My Digital Banking Nirvana

aMy Digital Banking Nirvana In many ways, there is no difference between what makes a great mobile banking application and what makes a great non-banking mobile application. The key components are:Simplicity: Does the app replace a non-mobile process I do often? Does it make my daily life easier? Is it easy to use? In the non-banking world, I love the KeyRing application because it stores multiple loyalty cards in one place on my mobile phone, eliminating the need to carry plastic cards. The app also links to digital offers I can redeem without cutting coupons.Engagement: Does the application stimulate positive interaction, and build a better application from this engagement? For me, my Marriott mobile application does a great job. Beyond providing the standard ability to make reservations and check my loyalty balances, it also allows me to check in early, receive notifications when my room is ready and informs me about special offers through multiple channels.Contextual: One of the benefits of a mobile application vs. an online tool is the ability to provide value based on where I am located. My favorite app from a contextual perspective is OpenTable. Using locational functionality, OpenTable provides suggestions of restaurants based on my current location and previous dining experiences. Reward points are provided for using the app and starting next year, the app will also allow me to pay for my meal using my phone and the OpenTable application.So, which mobile banking applications meet one or more of the above criteria and could become part of my digital banking nirvana? As could be expected, this list is fluid, since new innovations are being introduced every week, replacing previous applications that were once best-in-class.As an active mobile banking user, there is some functionality that must be the foundation for my best-in-class mobile banking relationship. First of all, as covered in a recent blog post entitled, Banking Innovation for the Fat-Fingered, leveraging mobile imaging technology and my phone's photo capability simplifies mobile banking by removing keystrokes and improving accuracy. Therefore, I expect my future mobile bank to provide the following:In addition to leveraging the photo capabilities of my phone to simplify my banking, I would prefer to eliminate many of my password and authentication steps, while not having to worry about security issues. One potential solution is to integrate Capital One's new SureSwipe login feature into my new mobile banking relationship. With SureSwipe, I remember a pattern as opposed to passwords, making my login easier as shown in this humorous video.I also do not want to go through a series of authentication steps just to see the balance in my account. In the U.S., GoBank provides me the opportunity to see my balances with a simple swipe of the finger. GoBank is still one of the few banks in the U.S. to provide this instant balance feature, even though Mapa Research found close to 20% of major banks worldwide offing this functionality. Banks overseas offering a similar capability included Commonwealth Bank's Kaching, Swedbank's 'balance shake' and Bank of New Zealand's mobile app that allows you to see your entire relationship without a full login.Other benefits of GoBank I would like to include as part of my digital banking nirvana include having a wide range of customized alerts, a negotiable monthly fee, and their 'fortune teller' that informs me when I might be spending money I will need later. (I covered the reasons I like GoBank in a Financial Brand blog post here) Going a step further, I would prefer not to type any information at all into my phone for basic mobile banking. If I had USAA's Virtual Assistant powered by Nuance, that would be possible since members are able to use voice commands to perform basic banking tasks. Nuance is also testing a similar solution at U.S. Bank.Beyond the basics, no other functionality of mobile banking is as important as payments. Despite high industry attractiveness and relatively low consumer acceptance (in the US at least), mobile payments is the Holy Grail of mobile banking and is the potential tipping point in the battle between bank and non-bank providers. From making payments to tracking payments, the diversity of payment applications globally is exciting.One of the most comprehensive mobile payment applications is from Commonwealth Bank in Australia. The CommBank Kaching application provides the ability to make P2P payments by bumping phones with another person, using a mobile phone number or email address, or even through Facebook. For bill or merchant payments, QR codes can be used and NFC payments are supported with internal Android functionality and with a CommBank Paytag on iOS devices.CommBank Kaching Mobile Payments FunctionalityOnce payments are made, some of the best mobile receipt capabilities I have seen have come from the new banking competition in the U.S. I am a user and a fan of the Moven digital receipt capability that provides me real-time feedback on my PayPass or debit card purchases as well as contextual transaction insights (the application also has spend tracking to compare spending to previous periods and the ability to pay friends by email, mobile or via Facebook).It would also be nice to include the ability to add pictures to my receipts as offered by Simple in addition to having real-time adjustments to my safe-to-spend and budgeting insight. Simple also provides a very comprehensive search capability that can assist the tracking of spending using 'Google-like' queries or hashtags for spending categorization. Poland's mBank also provides transaction search capability using Google-like queries supported by the excellent Meniga PFM platform.Simple Real-Time Receipts with Safe-to-Spend I understand that my mobile phone is not the best platform for enhanced budgeting, but I still want to be able to track how I am doing each month using my mobile device as an adjunct to the online banking capability on my desktop. This requires striking a very careful balance between form and functionality.As I mentioned, I am a fan of both Moven and Simple for their tracking and budgeting capabilities. Both allow me to see my financial position compared to previous periods and utilize a mobile-first design. The visualization of spending behavior is excellent with the use of easy to understand graphs on both the online and mobile platforms. For me, one of the best personal financial management (PFM) tools has been developed by MoneyDesktop. Using some of the most advanced user interface design capabilities in the industry, their MoneyMobile solution takes some of the best functionality from their online application and creates an excellent visual interface for mobile devices.MoneyDesktop Mobile PFM SolutionAs much as I am looking for the ultimate mobile banking experience, I realize that mobile may not be the best channel for all of my interactions with my bank. In those instances when I want to use online banking tools, talk to a customer service representative or visit a branch, I still use the same criteria of simplicity, positive engagement and contextual functionality.As I travel between online, mobile and my tablet, I don't want to relearn how to conduct my banking. While I may want added functionality that takes advantage of the tactile and interactive benefits of the tablet or the expanded canvas of the desktop computer, I want the 'feel' of the experience to be similar.Westpac New Zealand recently introduced an excellent device agnostic solution  that provides a similar look and feel across devices. In addition to using a responsive design (making the look conform to the device and how the device is held), the use of a 'central platform' will simplify changes in the future.WestPac Device Agnostic Central PlatformWhen I have a problem with my account, the last thing I want to do is search for the appropriate phone number for customer service or wait until I get home. Therefore, the ability to have an integrated customer service capability within my mobile banking application is a must.NatWest and RBS were the first two banks in the U.K. to offer in-app, real-time customer service whereby a customer can initiate a conversation with a dedicated Mobile Chat advisor. In addition, ING has a mobile application that allows for direct appointment setting with a specific agent in a few easy steps.Going one step further, Turkey-based Akbank became the first bank to offer video chat. Customers can make a one-click video call from within the bank's online banking site to one of the bank's video enabled service agents. No additional software is needed and the application will soon work on Android and iOS devices as well.Finally, for those potential instances I may want to use a branch, the traditional branch just doesn't meet my needs. I want to be in and out as quickly as possible and most likely won't need to see a teller. Banks globally are trying to address this change in customer behavior by scaling back traditional transaction-centric branches and replacing them with either advisory-centric units or technology-enabled branches that leverage video and advanced transaction capabilities.National Australia Bank (NAB) recently opened their first 'Smart Store' where traditional tellers have been replaced by full service machines. These new branches take less space, will potentially have longer hours and are geared to the lifestyles and digital-savvy nature of Customer 3.0. (This new branch format was covered by The Financial Brand here)As with any avid mobile banking user, I want even more from my mobile banking experience than just basic transactions, payments and basic money management. For instance, I have definitely come to enjoy my PNC Bank ATM/Branch Finder, that uses augmented reality to allow my phone to search and find facilities through the screen on my phone. Interestingly, while I find the app useful, I am intrigued as to why the app isn't integrated into my normal mobile banking application (PNC Finder is a separate app).With the demise of most points programs associated with debit card usage, more elaborate (and potentially more lucrative) merchant-funded rewards programs have taken their place. Unfortunately, the vast majority of these programs require a proactive opt-in on an offer level basis and are connected with the online banking relationship as opposed to mobile banking. This makes taking advantage of any rewards cumbersome at best and downright maddening most of the time.To address this problem and to provide locational rewards using my phone's GPS capability, Cardlytics is enhancing their merchant-funded reward program in early 2014 to include a much more user-friendly rewards program that will provide offers based on where the customer is located. This functionality is already available from American Express with their My Offers program that leverages both transaction history (what I do) with locational information (where I am).As long as I am trying to develop my digital banking nirvana, I might as well look a bit further into the future and make sure my mobile banking relationship can be supported by wearable technology. While definitely not for budgeting or more difficult mobile banking transactions, both Google Glass and SmartWatches can potentially be effective for mobile alerts, balances, simple transfers/payments and augmented reality ATM/Branch finding capabilities.Two banks are setting the pace globally for wearable technology integration. Banco Sabadell has already used an open app development forum to create mobile banking using Google Glass. As covered by The Financial Brand, the first iteration of 'banking by glass' includes balance inquiry, the ability to get alerts and find branches and eventually deposit a check by looking at it.In addition, Westpac New Zealand has created the first SmartWatch banking app that leverages the bank's Cash Tank application. Initially only providing balances without formal login, the application is expected to also include the ability to get alerts and do transfers in the future.It is clear that the development of innovative mobile banking applications is an ongoing process with new applications and capabilities being introduced almost every day. Therefore, it is important for those searching for digital banking nirvana to not only keep up with industry trends globally (much of the innovation is being done in the Asia Pacific region as mentioned in my recent blog post on innovation), but to also partner with those banks that have innovation ingrained in their culture.I was lucky enough to be surrounded by many banks at Next Bank Sydney that obviously do more than just talk the talk on innovation . . . they walk the walk. It was apparent that each institution put a high premium on future thought and were encouraged to think out of the box and not be afraid to fail. The energy level of people from these banks was high and there was an amazing willingness to share from each other as well as leaders globally.Beyond Australia, banks like CaixaBank and HanaBank, as well as USAA, Moven and Simple in the U.S. are ones to follow. I also am intrigued by BBVA, where their Innovation Center is both robust and very public. In addition to a public Innovation Center web site, there is also a LinkedIn and SlideShare page, sharing ideas that have been developed and discussing the innovation process at BBVA.It is clear that my digital banking nirvana will be a moving aspirational target. But, if I was to combine what is available globally today into a single mobile banking app, I would have a killer mobile banking relationship with my bank.

