Bankers have been hearing for years now that they need to invest in mobile banking, but how do they know when it’s working? Moreover, when will an abundance of apps supplant the importance of the traditional brick-and-mortar branch?
A new white paper from fintech giant Fiserv seeks to answer at least that first question. To put together the findings – titled “Mobile Banking Adoption: Where Is The Revenue For Financial Institutions?” – Fiserv spent 12 months in 2014 and 2015 studying consumers across eight credit unions and nine banks of varying sizes. They looked at metrics like product usage and transaction frequency, and they studied consumers for three months before and after mobile banking adoption.
“Mobile banking is table stakes, and I think all financial institutions do realize that. The main reason we wanted to do this study was because financial institutions generally don’t see the ROI – or if they do, they might have more of a limited perspective,” said John Moon, Fiserv’s director of consumer adoption marketing. “We wanted to show the full scope of where value is seen when it comes to adoption and adoption increase and really point that out. It wasn’t so obvious for a lot of our clients.”
Broadly speaking, Fiserv’s research showed that consumers who used mobile banking tended to have deeper relationships with their bank or credit union, they generated more debit and credit interchange revenue, and unsurprisingly, they skewed younger, with 53 percent of mobile users across the study under the age of 55.
Where product holdings are concerned, Fiserv found that the number of different products held by bank consumers increased about 12 percent in the three months following mobile adoption, and mobile banking customers averaged 2.3 product holdings, compared with branch-only customers, who averaged 1.3 product holdings.
Mobile banking also helped customers’ “stickiness,” Fiserv found. According to the white paper, credit unions experienced an attrition rate of 4.9 percent for mobile banking customers versus 13.4 percent for branch-only customers.
“The primary message is that if financial institutions do invest in their customers and growing mobile users, then they do experience a higher return on investment,” Moon said. “While it’s not as apparent as things like loan products and services, they do need to understand the other indirect value points of more interchange revenue and product ownership and retention.”
A Tale Of Two Banks
On the other hand, the branch network is still critical for many banks’ success, and striking the right balance between a physical network and a suite of self-serve options will depend on the bank.
Perhaps this is best illustrated with a tale of two (very different) banks. First, consider the Waterbury, Connecticut-based Webster Financial Corp. When Citibank announced its exit from retail banking in Greater Boston, Webster snapped up the 17 empty bank branches Citi left in its wake.
With more than $24 billion in assets, Webster isn’t exactly hurting for resources to dump into tech, but it viewed the acquisition as an opportunity to break into a market that company leadership has had its eyes on ever since Webster first planted its feet in Boston’s Financial District in 2009.
“We do believe that those physical locations are critical. We’re big believers in digital … but at the end of the day, what we see and what we find is that relationship you have with your banker, knowing who is holding your money, is critical, and it’s very important to be in the communities we serve,” said Greg Jacobi, Webster’s director of distribution and customer experience.
For Webster, those physical locations are crucial to breaking into a new market. Though customers might conduct day-to-day transactions on their phone, when the time comes to talk about a mortgage, they will probably want to have a face-to-face conversation with a banker, he said.
On the other end of the spectrum, you have Radius Bank. Radius has exactly two locations – its flagship banking center in Boston’s Seaport District and a business banking office in Long Island, New York – but it boasts customers across the United States.
Radius’s strategy has been to invest first and foremost into its technological offerings, from its partnership with LevelUp to Apple Pay to its latest P2P app.
“For us, the strategy is investment in really great products and technology to first acquire the customers. The second half of the conversation quickly becomes around retention and deepening relationships,” said Chris Tremont, executive vice president of virtual banking at Radius.
And like Fiserv, Radius Bank wants to know those things are working, so they track those metrics, too.
“There are certainly different client profiles that can lead to profitability, but typically, if you have somebody who’s enrolled in online or mobile banking and they’ve got their paycheck deposited direct to you, that tells us that we’re their primary bank,” Tremont said. “When we look at that data, you say, ‘That’s the kind of client profile we’re looking for,’ and that’s when we know it’s working.”
