The Impact Of Mobile Banking

Ten years ago (and by the looks of the picture on the report, at least 10 pounds ago), I wrote a brief titled Banks Cutting Costs Should Cut Mobile Finance.

At the time, mobile banking was making its first appearance at a number of banks, and the crux of my argument was that it wasn’t the right time for banks to be investing in mobile banking capabilities. Why?

  1. Technological hurdles. Smartphones hadn’t quite made it to scene, and the majority of households back then didn’t have data plans.
  2. Consumer preferences. Mobile banking features weren’t important to consumers back then. Believe it or not, only 15% of consumers said they’d check their account balances with a mobile device.
  3. Relationship risk. Bottom line, nobody was going to leave their bank because it didn’t offer mobile banking.

I had a colleague who wrote the opposite — that banks should be investing in mobile banking. The CIO of a large bank flew the two of us out to his firm’s headquarters and had us debate it out in front of his team. I won the debate (of course), and the bank took my advice and eliminated its mobile banking budget. 

A year later, I got an email from the CIO thanking me for making the right recommendation. He told me they redeployed millions of dollars of capital to more important initiatives. 

Roll the clock ahead 10 years, and I’m still an analyst writing about mobile banking. But man oh man how my tune has changed. 

Aite Group just published a report I wrote called The Impact of Mobile Banking: The Case for Mobile Marketing. I always walk a fine line when I blog about reports I write because I can’t give away too much. But I will share two conclusions from the report:

  1. If you think that mobile banking — like online banking and online bill pay before it — is a way to improve retention among more affluent customers, you’re seriously wrong.
  2. Mobile banking will have a detrimental impact on revenues. 

If you think that these conclusions  sound like arguments for not investing in mobile banking, I’d understand. But that’s not what I’m arguing for. Offering mobile banking capabilities is an imperative — consumer interest and demand is overwhelming and growing. But simply providing mobile banking capabilities — e.g., checking balances, transferring funds, paying bills — won’t pay for itself.

Banks and credit unions must get a whole lot better at mobile marketing — in the form of cross-selling, influencing choice of payment cards, merchant-funded reward offers, and driving mobile payments — in order to recoup their investment in mobile banking. And in 2011 — unlike in 2001 — there’s no putting off this investment to the future.

For more specifics, I’m afraid you’ll just have to read the report.

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