Big Day for Payments: Plastic vs. Digital

a Big Day for Payments: Plastic vs. Digital Maybe both will garner the support of the key involved parties. Maybe neither. Maybe another company will take the Coin concept mainstream sooner than the planned introduction. The one thing I am pretty sure of is that it is further evidence that financial institutions need to place multiple bets on alternative solutions to avoid being left behind.Despite all of the talk in the industry around mobile payments, acceptance of new digital innovations and platforms has been anything but a smooth ride. In addition to the seemingly insurmountable challenge around consumer's concern with security/privacy, getting merchants, consumers, financial institutions and even carriers on the same page has been close to impossible.At the end of the day, the biggest challenge may be the perception by many that there is no reason to fix something that isn't broken. The current card-based process for making payments, while not perfect, is relatively easy and definitely firmly entrenched in the consumer's daily life. Coin is a .84 mm thin plastic card-like device that can store any of your current cards (actually, 8 of them) and behave like the cards it replaces. Instead of carrying an assortment of debit, credit, gift, membership and loyalty cards from various institutions, you simply use the dongle provided (like the one used by merchants accepting Square) to capture your card information on your phone, take a picture of the cards and use the Coin app to load your Coin card. While only 8 cards can be loaded into the Coin card, an unlimited number of cards can be stored in the mobile app and switched in and out of the card as desired. "You don't need eight cards every day, so your phone is kind of like your drawer, and your Coin is kind of like your wallet," explains Parashar, founder and CEO of Coin. When you are ready to pay or use a loaded card, simply press a button on your Coin card to select the card you want to use (electronics imbedded within the Coin card itself), present your card to the merchant like you have done in the past, and the rest of the process is the same as it is today (see compelling video below).For those concerned about the security of the card should you leave the card behind (only happens to me about 4x a year), the Coin card uses Bluetooth low energy technology to inform you on your phone that you left your card behind. Better yet, the card completely disables itself if your phone and card are away from each other for more than 10 minutes. For those concerned about someone scanning another person's plastic into the app, Coin says that the app only accepts a card that includes the user's personal information. Further, the Coin app is protected with 128-bit or 256-bit encryption and the company is pursuing PCI compliance. The app is also password protected.From the video alone, it is clear that Coin is cool. I personally love it because it is another example of incremental innovation, based on simplifying a person's life seamlessly. It combines something that I am very familiar with (traditional magnetic swipe mechanics) and leverages very high tech digital technology to lighten my wallet. The public seems interested as well since, in the first 48 hours, almost 2 million people viewed the demonstration video on YouTube, making this financial product the number one trending video.No new hardware is needed since the device uses a traditional (or new form) credit card swiping device. In other words, Coin has done what mobile payments is hoping to do (eliminate wallet bulk) without changing my payments behavior. And until NFC, Isis, PayPass or any other mobile payment alternative gains the needed momentum to become omnipresent in my life, an incremental improvement works for me (even though I still love the integration of my Moven debit card and PayPass with mobile receipt and payment analysis).Initially, the Coin card is expecting to be released in either black ('Midnight') or white ('Snow'), with additional colors being introduced later (sound familiar?). The app will initially be able to run on both iOS and Android. Obviously, the Coin card would not be used for online purchases.While not the best way to judge a new payments alternative, even the Card website is cool. Here is a link to the product's FAQ page (be sure to read all of the questions . . . some are helpful in daily life).While already having raised funds from venture capital firms (and interestingly the backing of former Google Wallet head Osama), Coin hoped to raise the $50,000 it says it needs to start producing the card by pre-selling the cards to the public beginning immediately for $50 on their website. This method of pre-sale was to gauge the acceptance of the concept up front and underwrite the initial  offering. It is expected that the card will be priced at about $100 at introduction which is scheduled for next summer.According to representatives from Coin, the start-up surpassed their initial goal for funding . . . within 40 minutes. In addition, the buzz in the industry (while not always the perfect barometer) was unprecedented. Obviously, the consumer wants an alternative to the fat wallet, that is easy to use, acceptable everywhere and avoids a steep learning curve.To kickstart the process (pun intended), Coin is offering a $5 referral incentive for those who pre-order Coin. Once a person orders Coin, they will be provided a unique URL via email which can be used to tell friends and family about this unique payments solution. For each referred party (up to 10) who also pre-orders within 90 days, a $5 credit will be applied (up to covering the $50 cost of the service. Just like the card-based platform Coin is hoping to simplify, the solution is not without some potential drawbacks. For one, while the concept of connecting the smartphone and Coin card for security is a significant benefit, there may be some challenges during normal use when the bluetooth connection is lost (during airplane mode) or the card is out of contact with the phone for extended periods. Coin says that reactivating will be simple.Additional issues include the normal concerns around any card-based system such as potential skimming even though there is encryption, durability of the card (said to be 2 years of 'normal' use) and the fact that the Coin card is not waterproof. It is still to be seen how durable a computer embedded, less flexible card will be (especially in my pocket).From my perspective, there is one more drawback . . . Coin won't be available for at least another 6 months. Knowing the unpredictable payments world, the introduction will probably correlate with an announcement by Apple regarding their entry into the payments battlefield. As mentioned in the beginning of this post, another significant announcement occurred today with the long awaited launch of the Isis Mobile Wallet. According to the press release, customers with one of the more than 40 'Isis ready' smartphones can receive an enhanced SIM card from their wireless carrier and download the Isis Mobile Wallet for free from Google Play. The Isis Mobile Wallet will allow customers to pay at contactless payment terminals. Unfortunately, with only 200,000 local and national merchant locations (out of 8 million merchant locations in the U.S. market), this solution will continue to face an uphill climb. In other words, this might be a potential mobile solution if you live in the right place with the right phone.Not surprisingly, the newswires were buzzing with discussion and stories about payments innovations today. It just wasn't about Isis.

