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)

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

Mobile Payments Growth: Just The Tip of The Iceberg?

AppId is over the quota AppId is over the quota Mobile Payments Growth: Just The Tip of The Iceberg? When Amazon and eBay launched their online shopping sites in 1995 and 1996 respectively, the notion that over half the U.S. population would make purchases online would have been scoffed at. Yet in 2013, the number of online shoppers in the U.S. will reach 189.6 million, according to eMarketer. In this case, the majority of the consumers were resistant to change until they made the switch and realized the benefits. The same applies to mobile payments. The key is to examine the current payments industry growth trends, motivations of current users, the reasons for the gap between awareness and usage, and how financial institutions, retailers, network operators and equipment manufacturers can work together to convert reluctant consumers into loyal users. As mentioned by many of my fintech colleagues recently, it goes beyond a mentality of "If you build it, they will come". There is a need to solve for the concern around mobile security as well as develop incentives for usage.For the purpose of the study being reviewed, 'mobile payments' were defined as when a mobile, internet-connected device (smartphone, tablet, smart watch, Google Glass, etc.) is used to facilitate a transaction that might otherwise have taken place using a physical credit card, debit card, check or cash at a physical (not online) store. 'Mobile transactions' (for the purpose of this study) are a larger category that included mobile payments as well as mobile commerce and e-commerce channeled by an app or mobile website (e.g., Amazon's mobile app).Mobile payments and transaction innovation is currently be led by start-ups and tech companies, who are prompting legacy payments players and card companies to reevaluate their current strategies and increase their own pace of innovation. 'Coopetition' has become the norm as companies team up with each other as opposed to building a mobile strategy from scratch. These partnerships (and individual initiatives) are pushing innovation forward quickly, making the industry fragmented yet ripe for consolidation.Like an iceberg, there is much more to the mobile payments than what the can be seen on the surface today, with a U.S. mobile payments forecast of $30 billion in 2013. According to the research compiled by BI Intelligence, this forecast represents an average annual growth rate of 118 percent since 2008, but still will only account for 2 percent of the $3.3 trillion debit and credit card volume in the U.S. this year. It was also found that other global markets (such as Africa and the Asia Pacific regions) are seeing a much larger percentage of mobile transactions.In both the U.S. and other global regions, the growth in mobile transaction volume has been driven primarily by the growth in smartphone adoption (especially in areas of underdeveloped banking systems). Not only has the smartphone impacted the consumer side of the payments equation, but also the merchant side, where attachable card readers transform smartphones and tablets into cash registers, making card purchases easier.In a recent research study conducted by Accenture entitled, Driving Value and Adoption of Mobile Payments: Consumers Want More, it was found that while consumers know that mobile payments are an option, they still prefer not to make them. In the study, 41 percent of North American smartphone users were highly aware that their phones could be used as a payment device, yet only 16 percent had done this. Similarly, the BI Intelligence research found that, similar to most disruptive technologies, the adoption of mobile payments to date has been driven by both the underserved and the early adopter segments. From the merchant perspective, firms like Starbucks, Apple and Home Depot are helping both awareness and usage.On the consumer side, new apps and 'mobile wallets' from firms like PayPal, Google and Square are helping mobile payments acceptance. But, while consumers are highly aware of these mobile payment applications, and find the convenience and money-saving incentives appealing, many are holding back from using mobile payments because of security and privacy concerns. Consumers worry about their liability if their phone is lost or stolen and express concern that the risk will escalate as the phone evolves into a mobile wallet.According to the Accenture study, 45 percent of respondents who do not currently make mobile payments said they were concerned about security, while 37 percent had worries about privacy. These findings were in line with another study done earlier this year by Chadwick Martin Bailey entitled, The Mobile Moment: Barriers and Opportunities for the Mobile Wallet. In this study, 73% of those households that were familiar with the concept of a mobile wallet but were forgoing using the capability mentioned security as the reason for non-use. The specific reasons for security concerns included identity theft (70%), theft of phone and personal information (60%), interception of personal information during transaction (57%), hacking of mobile phone (52%), hacking service provider (34%) and getting charged for an accidental transaction (19%).Chadwick Martin Bailey Mobile Wallet Research, 2013As we move from mobile payments to mobile wallets, many studies indicate that there is the potential to offer more than just payments. According to a recent study from mobile marketing firm Vibes, nearly 85 percent of smartphone owners would like to receive non-payment services from a mobile wallet, including loyalty card storage, coupons, personalized offers and other marketing materials (similar to the Apple Passbook app). Interestingly, the study finds that only 19 percent of those surveyed believe they had been offered any such content.Again, the Chadwick Martin Bailey research from earlier this year collaborated with the findings from Vibes, illustrating that several additional features would be viewed positively by households who understood mobile payments but had decided not to use this functionality. In fact, the 'perfect' mobile wallet combination from the perspective of non-users was payment functionality combined with the ability to store loyalty cards and other sensitive documents (insurance cards, drivers license, etc.). While mobile offers were not scored as high as storage of cards in the CMB research, the Accenture research found that 60 percent of consumers who already do mobile payments would do so more often if they received instant coupons. In addition, 36 percent said they would provide personal information in exchange for such rewards and 46 percent would increase payments if they received location-based offersChadwick Martin Bailey Mobile Wallet Research, 2013Near Field Communications (NFC) is a technology that allows devices to communicate with each other at close range to facilitate payments and other transactions. Despite years of debate on the pros and cons of the technology (especially in the U.S.), there are more and more who believe NFC will be a non-starter as a payments technology. It's not that the technology is disappearing (NFC chips are being placed in virtually all new Android phones). It's just that acceptance has never gained steam:Google Wallet recently dropped the requirement that NFC technology be required for its wallet app to run. Google wallet has recently developed an app for the iPhone and becoming device and technology agnostic.Apple (and PayPal) recently released new close range technology (Beacon) that use low frequency bluetooth communication that is available on virtually all smartphones. This technology also requires significantly less hardware upgrades from the merchant and is faster and has more functionality for the consumer.Beacon technology could eliminate the checkout entirely, providing real-time offers, product information, facilitate payments and remove any security devices before leaving the store.Despite a lot of noise among financial technology insiders and the payments industry, mobile payments and mobile wallets are far from becoming mainstream. As expected, mobile payments are more commonplace with younger demographics and higher income categories as well as having greater potential for those who are underbanked. In other words, the potential for mobile payments in the future is high, but is far from guaranteed.While our industry continues to be focused on the next shiny technology breakthrough in payments, consumers are more concerned about security, privacy, convenience and the improved 'value' of using their phones to make payments. In other words, "Will the customer experience be better than what I have now?"Financial institutions, merchants, network operators and technology providers must answer the above concerns and provide education on the way to best move forward . . . from the consumer's perspective. This education is made more difficult with the multitude of different payments solutions being introduced and the overall 'noise' in the marketplace. Finally, recent research indicates that both current mobile payments users and non-users can be provided incentives to increase their use of mobile payments. This can be in the form of transaction incentives, mobile coupons, geolocational offers, etc. that are incorporated into the mobile payment experience. Today's digital consumer expects their mobile devices to improve and simplify their lives. Until the providers of mobile payments can achieve this goal on a broad spectrum, mobile payments will look like more of a tip of the ice cube vs. tip of the iceberg.

