Mobile Banking: Critical Switching Trigger Today… Table Stakes Tomorrow

Mobile continues to play an increasing critical role in bank-switching decisions, with 60% of smartphone and tablet users citing mobile banking capabilities as “important” or “extremely important” in their decision to switch banks.

According to the “Mobile Financial Services Tracking Study” from AlixPartners, 60% of smartphone or tablet owners who switched primary banks in the fourth quarter said that mobile banking capabilities were an “important” or “extremely important” component in their decision to switch. That’s up dramatically from 48% in a similar survey fielded in the first half of 2013.

“Banks who fail to innovate run the risk of losing customers and face real challenges in attracting new customers.”
— Bob Hedges, AlixPartners

“The availability of mobile banking features plays an increasingly critical role in the consumer’s decision to switch primary banks,” according to Bob Hedges, managing director in AlixPartners’ Financial Services practice. “Consumers are demanding, expecting, and shopping for more mobile capabilities. Banks who fail to innovate run the risk of losing customers and face real challenges in attracting new customers.”

Hedges says the mobile channel has the potential to fundamentally alter the services sales and servicing paradigms at US-based financial institutions.

“Development of new mobile capabilities will attract new digitally-oriented consumers to retail financial institutions. A commitment to innovation on behalf of the consumers’ needs and preferences is required to build the financial services franchise of the future.”

— Mobile Financial Services Tracking Study, AlixPartners

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Mobile remote deposit capture adoption is growing steadily. Across smartphone and tablet owners, remote deposit adoption is growing fast, now at 22%, up from 18% in just six months. The study found that the typical consumer who adopts remote deposits tends to be younger and wealthier, and tends to use more of the products available at their primary bank than non-adopters.

“We will increasingly see banks developing and rolling out capabilities aimed at addressing specific consumer pain points and opportunities to add value,” says Teresa Epperson, managing director in the Financial Services Practice at AlixPartners. “In the ongoing wave of industry innovations, mobile photo bill pay could be the next big thing.”

In the fourth quarter of 2013, 28% of consumers between the ages of 26 and 34 said they would be likely to change banks to gain access to mobile photo bill pay.

The study also shows strong growth in the adoption of mobile banking services overall, with mobile banking now being used by 28% of all U.S. banking consumers, up four percentage points from the survey in the first half of 2013, and up nine percentage points from the fourth quarter of 2012.

This trend will almost certainly continue as smartphone, with sales of mobile devices soaring. U.S. consumers are spending more and more time on their smartphones and tablets, particularly for banking transactions — specifically to check balances, look at monthly statements, make account transfers, and pay bills.

Consumers who adopt mobile banking channels use higher-cost banking channels — like branches and call centers — less frequently. According to the AlixPartners study, mobile-banking users reported visiting a bank branch 39% fewer times per month after adopting mobile banking services.

“The behavior and decision making of consumers who have adopted mobile is making the business case for mobile innovation and promotion by financial-services institutions,” Hedges added. “Consumer engagement with smartphones and other digital channels cannot be ignored.”

“Mobile is now mainstream,” Epperson points out. “It is table stakes for being relevant to consumers.”

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