The Engagement and Revenue Potential of Mobile Alerts

aThe Engagement and Revenue Potential of Mobile Alerts As discussed in my post, Is Your Bank Ready for Customer 3.0, today's mobile-savvy customer expects their bank to provide instantaneous feedback as to their financial position and to move from being a financial facilitator to being part of their everyday, always-on digital ecosystem. A new white paper from Fiserv entitled, Enterprise Alerts: The Superhighway to Delighting Customers With Timely, Relevant and Actionable Information discusses how financial institutions can develop a comprehensive alert strategy that can take advantage of this opportunity while also meeting regulatory requirements related to customer notifications.Despite the benefits of alerts to financial institutions, adoption of alerts (similar to online banking and bill pay) have flatlined according to Javelin Strategy and Research. In a recent study entitled, Road Map to Alerts 3.0: A New Channel Emerges for Interactive Finance, Javelin predicts that the number of consumers who receive email or text alerts is only 34% currently, and will only grow by 4% annually through 2016 unless the industry deepens the pool of users by upgrading alert technology, providing more real-time insight and making alerts more useful and relevant.Source: Javelin Strategy & Research (2012)As could be expected, the banks with the most successful alert strategies (based on households receiving alerts) are the larger banks, while community bank and credit union customers/members are the least likely to have received an alert according to Javelin research. While Bank of America customers are the most likely to have received an email alert, Chase customers were the most likely to receive a text alert in the past 30 days.Bank of America Mobile and Online Banking Alert Selection PagesAt a time when the vast majority of interaction with online and mobile banking involves simplistic balance inquiries or funds transfer, expanding the number and variety of alerts can lead to a significantly higher level of engagement that can deepen the relationship with the customer. According to the Javelin research, while email continues to be the primary delivery channel for alerts, text alerts are the fastest growing type of alert even though this form is usually used to supplement the email variety. As mobile banking downloadable app usage continues to grow (currently at about 50% of mobile banking users), opt-out push notification alerts continue to grow.In early 2013, Varolii Corporation did research on mobile banking preferences entitled, Can You Bank On Your Banking App, which found that consumers differ significantly in the way they want to be contacted regarding their account. Some of these preferences may be correlated with the way in which they are currently being notified by their financial institution.Source: Can You Bank on Your Banking App?, Varolii Corporation (Jan. 2013) With such a wide variety of preferences, banks and credit unions must find a way to economically tie their alert system to a unified system of engagement that does not confuse the customer with too many notifications but still allow the customer a degree of customization. The key is to ensure that time-critical information is delivered to the customer in a manner that both informs and allows for immediate action. "An enterprise alert strategy should include a wide variety of alerts distributed via multiple end points and devices," says Jim Tobin, senior vice president and general manager, Mobile Solutions from Fiserv. "This will enable financial institutions to serve customers at different stages in their lives while keeping pace with regulatory demands."While the origin of alerts were to notify customers of overdrafts or potential fraud potential, the variety of alerts within downloadable applications has expanded significantly over the past 18 months resulting in an increase in engagement and a better potential customer experience. In the past, the majority of alerts have involved a one-directional flow of information from the bank to the customer. Examples include: Balance alerts: these could include overdraft or NSF alertsScheduled alerts: could be balance or other insight delivered on a scheduled basisEvent-based alerts: Could be based on a bill payment or potential fraudulent activityWhile the majority of the above were usually done via email, the movement to using SMS channels opened the door for potential conversations between the bank and the customer. This expanded to 'push' notifications that allowed customers to instantly take action on an alert.Push notifications enable customers to not only view an alert, but initiate a transaction in response to an alert within a secure app . . . in real time. For example, instead of simply getting notified that there is a low balance on an account, the alert can include a response option that allows for a transfer to be made using the mobile device. This deepens the engagement level, provides the customer more control and ultimately increases customer satisfaction.As the use of smartphones continues to grow, push notifications are the expected level of engagement for 'Customer 3.0'. "With push notification, financial institutions have an opportunity to transform their existing alerts offering from a reactive, event-driven service to a proactive personal financial management (PFM) tool," says Fiserv's Tobin.According to Fiserv, Push notification uniquely provide the ability for financial institutions to evaluate and measure alert programs. Unlike text and SMS, push notifications within the mobile banking app are not limited by carrier policy restrictions. For this reason, push notifications open the door for innovation and facilitate Enterprise Process Management (EPM) with the ability to measure the value of alerts.Bottom line, an expanded alert strategy with the resultant engagement by customers can transform a one-way, static alert offering into a proactive personal financial management tool.Not surprisingly, the new digital banks (Moven, GoBank and Simple) as well as several banks overseas have leveraged the power of mobile push alerts the most effectively. The options available and the ability to personalize the alert 'experience' can be seen below.I have covered the potential for financial institutions to charge a fee for services that provide 'added value' to banking and credit union customers. While most banks have been reluctant to charge a fee for almost anything since the Occupy movement, some institutions (most notably U.S. Bank and Regions Bank) have built a strategy around charging fees for 'premium' services. (see my post on monetizing mobile and building a fee-based strategy here and here).In a report from Market Rates Insight entitled, Growth and Revenue Potential of Emerging Financial Services, evidence is provided that banks and credit unions are missing an opportunity to charge for services that go beyond basic. While not covering push notifications per se, this 168-page study covers 13 different emerging financial services, with insights into fee optimization, targeting, institutional differences and bundling options.One of the services they do cover is the ability to charge for identity theft notifications which could be one of the many push notifications offered by a financial institution. According to the research, 82% of the households surveyed said they were likely to use identity theft alerts, with an average acceptable monthly fee of $4.07. The level of acceptance and perceived value of the service was not impacted significantly by either type of institution or type of customer (while women did value the alert slightly more than men).According to Dr. Dan Geller from Market Rates Insight, “Staying informed through alerts is highly desired and valued by consumers. Nearly nine of ten banking customers want identity theft alerts, and nearly eight of ten banking customers desire low balance alerts.”While I realize the value of an identity theft alert is definitely more than a basic alert, I believe there are alerts that the customer could receive that could be charged for as part of a bundle. For instance, the ability to charge a small monthly fee (let's say $2.00) for the following expanded set of alerts could be tested:Credit card or checking account low threshold alertUpcoming bill (within 2 days) where available funds are not sufficientLarge recurring bill notification (15 day notice) for mortgage, rent, car payment, tax bill, etc.Customized personal notification (owe a friend, non-financial promise made)Integrated personal calendarAccording to Fiserv, an enterprise alert strategy should include two way information flow and should be seamlessly integrated with all banking channels to support information access and management reporting. It should be both easy to enroll for and easy for the customer to make changes to preferences or to opt-out.Since the potential for a broad-based alert strategy can be difficult to implement, Fiserv recommends a phased approach with different stages to implementation including:Step 1: Account-centered alerts that are specific to account activity (low balance, direct deposit, large debits)Step 2: Event-based alerts that indicate when an event may prompt a follow-up action (bill payment due, P2P request)Step 3: Security-related alerts that notify the customer when accounts may be compromised (international charges, password change)Step 4: Customer care information that can be initiated by the customer or the financial institution (CD maturing, lease up for renewal)Step 5: Actionable insights that provide financial management tips and guidance based on the customer's activity (changes in financial activity compared to historical data)While it may be difficult for some banks or credit unions to reach the final stage of implementation, digitally savvy and mobile-first 'Customer 3.0' expects this level of partnership from their financial institution. While providing such an array of alerts may seem like we could bombard the customer with communication, today's alert strategy keeps the customer in control of what they want to see and what they don't find important. The key element is providing choice.As I have said in previous posts, "If you build it, they won't come." In other words, just because you have a robust, interactive alert capability doesn't mean that customers will take advantage of this opportunity (assuming they can find the option on their online and/or mobile banking site.Banks and credit unions should focus early efforts on those customers most likely to want and use alerts actively (low hanging fruit). These would most likely be those customers who already are using online and/or mobile banking actively and would best understand the benefits of customizable alerts. Messaging within the online and mobile banking platforms is the least expensive and most effective way to begin. Fiserv suggests segmenting the target audience by digital personas to determine which alert(s) would be most valuable for each segment.Beyond messaging within the online and mobile banking sites, other effective ways to communicate the benefits and use of alerts include:Frontline staff: leveraging the referral power of customer-facing personnelEmail: a series of email communication regarding alerts with direct links to preference pages on the customer's online banking site (Don't forget the power of engaging offline customers as well)Ad campaign: Because of the innovative nature of robust alerts, ad campaigns have been used as a way to acquire new mobile-first customersBranch and ATM signage: While branch traffic is less than in the past, branch and ATM signage is still effective at raising the awareness of customers who may or may not use online or mobile bankingATM receipts: One of my perennial favorites is the use of QR codes on ATM receipts to encourage both the sign-up for mobile banking but the selection of alert preferences. Linking to the alert marketing page of a bank, these receipts are an inexpensive way to reach mobile customers and prospects.Banks and credit unions have a unique opportunity to expand the functionality and engagement of both online and mobile banking by developing an enterprise approach to alerts that satisfies customer needs, addresses regulatory issues and can generate revenue. Since the implementation of a robust alert strategy is still in formative stages, financial institutions have a unique opportunity to develop both a standard (free) set of alerts along with premium (fee-based) alerts that customers value and are willing to pay for.This is a great time for banks to step up to the plate to provide a service customers will value and to generate needed fees at the same time. The question is . . . will we give another innovative set of services away for free?