GoBank Introduces One of First iOS7 Mobile Banking Apps

In line with the GoBank brand, the relatively new mobile-first banking brand considered the introduction of a new design in late September an important differentiator for GoBank. "Being first to introduce a new design that leverages the iOS7 look shows that we're not just a bank, but also a technology company … right on the pulse of what's new and next," stated Sharon Pope, chief marketing officer of GoBank in an online interview with Bank Marketing Strategy.  Download (or update!) the #gobank #app to experience why Apple is featuring us as one of the "best new… http://t.co/x8AKAtK9xA— GoBank (@gobank) October 1, 2013According to Pope, GoBank's iPhone team worked carefully to incorporate Apple's new vision for the iPhone aesthetic so that the app would feel right at home on customers' recently updated devices. "You can see a lot of the elements of Apple's vision throughout the design. And a great indicator how beautifully we applied Apple's guidance is that Apple has featured GoBank as one of the "Best New Apps" for the iPhone."Hoping to design in line with Apple's iOS7 'human interface guidelines' as outlined in their developer user interface design resource guide. According to Apple, an iOS7 design should embody the following themes:Deference: The UI helps users understand and interact with the content, but never competes with it.Clarity: Test is legible at every size, icons are precise and lucid, adornments are subtle and appropriate and a sharpened focus on functionality motivates the design.Depth: Visual layers and realistic motion impart vitality and heighten users' delight and understanding.Immediately upon login, it is clear that GoBank was following the lead of Apple, especially with the design of buttons, eliminating the previous hard-edged buttons, arrows, etc. and replacing them with the borderless buttons that are key to the new iOS7 design. While the use of 3D button icons were used by Apple initially to replicate the Blackberry experience that so many early smartphone users were familiar with, consumers no longer needed the transitional visual element.In addition, the initiation of the GoBank app follows Apple's ">start-up standards by avoiding splash screens and other elements that inhibit the ability to open the app immediately. This has always been a strong point for GoBank, with key activities shown at start-up. "We have never wanted the user to click through 4-5 screens to get to their main reason for visiting the site," stated Pope.It should be mentioned that of all of the mobile-first banking firms (Moven, Simple, Bluebird), GoBank had one of the most streamlined applications in it's pre-iOS7 iteration. I have written on my admiration of GoBank in the past (Seven Reasons I Love GoBank) because the UI has always been intuitive, crisp and fluid, with all primary mobile banking functions being easy to access. The application and communication from the bank also is informal and accessible from their Facebook page to their new iOS7 Fortune Teller application that informs users if a proposed purchase could cause a potential financial challenge.Another iOS7 designer guideline was to let translucent UI elements hint at the content behind them. For GoBank, this can be found in the pre-login experience (what someone would see when they download the app for the first time, which overviews some of the key features).According to Sharon Pope from GoBank, the sponsorship and product placement on Project Runway has yielded a marked increase in awareness of GoBank throughout the fashion community and their overarching target audience. "It's a great target for us, because that community is always looking to find that look for less. Our budget tool, and Fortune Teller, are great for them. We think it's the perfect accessory to any fashion-loving person on a budget. And we've received a lot of praise from early users in this area," says Pope.The engagement with Project Runway is also highly promoted through Facebook, Twitter, Instagram and YouTube. OH: "It’s amazing. I’m totally going to use this in my everyday life.” #projectrunway #sponsor http://t.co/F3cBkWFzWv— GoBank (@gobank) September 27, 2013

