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The Great Mobile Banking Retention Delusion

The Federal Reserve Bank released its annual study on mobile banking, and some of the findings are a bit hard to stomach. The Fed asked:

What business benefits have been achieved since offering mobile banking?

More than eight in 10 banks said customer retention:


First off, that’s an interesting way to word the question. I would have asked “what business benefits have you achieved as a result of offering mobile banking?”

The way the Fed asked the question the benefits achieved could have been the result of the economy improving if a bank had started offering mobile banking right when the economy started to improve. But I’ll assume respondents answered the question from the perspective of what results were achieved from offering mobile banking.


I’m not buying the answers, though. Marketers find it nearly impossible to attribute a change in retention to any one action or offering. Maybe what these banks are seeing is that customers who use mobile banking have a higher rate of retention than customers who don’t. That may be true, but it doesn’t prove that mobile banking caused the higher rate of retention.

In addition, although nearly half of respondents said they’ve achieved increased efficiency from offering mobile banking, just 29% said that they’ve actually reduced costs by offering mobile banking. That means there are a lot of banks with unrealized productivity gains.

But it’s probably a moot point. Eight in 10 banks said that they have less than 20% of their customers actively using mobile banking. With so few people actually using mobile banking, what impact on overall retention—or operational costs, for that matter—could  mobile banking really be having?


The regional differences in claimed benefits are interesting, as well.

While more than 80% of the banks in the Atlanta, Boston, and Dallas regions–and nearly 90% of the banks in the Richmond, VA region–claimed retention benefits, only 65% of banks in the Minneapolis region said they’ve seen an improvement in retention as a result of mobile banking.

In fact, 22% of the Minneapolis-area banks said they’ve seen no benefits from mobile banking, roughly three times the percentage of banks in the Atlanta and Dallas regions who have realized no benefits.

Maybe Minnesotans like to get into their cars when it’s three below zero and drive down to their banks to check their account balances. If you have another explanation, I’m all ears.

The Fed report speculated:

Those FIs finding “no benefits” may be offering mobile services for competitive reasons alone, or are too new to mobile to see benefits as yet.

That makes no sense. If you’re offering a service for “competitive” reasons, and other banks have realized certain benefits, then you should be realizing those benefits, as well.


There’s something else that bugged me about the Fed’s findings. When asked what the most common reasons preventing customer adoption of mobile banking were, 70% of bankers said “lack of customer awareness.”

Oh come on now, how big of a rock do you have to live under to not know what mobile banking is, and whether or not your bank offers it?


Bottom line: I’m not arguing that banks shouldn’t offer mobile banking. What I am arguing is that:

  1. Mobile banking is infrastructure. It’s a platform for which other things—things that could actually produce an ROI or business benefit—can happen, and
  2. Proper measurement techniques are needed to isolate and quantify the impact of investments. I’m just not buying that many of the banks surveyed have those techniques in place.

But hey–if you need to dazzle your senior management team with BS in order to get more funding for the mobile channel, don’t let me shatter your mobile banking retention delusions.

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. Slightly off subject:

    Why does the Federal Reserve feel compelled to do these surveys, when other others do similar ones?

  2. Jim Marous Jim Marous says:

    I think you may miss some of the nuances of the report as it relates to retention. Since the vast majority of banks and credit unions surveyed were smaller organizations, I think it is safe to assume that the majority of those who stated ‘retention’ as a benefit were late to the mobile banking game. In those cases, not having mobile banking was hurting both acquisition and retention efforts. By offering mobile banking, these same banks were able to ‘stem the outflow’ of those customers who no longer had to go elsewhere for mobile banking.

    I also found it humorous that the ‘improved efficiency’ numbers were so much higher than the ‘reduced costs’ numbers. This is completely in line with what Cornerstone and others keep saying regarding the benefits of mobile banking (and mobile deposit capture). If you don’t reduce staff, close branches, etc., in response to the shift in transactions through the mobile channel, all you have done is add a channel and increase costs.

  3. Bryan: The Chairman of the Federal Reserve is compensated on how many Facebook “likes” the Fed gets, and surveys like these give them more social media presence.

    Jim: How are you defining “late to the game”? One of my former colleagues at Atie Group pulled together the % of banks and CUs offiering mobile banking, and 3-4 years the percentage was already over half. So I’m not sure why you’re assuming the banks surveyed were late adopters.

    And why would you assume that not having mobile banking was a driver of attrition in these banks? Gen Yers disproportionately bank with larger banks, so the consumers most likely to leave a bank for not having mobile banking weren’t banking with those smaller banks anyway.

  4. I define having less than 80% of banking organization offering mobile banking as of August of 2014 as ‘late to the game’ ( It is not hard to offer mobile banking, and numerous studies have shown that people will leave an FI for that functionality.

    And to assume that people wanting mobile banking services are Millennials is forgetting that some of the most active users of mobile banking are wealthy households. Most Gen Y’s = Digital Natives. Not all Digital Natives are Gen Y’s.

  5. Didn’t say other generations didn’t USE mobile banking.

    Am implying that they don’t switch (more accurately, didn’t switch and/or haven’t switched) because of lack of mobile banking.

    To your first point: I don’t understand your point. 78% said they offer mobile banking. Was there another data point that showed HOW LONG they’ve been offering mobile banking? You seem to be implying that some meaningful percentage of that 78% only recently began to offer mobile banking, and therefore, were “late to the game.”

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