Today's Mobile Banking Apps: Table Stakes or Cutting Edge

AppId is over the quota AppId is over the quota Today's Mobile Banking Apps: Table Stakes or Cutting Edge Over the past 18 months, mobile banking applications have evolved beyond the basics to include specialized functionalities, improved user experiences and an expansion of platforms supported. A year ago, mobile remote deposit capture (RDC) was live at only five of the top 13 banks. Today, it is a 'must have' banking application that has the potential to drive revenue. Similarly, P2P is now taking center stage at most banks despite some logistical hurdles, with five banks adding this functionality in the past 12 months.How are banks keeping up with consumer demands? How are they keeping up with each other? What's next? In the third report in a series on the state of mobile banking released by the financial research and consulting firm Celent, a review of new application development is provided along with a glimpse into the future. In the 44-page report, The U.S. Mobile App Landscape: An Annual Evaluation of Mobile Banking at Top U.S. Banks, Celent found that larger banks tend to out-develop and out-adopt smaller institutions by a significant margin. “The channel is still relatively new, but leaders in the digital channel space are beginning to take offerings into the realm of value-added services that are context-sensitive, timely, and utilize big data", says Dan Latimore, senior vice president of Celent's Banking Group and coauthor of the report. "There’s a large disparity among digital offerings—industry leaders are light-years ahead of the laggards.”Below is Celent's view of the mobile landscape as it continues to evolve. As can be seen, Emerging Capabilities include a more advanced stage of interaction with more knowledge-driven tools and analytics. While some of these may not be pursued by every organization, Celent believes most will be tomorrow's standard. Interestingly, some of the functionality in the Future Focus is already being implemented on a global basis (see previous post 'Banks Accelerate Mobile Banking Innovation', June 2013). While the future may be considered speculative, some components are beginning to appear at the more progressive institutions (U.S. Bank and BBVA Photo Bill Pay) and at some of the new players such as Moven, Simple, GoBank and BlueBird (see 'Challenger Brands & Disruptive Ideas: Learning From The NeoBanks', Financial Brand, August 2013).Current Evolution of Mobile (Celent, June 2013)Key Findings of the report include:Mobile, and more broadly digital channels, have become core parts of banking in 2013. Mobile devices are now just as much a tool to keep people out of branches as they are to facilitate interaction. Consumers are more eager to engage through a smartphone, and as nontraditional players rush in to fill gaps left by legacy financial institutions, CIOs are beginning to feel the pressure to build out digital capabilities.Digital channels are in a continuous process of evolution, proliferation, and adaption. While remote deposit capture was 'new' a year ago, it is now a basic functionality. Innovation in the mobile channels is ongoing with today's innovations quickly becoming tomorrow's table stakes. Banks are moving forward in their evolution of digital channels, but it's a slow and sometimes confusing process. It’s no surprise that banks aren’t considered innovators: it’s difficult, expensive, and risky to innovate. Yet, banking is entering a time of customer-centricity, where each institution defines this concept differently.New functionality is on the horizon, but not yet front and center. This includes: 1) Speech recognition, 2) Social media integration, 3) Mobile PFM tools, 4) Easy access account balance, 5) Cardless cash withdrawal, 6) Debit card on/off switch, 7) Remote mobile bill pay, and 8) Biometric security.Mobile is definitely moving beyond the replication of online banking services and into value-added features built to serve more specific use cases and even different segments of the bank (retail consumer, small business, wealth management, commercial, etc.). As shown above, the evolution is trending towards an environment where solutions are being 'bought' vs. 'built' and where engagement of the customer on a contextual level is beginning to be achieved. Using a features and functionality scoring sheet for each mobile platform (developed as part of the previous Celent research 'What's App, Doc: A Biannual Evaluation of Mobile Banking at Top U.S. Banks'), Celent evaluated apps for the Apple iOS, Android, Safari web browser and text banking. Scores were compiled for the top 13 banks in the U.S., with banks grouped into three categories based on the following criteria:How easy was it to find the desired function?How easy was the app to use?Was the information presented intuitive from a navigation perspective?Did the app take advantage of standard OS functionality to enhance familiarity?A very in-depth evaluation was performed for the following functions on each mobile platform to determine breadth of offering. Each function was evaluated on a number of levels with values placed on each of the following capabilities: Balance inquiryRecap of previous transactionsBill paymentsMoving money (RDC, A2A, P2P, etc.)Merchant-funded rewardsPFM toolsSocial Media integrationGeolocational toolsMarketing and salesSecurityCustomer supportPersonalizationAlertsCelent grouped the banks in this report into the following three categories: most improved, noticeable improvements, and minimal/ no changes.According to Dan Latimore, "While Chase continues to build on their mobile excellence, some apps have been playing catch up." And while not making significant changes does not necessarily mean the mobile banking site was poor, standing still in today's mobile marketplace is not a solid long-term strategy.Interestingly, in an unrelated research study conducted by Xtreme Labs for the period May 18 - June 1, 2013, entitled 'U.S. Banking Apps Report: Customer Reviews', a different set of 'winners' emerged based simply on the number of positive and negative customer ratings in both the Apple iTunes Store and Android Play Store. A minimum number of reviews were required for any app and an averaging of reviews was used for scaling. While significantly less scientific than the Celent research, the Xtreme Labs research provides a social media commentary on customer sentiment around mobile banking apps.Of the largest banks reviewed by Xtreme Labs, RBS Citizens, had the highest score on the iOS platform (4.5 out of 5 and a 93% favorability rating) and one of the best scores on the Android platform (4.5 out of 5 and a 97% favorability rating). USAA, American Express, Wells, TD Bank, Chase, BB&T and Regions and U.S. Bank also scored well in this study.Conversely, PNC (not virtual wallet), SunTrust, TD Bank, Fifth Third, Bank of America, Well Fargo and USAA also appeared on the negative side for the iOS platform in the Xtreme Lab study, indicating that the mobile apps were not considered the best for everyone.Beyond the need to explore the development of additional functionality that makes engagement easier and leverages big data more effectively, Celent saw some trends they believed warrant attention in the near term.As was noted in my June 2013 blog post around Mapa Research's study of global mobile banking innovation, U.S. mobile banking apps still haven't leveraged some of the power of cross-selling from a mobile device. While the Celent research noted that many banks have attempted some form of 'product pushing' or advertising of services, there seems to be minimal leveraging of big data insights to drive contextual offers. "Splash screens and real estate crowding banner ads should be left to online banking", say Latimore. "Apps should move toward offering up product suggestions (without sacrificing user experience) as well as being able to facilitate the beginning of an enrollment process, which can be finished at the branch, over the phone or online".While it is understandable that many banks may be a bit skittish around using Apple Maps for branch and/or ATM directions given early flaws with the iOS application, using Google Maps from within the Safari browser was found to be slow and 'clunky' compared to the integrated option from Apple. Celent believes the risk may be worth it. Another option (used by both PNC Bank and U.S. Bank) may be the use of augmented reality for locational guides.App Design and Platform ChangesCelent noticed that a number of apps in the study had little or no change from the previous report from Q4 2012. While this may not seem out of the ordinary if compared to bank website redesigns, and certainly falls in line with the industry's normal 'wait and see' approach, this speed of change is not acceptable to most mobile users who are used to constant and frequent enhancements to apps.In addition, as tablets of all forms have exploded onto the marketplace, banks have done a terrible job of developing applications that take advantage of this very unique platform. Beyond the tactile and length of engagement differentiation of this platform, the demographics of the typical user (more affluent and more digitally astute) warrants a greater focus.There is no disputing that PFM on mobile has yet to gain any traction. Banks are struggling to define what PFM should be and what it should look like on different channels as well as platforms. The majority of consumers are not attracted to charts and graphs on mobile devices (there is a segment however). But PFM on mobile may provide promise if looked at in the perspective of improved receipts, budget updates and even gamification. Merchant-funded reward integration is also possible with geolocational capabilities providing the ability for immediate rewards through the mobile device.While some banks are testing some of these capabilities (most notably the neobanks like Moven as covered here in my early 2013 blog post), there is quite a bit of debate on whether the investment in development can be recouped without a value-added pricing model.According to Latimore, "Eventually, Celent imagines high-value advice on savings, alerts for overspending on a budget category, or GPS-enabled deals. The camera is another unique attribute to the mobile phone that can be used to provide a snapshot of spending."Mobile banking has quickly evolved from being a more cost effective way to handle balance inquiries to a core component of every bank's delivery network. We have moved from a transaction focus to an engagement focus, with CIOs beginning to feel the pressure to build out mobile capabilities. With basic mobile transactions such as balance inquiry and moving money, simplicity is the 'new black'. With more sophisticated interactions, the use of 'big data' for insight dissemination and solution recommendations is the key to success. In all cases, Celent found a trend away from 'bolt-on modules' to more holistic approaches that will require significant investment.While other industries have reached young adulthood in mobile integration, mobile banking is still in its infancy. With shrinking margins and more regulatory pressure, banks must determine if there is the potential for mobile services to generate revenue that can help offset development costs and replace lost fee income. Without fees from new value added services, what is the ROI of mobile banking? (see previous BMS post, 'The Revenue Power of Emerging Financial Solutions", August 2013)According to Celent's Dan Latimore, "While mobile banking definitely expands a bank's ability to reach new and existing customers, and while there is significant movement by some organizations, there is still a long road ahead for others."The U.S. Mobile App Landscape: An Annual Evaluation of Mobile Banking at Top U.S. Banks - Celent (June 2013) Mobile Banker Vendor Solutions - Celent (April 2013)What's App, Doc: An Updated Biannual Evaluation of Mobile Banking at Top U.S. Banks - Celent (January 2013)U.S. Banking Apps Report: Customer Reviews - Xtreme Labs (July 2013)Tomorrow's Mobile Banking - Hear What Top U.S. Banks are Doing to Get a Glimpse Into the Crystal Ball - American Banker Webinar sponsored by Kony (September 11, 2013)Mobile in 2013: A Digital Digest Featuring Gartner Research - Kony (March 2013)