Top 10 Mobile Banking Mistakes

AppId is over the quota AppId is over the quota Top 10 Mobile Banking Mistakes 10. Not going for 100% mobile banking adoption  The adoption rate for mobile banking should be 100% of those customers who have a mobile phone. And yet, many banks choose to limit themselves by requiring users to activate in online banking or enroll at a local branch. This reflects the fact that mobile is still an afterthought for many banks.9. No Balance Between Security vs. Usability  Can’t we have both? It’s remarkably easy to lose your mobile phone, which makes it especially important for banks to safeguard user information. While banks should absolutely secure mobile banking beyond just ID and password, it shouldn’t be impossible to use, either. Does it really make sense to ask users who their favorite teacher was in elementary school, or require everyone to carry another device just to log in to mobile banking on their smartphone? Risk-based authentication, geolocation, biometrics—these and many other technologies are available to help banks find the right balance between security and ease-of-use.8. Cutting Corners in Education  Should we assume that all smartphone users are smart? This is especially true for security. No technology today (that I know of) can prevent a user from writing down his/her ID and password on a paper attached to the back of the phone. An educated user is your best defense against fraud and loss of privacy. If you teach customers the value of security features—and how to use them—they’ll be happy to see those authentication layers instead of cursing at them.7. No Consistency in User Experience Across Platforms  Does your Android app look like it’s from a different planet than your iPhone app? People shift between platforms, and lack of consistency is confusing—and annoying. Banks should invest in a MEAP (mobile enterprise application platform) to help teams ensure a consistent user experience between environments. A MEAP such as IBM Worklight can enable write-once-deploy-across-many-platforms that both saves cost and improves user satisfaction.6. The “X2 Button” Tablet App  If your iPad app strategy is to tell users to push the X2 button, you’re missing an opportunity to provide customers a richer banking experience. You’re also providing an interface that’s downright clunky. Tablets aren’t going anywhere soon, so don’t waste the screen real estate your clients have paid a premium for—invest in a tablet-friendly user experience with dedicated features such as spending analysis and retirement planning.5. No Love for the Mobile Team  Is your mobile team stuck in a corner of basement? For many customers, mobile is how they most frequently interact with your bank. The mobile banking team deserves more love from bank execs. Mobile should be at the center of your channel strategy—and your planning meetings.4. One App Fits All  Consider providing a unique app for each major customer segment (retail, mass affluent, small business, and so on). Different customer segments have different needs. Mass affluent clients appreciate more financial analysis, while small business clients would rather have mobile invoicing and collection. Don’t assume you can satisfy everyone with the same solution.3. No Roadmap to ROI  Mobile shouldn’t just be a cost center. What’s your plan to profitability? In the interest of “getting something up and running,” many banks lose sight of the long view. When it’s done right, mobile banking can be a valuable sales and marketing tool that can build loyalty, cross-sell products and yes—generate revenue.2. Me-Too Syndrome  One of the worst mistakes a bank can make when going mobile is adopting a “me-too” approach. When you outsource to a company that creates and hosts mobile banking for your competitors, you’ll end up with a mobile banking app that looks just like your competitors’—and one that provides zero differentiating value.1. Not Realizing that Non-Banks are Eating Your Lunch  Non-banks such as Square and PayPal have been riding the mobile momentum for some time now. And Google, Apple, Walmart and others have their eyes on the revenues traditionally enjoyed by banks through mobile payment and wallet apps. Does your bank have a strategy for dealing with cross-industry competition and disintermediation? (If not, how well have you been sleeping these days?)So, what other oversights have you seen in mobile banking lately? Share your own top mistakes—as well as best practices for success.Danny Tang leads the Customer Care and Insight (CC&I) Framework for IBM’s global banking organization. Prior to his current role as CC&I Framework Leader, Tang was on assignment to China between 2009 and 2011 as the Executive leading IBM Software Group’s Financial Services Industry Solutions team for the Greater China Group. Before that, he was IBM’s Worldwide Executive Consultant advising financial services firms around the world.  Tang joined IBM via its acquisition of CrossWorlds Software, Inc., where he spent several years architecting EAI and B2B solutions. Prior to CrossWorlds, Tang worked for top consulting firms including Andersen Consulting (now Accenture).Note: This post originally appear on 'Insights on Business'. This is probably the best post I have seen around what banks may be doing wrong in the mobile space. The post has been reprinted with permission from the author.