By Daniel Huang
A waitress from Queens, N.Y., Ethel Bueno represents the
promise--and the pitfalls--of a recent surge in the popularity of
mobile banking.
The 23-year-old keeps her phone close at all times, and
frequently logs on to her Capital One bank account to check her
balance and make sure charges go through correctly. "It's made my
life easier," she says.
But for bigger and more-complex transactions, which often
require fees, Ms. Bueno prefers to visit a bank teller in person.
That means her digital devotion to the bank doesn't actually
generate much revenue, a puzzle firms across the industry are still
trying to solve.
For the first time, U.S. customers interact with their banks
more through mobile devices than any other means, according to a
new study by consultancy Bain & Co. Mobile interactions are now
35% of the total, more than any other type, including traditional
online channels, automated-teller machines and branch visits, the
report showed.
The report, to be distributed Friday, highlights a major shift
in how banks engage with their customers--one that the firms hope
will help them build loyalty among some of their most valued
clients.
"Mobile users are redefining how we think about banking," said
Gavin Michael, head of digital at J.P. Morgan Chase & Co. The
nation's largest bank by assets has 18 million mobile users who
have logged on within 90 days, up 23% from November 2013. More than
40% of customer households today use the mobile channel, up from
25% in 2012.
In recent years, most of the nation's big banks have emphasized
their digital offerings while closing branches and making newer
branches smaller in an effort to cut costs.
But the Bain report also indicated that banks that go all-in on
digital do so at their own peril. "Digital-only" customers scored
lower on a loyalty and engagement scale than those who only visited
branches or used a combination of branches and digital
channels.
Digital-only customers also purchased fewer products than those
that connect with banks through a combination of digital channels
and physical branches.
The key, the report argued, is for banks to develop
"omnichannel" relationships with customers that build loyalty
through a variety of experiences.
"There's a virtuous cycle," said Gerard du Toit, head of Bain's
banking practice in the Americas. As customers engage more
frequently with their banks, "they're more open to learning about
and consuming new products."
The Bain report, which surveyed roughly 83,000 bank-account
owners around the world, found that customers in 13 out of 22
countries complete more interactions through smartphones or tablets
than any other channel.
Global customers using mobile applications to access banking
services climbed 19% in the past year and now comprise nearly half
of all customers, Bain said.
Banks are also pushing further into mobile as a matter of simple
economics.
"Mobile is by far the least expensive channel," said Kevin
Sullivan, senior vice president at Fifth Third Bank. He said the
Cincinnati-based bank's internal costs were consistent with a 2012
report by Fiserv, a provider of financial-services technology,
which found that digital transactions cost on average 17 cents
each, compared with 85 cents for an ATM transaction and $4 for an
interaction with a bank teller.
To be sure, many customers are just dipping their toes in
mobile, using their smartphones or tablets to handle basic tasks
like checking account balances. Other services, such as remote
check deposit, are also catching on, but mobile users tend to stay
logged on for shorter periods than their computer-using
counterparts, said Mr. Michael of J.P. Morgan. More important
transactions that generate fees or require advice often still
involve a visit to a branch or a call to the bank.
For some customers, the joy of mobile banking comes from
depriving banks of that opportunity.
Manuel Rodriguez, 43, a maintenance worker from New Jersey,
likes that when he is on his mobile device, he can focus on
completing the task at hand. He says he banks with his phone at
least once a day, often checking his accounts and paying bills on
the go.
"I don't want to hear from the teller, 'Oh, would you like to
try this or that today,'" Mr. Rodriguez said.
But banks contend mobile users are attractive nonetheless.
Wells Fargo & Co. says that "high-intensity"
customers--those who frequently interact with the bank across
multiple channels--tend to be 1.7 times more profitable, and
typically own six more products, than low-intensity customers.
The San Francisco-based bank's mobile users, on average, access
their accounts 15 additional times each month, while interactions
through other channels remained consistent, indicating that "mobile
growth is entirely augmentative," said Brett Pitts, head of digital
at Wells Fargo.
Bank executives contend there is little downside for the
consumer.
"The mobile experience is, at worst, more convenient," said Mr.
Sullivan from Fifth Third. "At best, it can even be kind of
fun."
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