P2P Payment Simplicity Square'd

AppId is over the quota AppId is over the quota P2P Payment Simplicity Square'd P2P applications are definitely not new. There are literally hundreds of bank and non-bank applications that allow you to send money digitally, including Google, PayPal and Venmo. Consumers also have the choice of simply writing a check as they have done for years. But, I believe Square has introduced the most streamlined app that may have the broadest mass market appeal. Imagine emailing money to another person, without a fee, directly from a debit card without a login or password. All that is needed is a debit card number, Zip Code and expiration date from the sender and recipient (only need to be entered the first time you use the service). After that, sending money is only an email address away.Compare that process to most banks, that require mobile banking sign-in (don't get me started), a test transaction and potentially more steps, even though there is normally no fee for the service. PayPal's P2P app transfers money from a PayPal account to another PayPal account, with transferring funds to a bank account being an additional step (in addition to a one-time signing up for PayPal). Google's P2P service uses email like Square, but requires signing up for Google Wallet and transferring funds to a bank account. Venmo is a growing favorite of younger people who prefer to send money via a Facebook-like newsfeed. This service also requires an application sign-up. Unlike Square Cash, most of the other P2P applications have fees attached as shown below. Square Cash, however, only supports debit cards at this time, with low weekly limits ($250) unless you provide a mobile phone number and Facebook account or verify your full name, the last four digits of your social security number and date of birth -- then the limit is raised to $2,500. If the Facebook option is selected, no information or messages are ever passed to the social channel. Square is simply using Facebook as part of authentication.Source: My Bank Tracker, September 2013I got introduced to Square Cash first thing yesterday morning with an email from fellow fintech geek, David Gerbino, who sent me $1 via email. To inform me of the 'gift', I received both an email from Dave that told me he was sending me money and an email from Square informing me of the same (shown below).To transfer the funds into my account, I simply hit the 'deposit funds' link on my computer or cell phone, and enter my debit card number, the expiration date of my card and my Zip code as shown below. That's it (and I only need to do that once). Notice how spartan each step of the process is. While there is an animated background with color and theme changes over time, there is zero unneeded information, highlighting that there are no strings attached.Upon making my deposit, I immediately received an email confirming my deposit was made and letting me know that I can now send money as well. As with the initial communication, my email and all processes are clearly optimized more for mobile than for a desktop.The Square Cash mobile app (offered in both iOS and Android versions) is very simple, with a built in step-by-step tutorial and an FAQ component. I found the desktop and mobile versions to be equally concise even though it is clear that Square Cash was built as a mobile-first application.With Square Cash, money is transferred from bank to bank with no funds ever being held in a Square account (like with PayPal). Square says that deposits will be made within 1-2 days, and I found it a bit ironic that it took me longer to log into my mobile banking account to confirm my deposit than it did to perform the entire transaction with Square.According to Square, there are no plans for ads or fees on the service as it is offered today, yet it does plan to offer premium options (I would assume that a fee could be implemented for faster transfers much like some organizations do for mobile check deposits).I believe the simplicity of Square Cash is the application's strongest benefit. While Square may not be known by everyone, it has a track record in the merchant arena and obviously plans to promote this service heavily. And unlike many of the competitors, if a payment is initiated with Square, the recipient can get their funds with minimal steps and can start using the app themselves immediately.From early comments on both the Apple and Android app sites, early buzz is overwhelmingly positive. I am sure that since it is free it helps.That said, there are still some drawbacks to Square Cash: Debit Card Only: While the limitation to only MasterCard and Visa debit cards may be viewed as a negative by some, I believe the limitation is consistent with the streamlined nature of the service. No decisions are needed as to what card or account to link. Simply link a debit card.Use of Email: Many of my Fintech friends debated on the merits of using email as opposed to SMS as the transfer media. Again, I believe this was a conscious decision by Square to appeal to the 'mass' market. While email is not used by Gen Y as much as texting, everyone has an email address and knows how to use it. The email-only decision may be adjusted over time. Again . . . simplicity. In addition, new Telephone Consumer Protection Act (TCPA) rules limit the ability to market via SMS without opt-in. Square can use email for subsequent marketing messages (such as for their wallet) or to promote the download of the Cash app like below.Limited Options: There is also no way to see a history of your transactions (except by keeping track of your emails) and you can only link one email to one debit card at this time. Again, I believe Square made a conscious decision to keep the application simple as opposed to filling it with a number of options that may be geared to 'power' P2P users.Transfer Limits: The limit on amount that can be sent ($250 a week unless additional personal information is provided and then the limit increases to $2,500) could be a drawback for some, but the service is not meant for large purchases.Fraud Liability: Square makes no guarantees in case of fraud beyond what is available on a person's debit card today. While they will reverse the transaction, that may not be enough.Funds Availability: While many fintech followers pointed to the 1-2 day funds availability stipulation as a negative, this is still faster than checks clear. However, the marketplace is definitely moving to real-time P2P so I expect Square to follow this trend over time (potentially with a 'premium' fee).Clarity: In the mission to remain a very clear app, some clarifications are tough to find. For instance, what if I want to change the debit card I have linked? (A Google developer answered this question online by referring me to www.square.com/cash/settings. As expected, the process was quite easy (even when I forgot my password).Getting the balance right between convenience and security is difficult at best and potentially a death blow if miscalculated. Square definitely broadens the reach of its new product by leveraging email as the funds transfer tool. Very straightforward . . . very simple. This highlights the paradox of mobile payments that must be overcome. On one hand, consumers find current authentication processes as being overly complicated and time consuming. On the other hand, increased awareness of cybercrime makes consumers concerned about how their security and privacy are being protected.With Square Cash, they hope they struck the right balance. If they are wrong, and a highly publicized security breach occurs, it is likely to damage Square's goal of becoming a trusted consumer payments brand.More than just a very easy way to transfer money, Square Cash represents what mobile innovation means today. Instead of trying to solve all of the world's problems in one app, companies are developing ways to use mobile to make our lives easier . . . from the customer's perspective. Square could have followed the lead of many of their payments counterparts and integrated Square Cash into their mobile wallet product. While it may have met corporate product growth objectives, it would have been a worse customer experience with a cluttered user interface. They could have carried forward their $.50 fee from the beta version of the service, at the cost of acceptance.It is clear that Square Cash is a mobile-first application. Look at all of the 'unused' space on the desktop version of the application. Square Cash is a killer app because they didn't fall into the trap of moving beyond simple elegance. When you use the application for the first time (much like the first time I used my Moven or GoBank account), the first impression is, "Wow, that was really easy"."There's a tendency to think of innovation as coming up with the latest gadget, or adding new features onto existing applications. But the concept of breakthrough simplicity recognizes that today, the most powerful forms of innovation don't manifiest themselves in new bells and whistles. They take the form of better customer experiences (or patient experiences, citizen experiences, etc.). And one of the best ways to improve any experience is to simplify it -- remove complications, unnecessary layers, hassles or distractions, while focusing in on the essence of what people want and need in a particular situation."What will be interesting to see is whether other payments players follow Square's lead toward a more simplified application. More importantly, it will be interesting to see if the banking and credit union industries will be able to focus on taking steps out of mobile and online processes for a better user experience. Jim Bruene, publisher of the heavily followed Online Banking Report and Net Banker newsletter has a discerning eye for what is evolution and what represents evolution in digital financial services. As founder of Finovate, he has the opportunity to see banking innovation up close on a regular basis. This week, however, he awarded Square with a 'Best of the Web' award. In doing so, Jim said,"It's been six months since he handed out an OBR Best of the Web award. Since then, there have been many new enabling technologies and promising applications. But with every passing year, it gets harder to raise the bar with a new digital financial product. Square did it this week. The company took P2P payments -- something PayPal commercialized in 1999, CashEdge/Fiserv bankified in 2009/2010, and Google simplified in May -- and distilled it down to its essence."He sums it up best when he says, "It's hard to imagine P2P payments being any simpler. And Square is doing it all for free". Regarding @Square Cash, the product managers for P2P at every major core provider just pooped their pants. https://t.co/vAnUksFttX— Brian Billingsley (@BBillingsley) October 16, 2013Send money via email to anybody, for free. Nice move from Square to get more people to join their ecosystem? // https://t.co/NG1HDlUK4s— Philippe Masset (@_pioul) October 17, 2013@bornonjuly4 @JimMarous @duperrieu @Square @leimer @rshevlin @sammaule My suggestion to the critics- try it. @Jack has got it goin’ on.— Matt West (@Matt__West) October 17, 2013@JimMarous the P2P game is tough, but I think it's all about text payments- Square and Google are on a goose chase. Still want Venmo— Melanie Friedrichs (@mfriedri) October 16, 2013Still it's a great play by Square. Acquire a large customer base w/ a default debit payment option. That's a good thing for Square merchants— Cherian Abraham (@cherian_abraham) October 16, 2013@sammaule @JimMarous @bornonjuly4 @duperrieu @Matt__West @Square @rshevlin mindshare leads to wallet share, engagement and usage - ask Apple— Bradley Leimer (@leimer) October 17, 2013The UX of of debit is much better than ACH (no trial deposits) and Square is making a big bet to get a two sided network going despite cost— Gus Fuldner (@gusfuldner) October 16, 2013Square's new e-mail money services is undeniably interesting, even if you do have to have a bank account to use it http://t.co/r3DKPrP6V7— Dave Birch (@dgwbirch) October 16, 2013Pay for dinner with one card, all my roommates send me #Square Cash... Simple. pic.twitter.com/RglsQj3k2t— NickBastone (@NickBastone) October 16, 2013

