a look at the picture below. Many thanks to Jaime Punishill who I stole this picture from.

In this picture, Kelly is out shopping, when she sees a pair of shoes that she wants.

A number of questions immediately pop into her head: How much do these shoes cost? Can I get them cheaper somewhere else? Do any of my friends have these shoes, and what do they think of them?  Possibly — but not necessarily — Kelly might also ask: Can I afford them?

In the old world of shopping, Kelly would had to have gone into the store to check the price, then go home, and search other retailers’ sites to see if they carried the shoes and what they sold them for (in the OLD old world of shopping, she couldn’t even have done that), and call around to her friends to get their opinions.

What I’m not sure a lot of banks understand just yet is that mobile shopping is more important than mobile banking or mobile payments.

In the new world of mobile shopping, banks must figure out how to add value in this process beyond “checking balances” prior to the transaction, and being the “payment mechanism (mobile device or not) at the culmination of the transaction.

The potential areas to add value, as I see it, lie in answering questions like:

    • Can Kelly afford it?
    • What will this do to Kelly’s budget if she buys this?
    • Which payment method should Kelly use?
    • Which payment method(s) do FIs want Kelly to use?

Answering the first question is fairly straightforward. Does Kelly have the money in her account or not?

Answering the second question is a little more tricky. It presumes that Kelly has used the FI’s PFM offering to set up a budget, and/or categorizes her expenses to enable the FI to provide some analysis. Although many FIs are moving in the direction of making their PFM offering mobile-enabled, answering this question — at the point of sale — is not that easy.

The third question is where the realm of possibilities leapfrogs what is currently available. With a mobile wallet that stores multiple payment methods, conceivably an FI could make recommendations on which account (e.g., checking account, credit card, or other account) would be best to use based on the account balance, rewards, and other criteria.

But even more value can be added if FIs could compete, in real time, for Kelly’s business. Perhaps American Express would offer Kelly an additional 5% discount if she uses her Amex card instead of her debit card. Perhaps her bank would offer her 50% off the cost of the purchase if she applies for a credit card (and is approved, of course).

There are probably many more questions that could be addressed. But my advice (helpful or not) to banks and credit unions is this:

The mobile challenge in front of you is determining where you add value in the mobile shopping experience.

Many mobile banking functions are just the porting of existing capabilities to the new channel. And success in mobile payments is dependent on adding value to the mobile shopping experience.

I hope this is a little more specific than “banks are going to disappear if they don’t innovate!” And I apologize to those of you who have said that. I know you know who you are.

Ron ShevlinRon Shevlin is Director of Research at Cornerstone Advisors. Get a copy of his best-selling book, Smarter Bank: Why Money Management is More Important Than Money Movement. And don't forget to follow him on Twitter at @rshevlin.

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  1. Oh boy! Do I ever agree with this! A bank or a credit union might disappear. Just like a retail store or even a chain store might disappear – but the danger of banks as a collective or credit unions as a cooperative being vaporized because they didn’t innovate is like saying the paperless office is going to make paper obsolete. True – all businesses have to keep up with customer demand and have to be advancing or they’re doing the death dance – but a little advancement is better than no advancement. And sometimes it’s better to crawl than sprint – especially when there are so many paths and unknowns.

  2. So am I allowed to make those claims and statements, seeing as all I tend to do is give advice that is mostly ignored?

    Brett King

  3. Ron, another great post. I totally agree with your view. In fact, what you are talking about is how do banks fit in with the Zero Moment of Truth or ZMOT. If anyone wants to learn more then goto the eBook is available for ALL formats. There is still an opportunity for banks and their technology partners to participate in the ZMOT.

  4. Got it in one, Ron. I agree that innovation for the sake of innovation is tired…the wired approach is finding ways to offer relevant services to today’s consumers. PFM in its current form is already a few years behind the consumer, but I think it does offer one way to provide a valuable service to mobile consumers. The picture you used says it all. Can’t afford it now? Set up the item as a goal to save towards as you stand there in the store. I know some people are not a fan of points, but you could also offer points for choosing your card at particular retailers instead of discounts (if you’re processor can’t handle that kind of functionality).

    Of course, this goes back to the need for credit unions and banks to revisit their business model…what markets do they want to serve and how do they want to make money? We are getting to the point that I think the individual FIs needs to look at their business as a CPG company with one brand but multiple product lines with separate brand managers supported by a common infrastructure. That’s the only way I see most FIs competing in this rapidly changing space.

  5. johnvowens says:

    Ron, while I do agree that banks should consider adding value to the mobile shopping experience, I do still think that banks need to keep up with the times or face a bit of a “death dance” as customers slowly leave for more progressive banks. I am already shifting quite a bit of my personal and our corporate banking to banks offering easier mobile banking access. Just porting internet banking to mobile banking is not enough anymore. Since I am often on the road and it is hard to access a computer, I look for banks where I can access my accounts, check transactions, pay bills, authorize payments, transfer funds, and even deposit a check (yes I still get checks) by using simple straightforward mobile applications.

    Increasingly in the Philippines, banks are also linking with mobile money platforms to allow clients to more easily “withdraw” or transfer funds from a bank account to a mobile wallet which can then be sent to anyone with a mobile phone whether or not they have a bank account. I do agree, however, that links to mobile money accounts will be more relevant to emerging markets as opposed to US or European markets.

  6. John: I couldn’t agree more. The speed of the “death dance”, however, is (or will be) different across countries. In a week or so, I’ll be publishing a report (through Aite Group) called the The Global Rise of Smartphonatics which looks at mobile banking and payments behaviors and attitudes in 14 countries across the Americas, EMEA, and Asia/Pacific. We didn’t look at the Philippines (sorry), but the adoption of the mobile channel in Singapore and India far outpaces the adoption in the US. So, what you’re experiencing there is a bit different from what the US bankers are seeing.

  7. Kimberlee Karr says:

    Nice post.

    Just one thing…you start out by saying that you’re sick of hearing people urge banks to innovate and what they really need is good advice. However, you end with advising banks to figure out where they can add value in the mobile shopping experience. Don’t get me wrong, this is a great point, but isn’t it a bit innovative? I mean, you’re still suggesting that banks innovate…just beyond mobile banking or mobile capture.

    It’s all right if you’re tired of people saying if banks don’t innovate they’ll disappear, but honestly, that’s how business works. Innovation is a must for all companies. Again, I think the point you were trying to get across is that people shouldn’t make the innovation claim without backing it up.

    …but when PayPal can handle the majority of my “banking” needs because of its innovative services, I would go as far to say that banking–as we know it–is being interrupted. I just don’t know if anyone wants to admit it yet.

  8. Kimberlee: OK, good point, fair enough. To hone my point, I should have said that I’m tired of hearing people urge banks to innovate WITHOUT PROVIDING CONCRETE IDEAS AND SUGGESTIONS. Empty exhortations to Innovate Or Die! are useless bits of advice.

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