The phrase “monetize your mobile channel” calls to mind things like charging consumers to download ringtones, order pizza, or make an in-app purchase of special game abilities. So far, that kind of pay-to-play revenue stream isn’t in most bank and credit unions’ playbooks, although maybe it could be.
Yet even without that there are plenty of practical ways financial institutions can begin to monetize the mobile banking services they provide.
Here are five ways that financial institutions can monetize the mobile channel, compiled by digital marketing expert Debbie Smart, of Q2ebanking for a recent presentation:
1. Cross-selling. 31% of consumers already use their mobile banking app more than any other app except social media and weather apps, according to research by Citigroup. Almost half of consumers overall, and two-thirds of Millennials, have increased mobile banking usage in the last year. Mobile is where to meet consumers who need more from your institution. Avid mobile banking users would make ready borrowers through digital lending programs, Smart suggests.
2. Reducing Costs. Mobile helps supplant costly traditional processing with less-expensive all-electronic transactions, and unlike other cost-saving measures of the past, hasn’t had to be thrust upon consumers.
3. Market Penetration. Widespread ownership of digital devices has created a virtual community that transcends geography. If you build a really great app with strong add-ons, people can come from anywhere to use it and come into your institution’s consumer base.
4. Data Analysis. Mobile technology can enable many analyses that can result in better service for consumers and more business for banks and credit unions — if institutions follow the signals there to be seen.
5. Pay-to-Play. Financial institutions may not be selling gaming add-ons, but in time leaders will develop mobile solutions to consumers’ financial challenges that will alleviate pain points sufficiently that they will be willing to pay for them, Smart predicts.
One factor that stands in favor of traditional financial institutions as they venture further into monetizing mobile services is trust. Smart cites figures indicating that 87% of Americans still trust banks and credit unions over nonbank financial companies.
“This is a huge opportunity,” says Smart.
Following Digital Breadcrumbs to Monetize Mobile
A key audience to watch as institutions’ mobile offerings grow and deepen are Gen Z consumers, the oldest of whom are now coming into the workforce and facing the need for more financial services. Smart, speaking at a webinar presented by The Financial Brand, says that 18-24 year olds are expected to make up 40% of U.S. consumers in the 2020s. Even more than Millennials, they are all about handheld digital technology.
“In fact, 80% of them would give up TV for a day to keep their mobile phone,” says Smart. She acknowledged that older channels never seem to go away, and that Gen Z will still occasionally want financial services through older channels — including branches.
Jim Marous, Co-Publisher of The Financial Brand and Owner/Publisher of the Digital Banking Report, believes that defining the needs and preferences of consumers by age may no longer be sufficient to understand how best to serve people.
“I consider myself to be a Millennial in a Baby Boomer body,” says Marous. Actually, he adds, he uses digital financial services — and far beyond merely mobile banking — more than his college-age son.
Hence the increased importance that his research has found among banks and credit unions on data analytics, a change from past surveys, when improving the customer experience led institutions’ priorities. In a sense, however, the increased concern for analytics feeds into the customer experience, according to Marous. The reason: All generations, but especially Gen Z, place more importance than ever on personalized services. Analytics that will enable institutions to gain that perspective on consumers represents a pre-requisite for personalization.
And that, he continues, is because increasingly consumers judge the quality and convenience of their customer experience by their bank or credit union’s digital face.
The bar to please consumers keeps rising. Presently, according to Marous, “they want better payment advisory service, real-time access to their financial data, the ability to easily make purchases from their mobile device, and the ability to share their banking credentials with third parties.”
This demand has been accompanied by easing in consumers’ feelings about sharing data with their providers. “They are willing to share so long as doing so gives them value in return,” Marous explains. In large part he credits companies like Amazon and Alphabet’s Google for the development of this willingness.
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Eliminating Friction, Going Digital No Longer a Choice
Marous is based in Cleveland, Ohio. He notes that the former Quicken Loans Arena, home of the Cleveland Cavaliers, has been renamed the Rocket Mortgage Fieldhouse. He takes that change as a cultural sign of the typical consumer’s demand for digital speed and quality.
As financial relationships grow increasingly digital, consumers’ views of rewards programs will evolve as well, Marous says. Among other developments is a growing expectation of tailored rewards offers based on what institutions know about a consumer. In fact, Marous quips that as a consumer he would like to see both his business and personal banking providers demonstrate more clearly how much they really know about him.
They don’t always know what they know, though.
“Bankers cannot get out of their own way,” says Marous, poking a bit of fun at himself. “I’m the first to admit that if I was a banker sitting at a table being asked to build a digital banking solution, I’d say it’s OK for everyone else to change, but I don’t want to change what my bank is doing.”
However, change must take place. Marous says he recently applied for and received an American Express card on his smartphone. It took about 30 seconds to be approved after he’d entered his information, and not much of that, either. On the basis of his name and Social Security number, he says, Amex was able to tap into sufficient data sources to grant him the card.
By contrast, he says, when he recently went car shopping digitally there were nearly two dozens points where traditional financial institutions could have picked up his interest in a new vehicle and his need for a new lease. Yet not even the holder of his expiring lease caught on. [Read a detailed recounting of this experience in Marous’ own words.]
Debbie Smart relates how a community bank that discovered a high number of ACH transfers to a large mortgage bank. Someone at the bank realized that these borrowers could have obtained their mortgages from the bank itself.
“The community bank had some attractive mortgage packages, and so it was able to put some better deals in front of the right consumers,” says Smart. “That’s just one example of tying data into better cross selling.” Delving into mobile banking data to accumulate such business intelligence will prove more and more important in the years ahead.
Can banks and credit unions ever tap the “pay to play” button based on such analyses? Smart says there is more potential there than many executives realize.
Remote deposit capture via smartphone has mostly been seen as a cost-saver for banks and credit unions, she says. Yet many consumers love the convenience and Smart says she believes consumers would be willing to pay even a couple of dollars per captured check to not have to deposit it in a branch or ATM.
This kind of thinking could change the concept of service charges. Smart suggests that the “freemium” model used by some fintech apps, where the basic function is free but other services are pay-to-play, could easily translate to financial services.