Banking Innovation For The Fat-Fingered

Banking Innovation For The Fat-Fingered As I have written about frequently over the past several months, I believe some of the best innovations in banking are not the result of added features and benefits to existing financial products and services, but the simplification of everyday processes that can improve the lives of a banking customer. This is what makes me such a fan of Mitek. Mitek has created solutions that allow customers to use the camera on their smartphone and tablets to deposit checks and reload prepaid cards, pay bills, get insurance quotes, open new accounts and transfer balances . . . all with a snap of a picture. No data entry is required. With mobile imaging technology, the image is captured with error correction and adjustments made, then data is extracted and put into pre-set fields on the mobile banking app instantly.What is interesting when I watch Mitek and their bank and credit union partners is that every time I think there is no more that my phone's camera can do, Mitek finds a new solution or enhances a previous innovation.In an industry where the growth of mobile banking is mirroring the growth in smartphone ownership, the benefits of using one of the most easily understood functions of a smartphone and leveraging it to facilitate a better mobile banking experience are enormous. These capabilities can attract new customer, build engagement, increase cross-selling and enhance loyalty. While what may follow may sound like a commercial for Mitek, it probably is. With so little true innovation being done by traditional banking organizations in the U.S., it is refreshing to see a company that makes innovation part of their overarching company mantra. The good news is that Mitek continues to build new solutions that banks can implement quickly and easily (i.e. U.S. Bank), making them innovators as well.To illustrate my point about the focus of Mitek on innovation, I have included a video where Jim DeBello, president and CEO of Mitek discusses innovation at his company.In a recent Forrester research paper entitled, 2012 US Mobile Banking Functionality Rankings, Peter Wannemacher wrote, "No mobile feature has made as big of an impact as quickly as the mobile remote deposit capture (RDC) functionality". The benefits of offering mobile deposit include:Mobile customer engagement: Moving the customer beyond simply checking balances.Cost reduction: While the amount of cost reduction is certainly up for debate due to the ability to reduce staff and physical facilities, there are definitely lower costs with mobile deposit than for a branch-based transaction.Revenue potential: As I outlined in a recent blog post entitled, From Free to Fee: Monetizing Mobile Deposits, U.S. Bank, Regions Bank and others have found a way to generate fee income from this value-added service.Enhanced customer experience: Anytime, anywhere simple mobile convenience to make a deposit, generate a receipt and access funds.Rather than resting on their laurels, Mitek has continued innovation within their mobile deposit solution. In the Spring of 2012, Mitek introduced the ability to leverage their mobile deposit platform to load prepaid cards using a smartphone, freeing underbanked customers from needing to use costly check cashing facilities.At the Remote Deposit Capture conference I attended in Orlando this September, Scott Carter introduced enhanced capabilities including endorsement analytics that can reduce risk, improved business intelligence that increases the ability to investigate processing exceptions, and a real-time image capture technology that provides instant feedback to the customer as to the quality of their image during the capture process (MiSnap™ SDK).In May of 2011, Mitek won their first 'Best of Show' award at Finovate for their Mobile Photo Bill Pay solution. At the event, JJ Hornblass, publisher of Bank Innovation gave the service an A+ for the 'cool factor', an A+ in the category of 'I want it' and an A+ for 'profit potential'. Nice report card at a highly competitive financial innovation showcase including dozens of other innovation introductions.The Mitek Mobile Photo Bill Pay solution enables users to pay their bills anywhere, at any time, simply by taking a picture of the paper bill with their iPhone or Android smartphone. Regardless of format of the bill, the relevant information from the bill is extracted, with fields within their mobile banking application being auto-populated. The customer simply confirms the information, schedules the payment and clicks 'pay'. Address barcodes can also be read which results in faster address verification.Beyond paying a bill, the solution allows for very easy addition of a new payee for either one-time or recurring payments. With bill payments being one of the most important engagement services to make a new or existing account 'sticky', this service is a major benefit to the bank wanting engaged customers.“As mobile banking applications have increasingly become ‘table stakes,’ it is even more critical for financial services providers to understand which new applications are truly value-added and should become a part of their core suite of mobile banking offerings,” said Bob Hedges, managing director at AlixPartners and co-lead of the firm’s financial services practice. “The valuable consumer functionality and convenience provided by Mobile Photo Bill Pay provides banks with a critical marketplace differentiator they need.”Partnering with Mitek, and leveraging its Mobile Photo Bill Pay product, U.S. Bank was the first leading financial institution to offer this innovative service to customers in early 2013. Since this announcement, several other major banks have partnered with Mitek on their bill pay solution including BBVA Compass.Mitek's mobile photo imaging technology is the foundation for a suite of solutions for the insurance industry as well including the following:Mobile Photo Quoting™- By entering a zip code and taking a picture of a drivers license, insurance ID card and the Vehicle Identification Number (VIN), a customer can get a quote in a matter of moments.Mobile Photo Payments™- By taking a picture of a blank check, automatic payments or reimbursements can be made directly using a customer's personal checking account.Mobile Photo Claims™- Filing a claim is simplified by using the phone's camera to take a picture of the drivers license, insurance card and the license plate, eliminating hundreds of possible keystrokes.Progressive Insurance was the first to market with Mitek's Photo Quoting supporting their mobile rate comparison application. Below is a video that describes the insurance industry suite of services.Enhancing the functionality of all of Mitek's solutions, MiSnap™ SDK is a technology that knows when all conditions are optimal and automatically snaps a photo of the check for mobile deposit or a bill coupon for the bill pay solution. This capability provides real-time visual feedback to the user in an intuitive and fun way, eliminating time and effort in the capture process. MiSnap is supposed to be twice as accurate as the previous manual capture process because it eliminates human error which can occur as a check or bill is being captured. This also decreases time to complete and increases satisfaction and adoption.In September of this year, Mitek again won the 'Best of Show' award at FinovateFall for their unique Mobile Photo Account Opening™solution. Mobile Photo Account Opening enables banks and credit unions to reduce the time and effort needed to open an account through the use of photo imaging. This solution could be used for mobile self-service account opening or in branches by new account personnel.By taking pictures of the front and back of a drivers license, vast amounts of validated data can automatically populate the new account application, eliminating many of the errors that occur during this process. This frees up valuable time for better customer interaction and cross-selling and eliminates mobile opening abandonment that can be as high as 70%.The Mobile Photo Account Opening solution can seamlessly integrate with a bank or credit union's  existing account opening process, assisting with identity proofing and fraud prevention through a partnership with Experian.According to the July 2013, Javelin Research & Strategy report, How to Upgrade Online and Mobile Account Opening for an Omnichannel Era, “the fact that 88.5 million Americans attempted to open an account online or with a mobile device in the past 12 months underscores how far digital account opening has come in a few short years. Nonetheless, its potential remains largely untapped, especially as consumers place growing importance on mobile capabilities.”In the same report the firm also noted, “The number one job for financial institutions should be to enable applicants to open and fund an account in one session.” In just the past couple of weeks, Mitek continued the ongoing wave of innovation by partnering with U.S. Bank to offer Mobile Photo Balance Transfer to U.S. Bank mobile banking customers.Mobile Photo Balance Transfer allows U.S. Bank customers to easily take advantage of credit card balance transfer offers from U.S. Bank by snapping a photo of an exisiting credit card payment coupon from another bankusing their mobile device and sending it to U.S. Bank to apply for a balance transfer to a U.S. Bank credit card.Using the photo capability of a mobile device simplifies the process of account transfer as well as eliminating many of the errors that can occur in the process.I am not sure what could be down the road with Mitek Systems, but it is definitely fun to watch as the ubiquity of the smartphone camera photo is used to simplify banking and improve the customer experience. Possibly, the next innovation will move beyond transactional functionality to provide a virtual safe deposit box for important documents stored electronically by the bank. Or maybe the solutions move into the payments space, allowing a customer to snap a photo of a barcode on a high priced item to enable the almost instantaneous approval of a loan for the customer. The good news is that I am sure the innovation isn't done.

