Mobile banking is on the rise and Fintech industry is changing the old ways of doing things. Regular banks face a new environment that has opportunities as well as new threats. As new technology emerges into the market, consumers are asking for a better experience and more flexibility when they conduct their banking. In today’s world, banks have to evolve and change or their going to lose market share. Mobile banking is leading the way in banking disruption, but this also gives banks new opportunities, too.
We will look at how mobile banking is changing customer behavior, usage and trends in The United Sates and Canada, how Fintech and banks are working together to enhance customer’s experiences, the barrier to adopting new technology, and how banks can employ new strategies for their own benefit in the mobile world instead of suffering.
Attitudes and Consumer Usage of Mobile Banking
The use of mobile banking is about the same as mobile payments. It has been gradual and not explosive. Since 2011, mobile banking has been growing a great deal. Consumers are expecting a lot more from financial providers to help them manage financial matters. 70% of Millennials are now mobile banking users, but its also growing across the other age groups too. 58% of smartphone users aged 30-44 in the U.S. and over 20% above the age of 60 are now adopting the use of mobile banking.
In Canada, mobile banking has also come to the forefront. In 2015, 30% of Canadians said they used mobile banking which is up from just 5% in 2010. Canadian consumers are favoring Fintech innovations and mobile banking.
• 25% of Canadians say they are increasing their usage of mobile banking
• About half of Canadians say they see themselves using mobile banking in the future
• 90% of Canadians say that apps and mobile services make banking easier for them
In Canada and the U.S., consumer’s desires are aligned with mobile banking and its benefits. The US Federal Reserve Board put out a report that said consumers want to expand their banking functions with their phones. The study predicts that their will be an increase in mobile banking usage as more consumers use smartphones and recognize that mobile banking is convenient.
Canadian consumers consider mobile banking to be valuable to them as its convenient. The Canadian Bankers Association says that consumers like banking innovations and stated there are three main areas that are important to consumers:
• 90% said they want to bank at a time that’s convenient for them
• 77% like banking innovations that help them bank more quickly and that save them time
• 77% said they like the fact that they can bank from almost anywhere
• 60% of consumers said that because they can use their mobile device to pay for purchases, they have a more positive banking experience.
Both the U.S. and Canada consumers like the convenience factors of mobile banking and the fact that mobile banking can meet their demands. They like performing transfers, checking recent transactions, checking account totals, depositing a check with a photograph, and getting notifications. Customers are looking for added functionality that makes banking experiences convenient for them.
User Adoption Barriers
While consumers want more banking functionality, the one barrier that make them hesitant to adopt mobile banking is the security factor. Consumers in the U.S. in particular, have concerns about how safe mobile banking actually is for them. They have concerns about the safety of their money and personal data when they use smartphones for mobile banking.
The attitudes about mobile banking are changing. From 2014 to 2015, an additional 5% believed that their personal information was safe when they conducted used mobile banking. This was according to the 2016 report from Federal Reserve Board’s Consumers and Mobile Financial Services. Building consumer trust will be a major factor in changing attitudes in those that have concerns with security.
Banks vs. Fintech
Banks have seen their market share threatened by Fintech Industry, but many now note that there’s a big opportunity for collaboration. Head of Scotiabank’s Digital Factory, Jeff Marshall says that while there is competition, it doesn’t mean there can’t be collaboration. Banks and Fintech share common ground as they both have a focus on the customer experience.
This idea was stated in the Canadian Banks 2016: Embracing the Fintech Movement which was released by PWC. In this report it stated that Fintech should be seen as an enabler for traditional innovations and that banks will be improved on an ongoing basis.
Banks know that they can benefit from the innovations of Fintech. In the near future, many of the offerings provided by Fintech may be used in the operational model of banks. This will help them reach underserved markets, cut costs, and they will have new revenue streams as well as new products to offer consumers.
The Challenges for the Banks
Fintech products and mobile banking offer a wealth of new opportunities, but the banks still face challenges. Innovation is critical, but there are some barriers to progress such as:
• Organizational and bureaucracy are a problem. Startups have more flexibility than large banks.
• There’s long development cycles. Some banks still spend a long time changing their processes to facilitate new development ideas.
• When a system has bene there a long time it makes implementation and adoption of new ones more difficult.
• Organizational thinking needs to be more agile, proactive, and have a lean philosophy so they can keep pace with changing consumer habits and new advancements in technology.
• Security is a problem as many believe these systems are still not secure. Banks need to establish trust with consumers. This is especially true with new digital services innovations in the mobile banking sector.
How Banks Can Improve Mobile Banking Technology and Services
There are challenges, but PWC says that banks need to keep up because they run the risk of competitors taking market share away from them. To capture market share in the Fintech space and mobile banking areas to stay ahead of the game, banks have to focus on:
Planning for the Future
The industry moves quickly and banks need to invest in new processes and technology to meet their business goals so they can become market leaders and evolve. Banks have to focus on longer term strategies so they can use new technologies when they present themselves.
Focus on Consumer Solutions
Fintech startups have success because they look at customer’s frictions and eliminate these points. Banks are working on this as well such as the ability to take a check, snap a picture, and deposit this in a bank account. As those in the digital age gain more wealth, they will have expectations and changing behavior. It’s just not millennials that are being impacted by new technology as Fintech services are being adopted by other age groups as well. With a focus on the customer, banks will deliver the services that the users are looking for and they will eliminate the friction points.
Look to Different Development Philosophies
To compete with the various Fintech organizations, the banks need a different development philosophy. Product launches and inefficiencies are created as many banks still use waterfall. New processes will help banks go to the market with improved offerings and quicker service which will meet the market demand. Many financial providers and banks are currently going through this type of transformation including those in the U.S. and Canada.
The Need to Invest in New Technology
Banks will invest more in Fintech in the future, but also have to look to new technologies to reduce dependencies on their outdated legacy systems. They will still need to have a focus of security.
New Partners and Collaboration When Warranted
Banks may be able to work through barriers to advance process and technology, but they will need collaboration and partnership, too. They will be able to partner with Fintech companies through acquisitions, mutually beneficial partnerships and though other investments. Banks may also look to partners that have expertise in processes and agile development and experience in the mobile industry This will help them with their organizational thinking and help them market new products as they make the transition.
In banking technology today, mobile banking is a big topic. It’s a window into a larger world that banks are facing and now adapting to. Across all financial services, consumer behaviors are changing. To stay competitive, banks must also change. New thinking must be adopted and ways of getting things done. Banks may also lead the way to new innovations, too.