From Free to Fee: Monetizing Mobile Deposits

I am not the first to propose that banks and credit unions take a harder look at mobile banking from a revenue perspective. In fact, in May, 2011, Jim Bruene, publisher of the Online Banking Report and the NetBanker blog and founder of Finovate, proposed that new pricing models could propel online and mobile services to the next level in his Online Banking Report entitled, 'Creating Fee-Based Online Services'. He stated, "Unlike the $35 debit card overdraft fee, there are rational and understandable reasons for charging fees for value-added online and mobile services." In his report, not only did Jim provide an historical perspective as to why and how banks and credit unions continually end up giving away their services, he provided 33 different services that could generate a fee and offered a perspective on the acceptance level by eight different customer segments.In my post, I am going to try to tackle the opportunity for charging a fee for mobile deposits . . . even if your institution currently does not charge for the service. I will be referencing several research reports to provide rationale, especially a recently released pricing optimization study produced by Market Rates Insight entitled, Growth and Revenue Potential of Emerging Financial Services. This 168-page study covers 13 different emerging financial services, with insights into fee optimization, targeting, institutional differences and bundling options (I reviewed this study in a recent blog post).I will also provide implementation and marketing recommendations based on my travels across the country and my work at New Control Direct and Digital. Note: A audio podcast of a 'Breaking Banks' interview by Brett King of Jim Marous and Dr. Dan Geller from Market Rates Insight around how and why banks should generate revenues from value added services is available for download here.Many banks are under substantial pressure to reconsider the economics of retail banking, especially given the decline in net interest margins and the reduced income from sources such as debit interchange and overdraft fees. While there has been a slight rebound in deposit service fees lately, many fees are associated with services on the decline (mortgage refinancing). Net Interest Margin for Banks with Assets > $10BAggregate Deposit Account Service Charges for Banks with Assets >$10BThere is no doubt that cost cutting has and will play a role in the effort to offset these reductions in income. But how much more can costs be cut without an impact on customer service or falling behind in the race for advancements in innovation and technology?Another option is to have more customers pay for services that were previously 'free' like checking accounts. This strategy has been implemented by many banks over the past few years as evidenced by the decline in institutions offering free checking today (39 percent) compared to 2009 (76 percent) according to Bankrate, Inc. Many banks have also increased their overall service charge structure as well as the requirements to avoid fees.A better option may be to build a new fee structure around emerging financial services that bring added value to the customer. Similar to options available when you purchase a car, these new fees could be singular line items and/or could be bundled into 'value packages' that the customer could select. The key is for financial institutions to no longer race to the 'free' finish line, but to assess a logical cost for benefits that bring a value to the consumer.So, how big is the opportunity for generating additional revenue from mobile RDC? According to recent research by Mitek Systems, more than 12 million mobile users have made deposits exceeding $40 billion using their mobile device. In fact, four of the top banks in the country have reported extraordinary volumes of mobile deposits when considering the relative infancy of this service.Bank of America: 1M/WeekJP Morgan Chase: >3M in MayWells Fargo: 1.4M in MayPNC Bank: 450K/MonthThe percentage of the largest financial institutions offering mobile remote deposit capture has almost tripled in the past two years, with 64 percent of the top 25 retail banks offering mobile deposit in 2013, up from 48 percent in 2012 and 22 percent in 2011, according to Javelin Strategy & Research. In addition, according to research from community bank mobile app provider, Malauzai Software, Inc., the usage of mobile deposit varies from organization to organization. Best-in-class financial institutions have approximately 20% of their active mobile banking end-users making deposits monthly and the average bank or credit union has 10% of active end-users making mobile deposits monthly. Average usage increases to 15%-17% of active end-users when looking at activity over a longer, 90-day period. The growth in mobile deposit use is not expected to subside any time soon either. In a June 2013 Celent survey of US internet active consumers, mobile deposit was the second most highly valued capability surveyed, with two-thirds of smartphone users ranking the capability “highly valuable” (6 or 7 on a 7-point scale). Among those surveyed, mRDC was more highly valued than person-to-person payments (54%) and the emerging capability to enroll a new bill payee using the phone’s camera (46%) which a handful of banks offer.“Mobile deposit, the ability for consumers to quickly and easily deposit checks using their smartphone or tablet cameras has become a must have for banks as consumers increasingly adopt a mobile lifestyle,” said James DeBello, CEO of Mitek, San Diego.Indexing the age, income, balances and behavior of the mobile deposit user against all households (index=100), a mobile deposit user is younger (by 14 years), has a higher income and loan balance, has an average checking balance, and provides interchange income that is higher than the norm. Not shown is the fact that these households have average mortgage, equity and credit card balances.Mobile deposit users, as expected, index significantly higher than the average household as to their likelihood of opening a new checking account online, and are more likely to use mobile payments, apply for a loan online, use a prepaid card and even make a payment through social media. Bottom line, mobile deposit users are heavy users of all mobile services . . . or heavy users of mobile services and heavy mobile deposit users. The research also found that these customers use the branch at a rate that is 66 percent of the average customer.One of the selling points of mobile banking has been the reduced costs of delivery of the channel. Estimated cost of in-person or call center delivery is quoted as roughly $4.00, with the cost of a mobile transaction being quoted as $.19. Even if we assume that these are accurate estimates of the fully loaded costs of each channel, an assumption that there is a 1:1 offset of transactions is definitely faulty. Taking these assumptions one step further, if we assume one transaction per month, some quote a cost savings of close to $50 per mobile customer per year. This is highly unlikely (as presented by Bob Meara, senior analyst from Celent in a recent blog post).While it is definitely easier to assume the cost savings above and to simply sell 'free', this leaves a great deal of potential revenue on the table based on recent research from Market Rates Insight. In the report, Growth and Revenue Potential of Emerging Financial Services, executive vice president and author of the report, Dr. Dan Geller, provides evidence of the willingness of consumers to accept 'value-added fees. In other words, while increasing fees on traditional services such as checking accounts will be seen as punitive and met with resistance (and potential defection), there is an opportunity to sell emerging financial services such as mobile deposit either singularly or as part of an enhanced service bundle. In the study, both the importance of mobile deposit and perceived value of the service were measured. In the case of mobile deposit (13 emerging services were evaluated in the study), this evaluation was able to illustrate that more could be charged for a premium level of service (such as same day availability) while a lower fee could be charged for slower availability.According to the study, 56 percent of consumers who did not already have the service found mobile deposit important to some degree. The average value consumers place on this service is $2.63 per month, while the 3.5 percent who found the service extremely important would pay $5.60 per month as shown below.Mobile Deposit - Level of Importance (MRI, 2013)Mobile Deposit - Distribution of Monthly Value (MRI, 2013)The MRI Study also provided these distributions for different types of institutions (national, regional, local and credit unions).Demographic VariancesFrom the perspective of demographics, it was interesting that the importance of mobile deposit was stronger for females (72.8%) than for males (64.9%) but that males were willing to pay significantly more on average for mobile deposit per month ($3.89) than their female counterparts ($1.82).In addition, as would be expected based on the Raddon Financial Group research noted above, the importance of mobile deposit as well as the willingness to pay for the convenience decreased with age, while the importance and willingness to pay increased with income (specific details of these values are available in the report).Potential for BundlingMarket Rates Insight (MRI) also developed revenue optimization scenarios for 26 different bundles of emerging financial services. Of the 26 bundles, four included mobile deposit as part of the service combination. These bundles included:Mobile Deposit with P2P Payments (optimal value of $8.38/mth)Mobile Deposit with Credit Score Reporting (optimal value of $8.57/mth)Mobile Deposit with Billpay, Low Balance Alerts and Prepaid (optimal value of $10.04/mth)Mobile Deposit with Payment Protection (optimal value of $9.23/mth)While the development of optimal bundles would differ by customer composition, type of institution and competitive scenario, an analysis such as the one below combining mobile deposit with P2P payments illustrates how the analysis was performed for each bundle. As can be seen, while total revenue could increase with the addition of more services, the incremental revenue would actually decrease due to cost of offering and lower customer acceptance of an expanded bundle. Overall Monthly Fees from Mobile Deposit/P2P Bundle + Add'l ServicesIncremental Fees from Mobile Deposit/P2P Bundle + Add'l Services"One of the most revealing and significant findings from our latest study on emerging financial services is that the principle of diminishing return applies to the bundling of financial services," states, Dr. Dan Geller, the author of the report.Of the top five banks in the US, only U.S. Bank charges a fee ($.50) for each mobile deposit. Fees have been collected since 2010 by U.S. Bank, and while not currently supporting the Blackberry platform, mobile deposits are possible via an iPhone, iPad and Android devices. As with most programs, there are daily and weekly deposit limits.Regions Bank is the other larger bank that currently charges for mobile deposits. Unlike the flat transaction fee charged by U.S. Bank, Regions has a sliding fee scale based on availability of funds. Immediate availability has a fee 1%-5% of the check amount with a minimum of $5. Overnight availability is $3 and 'standard processing' (two business days) is only $.50 per check. The 'standard' processing is actually faster than any of the 'neobanks' (Moven, Simple, GoBank) at this time. "Obviously, customers aren't going to be happy with any kind of cost you throw out there," stated Greg Melville, product owner of mobile products and payments for Regions Bank. "But if you offer a value-added service, such as immediate access to their funds, they have shown that it's something they are more than willing to accept." There was also some negative feedback initially, especially on social media, but very few of the complaints resulted in customers actually leaving the bank."FedEx pioneered the concept of higher fees for greater expediency and now consumers are expecting the same option from their financial institutions especially when it comes to mobile deposits," states Dr. Geller.Jim Bruene, who was one of the first to write a study on the potential for fee revenue from mobile services applauded Regions Bank on their decision to charge a fee, but still believed it would have been better to include mobile deposit as part of a larger bundle with a monthly subscription fee. He also believed the fee structure is overly complicated.Dave Kaminsky, a senior analyst at Mercator Advisory Group, a research firm focused on the payments industry, explained that users perceive mobile banking's offerings as worth the cost. "Customers tend to look at remote deposit capture or expedited processing as an additional value, so they're willing to pay for it—at least for now."Many of the other large banks do not currently charge a fee, citing that the value of the mobile deposit customer is higher than average (as shown above), that they are less likely to leave the bank because of this 'sticky' service, that mobile deposits reduce their costs (somewhat debatable) and that there are more transactions that generate interchange income. While each of these arguments may be true to varying degrees, I still believe needed revenue is being left on the table. Despite all of the logic above around the why a  bank or credit union should charge for mobile deposits, the real challenge is in answering the how question without alienating your customers, frustrating your sales teams or negatively impacting the growth potential of mobile deposits. If there is a question around moving from a free to fee strategy, then research your customer base, competitive position, internal capabilities and institutional priorities. If there is not enough rationale around making this transition, maybe now is not the time. According to James "Alex" Alexander, founder of Alexander Consulting, there are four options available when trying to implement fees when the market (or your current strategy) may be giving services away for free.Don't Do It: With the potential challenges to moving to a fee-based structure, maybe it is better to wait until all impacted parties buy-in. Selling 'free' is easy. Selling 'fees' is hard.Just Do It: This strategy is based on picking a date and letting customers and all employees know that there will be fees from the selected day forward. The upside is that this strategy is simple. The downside is that phones will ring and you need a very strong constitution to decipher the customer (or employee) threats from the reality. The key here is to not make exceptions, because exceptions quickly escalate into more and more fee waivers. If your entire team understands and believes the value proposition, they should be in a position to help stem attrition (there will be some).Grandfather Existing Customers: Under this strategy, current customers who have used mobile deposit will not be charged, while any customers who use the service for the first time after the transition date will be charged a fee. The challenge is that customers (and employees) talk, potentially undermining this strategy.Productize the Old and Sell the New: The challenge with any of the above strategies is that they can trigger a powerful, negative psychological response -- people don't like to have something taken away from them or to have differential treatment for a segment of the customer base. In this scenario, mobile deposit continues to be given away, but in a lower value manner. For the majority of organization, this approach is far superior to the others since the customer is given a choice of services and fee options.Productize the old: With 'basic' mobile deposit, this can be done by extending the period for funds to clear. Similar to what Regions Bank has done, change basic mobile deposit to a 7-10 day clearing period.Sell the new: For 'premier' mobile deposit, the clearing time can be reduced to 3 days or even shorter. When given the option, most customers will willingly opt for the faster clearing of deposit and will pay the fee. Another option is to include 'premier' mobile deposit in a bundle of mobile benefits as discussed above, with the option of charging an even higher fee.To fully benefit from the a fee-based mobile deposit program, the solution must be marketed to customers. For those who have used the service, it is extremely simple and time saving. For those who haven't, it could be considered confusing and even scary from a perceived security and risk perspective. Similar to making a deposit at an ATM, until a customer tries the process and realizes it works, there can be barriers to acceptance and use. Here are five quick ideas to stimulate mobile deposit usage:Free Trial: When you buy a new car, many come with satellite radio already installed and ready for use. In my case, I would never have taken this option at the time of sale, but would have most likely waited or never turned on the service. With the free trial (and very complete up-front training), I not only enjoyed the service . . . I now pay for it on a monthly basis. For mobile deposit, make a huge deal about this service an its benefits. Educate the customer up front and get them 'hooked' on the 'premium' mobile deposit service. After the trial, penetration of the service will be much greater and the opt-in rate for a faster clearing (and the fee) will be greater.Incent Your Team: Don't compensate on sales volume alone, compensate on profitability (or at least reaching a minimum 'premium'/bundle penetration benchmark). By providing incentives, your front line will spend more time educating customers and will emphasize the benefits of your 'premium' mobile deposit service or bundle. Make sure your expectations are that all new customers will begin to use mobile deposit immediately.Don't Accept Deposits: O.K., maybe a bit radical, but when a customer wants to deposit a check into their account in a branch, use this transaction as a customer education opportunity. Either arm your tellers with a tablet device used exclusively for mobile deposits (and other training) or use another available terminal in the office.Build an Educational Video: a short educational video serves several purposes including being a landing page for online and mobile banking customers, providing a location for linking email communication, and providing a tool that can be used in the branch when a customer opens an account or wants to deposit a check.Leverage Digital Communications: Don't be afraid to regularly email customers about the benefits of mobile depost. If you have implemented either a 'premier' or bundled mobile deposit product, each email will more than pay for itself. In addition, monitor customers who continue to deposit checks in your branches. Remind these customers (through email, direct mail, online banners, digital retargeting, mobile banners, etc.) that they can save time by taking advantage of mobile deposit.The key to success in generating revenue from mobile deposit programs is to 1) communicate the value of the service, 2) provide customers the option of not having to pay (or use the service), 3) reinforce the importance of 100% acceptance of the process to all internal teams through education, mandate and incentives, 4) continuously market the service, 5) build a segmentation strategy and 6) measure results."Amid the growing proliferation of digital channels and rapidly evolving consumer behavior, retail banks can no longer afford to adopt a one-size-fits-all approach in devising and enhancing their mobile strategies," says Vin Malhotra, consulting partner for Banking and Financial Services with Cognizant Business Consulting, Cognizant's consulting practice. "Providing innovative and personalized mobile services based on consumer segmentation will enable banks to not only run better by maximizing their investments, but also run differently by strengthening customer engagement and driving greater adoption of mobile banking for competitive differentiation." If properly positioned, packaged, sold and reinforced, not only will your employees and customers understand the rational of moving from free to fee, but the service will serve as a retention tool as customers become more comfortable with the benefits and value the fee options. And mobile deposit will become one of several new revenue engines within your institution.Coming Next Month: How to Generate Revenue from Mobile Bill Payments