Standing out from the crowd

As banks seek to provide better access to their services at less cost, mobile technology may finally be coming into its own as a viable option for consumers. But there is still some way to go before the ‘mobile opportunity’ is fully recognised, writes Jukka Riivari, Meridea Financial Software Ltd.

In today’s fiercely competitive market, retail banks increasingly need to differentiate themselves by superior service in order to attract and retain customers. At the same time, investors and shareholders want to see increased revenues and lower operating costs.

To provide differentiation, lower costs and maximise customer convenience, banks introduced ATMs, telephone banking services and then internet banking. These channels are undoubtedly popular and have reduced overall branch banking costs. Now they are no longer differentiators – just a cost of doing business that should be minimised. Each ATM costs as much per year as an employee. In the case of telephone banking (according to Gartner), each inbound call costs the bank E5–8. Even when IVR systems have been introduced, most consumers prefer to divert to a ‘real’ person, keeping the costs high. Most incoming telephone calls are mundane requests for information: ‘what is my balance?’; ‘did my salary get paid?’ These types of calls represent over 60 per cent of all incoming traffic. These calls do not represent an opportunity to sell, and the customer resents waiting in a call queue. For most banks, moving these simple, low-value transactions to electronic self-service channels has become a high priority. Internet banking is by far the cheapest service channel, but banks struggle to persuade most customers to log on and use the service. Some are concerned about security, some do not have the equipment and some just do not want to do it.

Recognising the mobile opportunity

In the late 1990s, banks recognised that the mobile device was becoming the universal and preferred method of communication for consumers. Today almost 80 per cent of European consumers use a mobile phone. WAP technology was hyped as giving consumers anytime, anywhere access to the internet. Unfortunately, the handsets had poor screens, the applications were complicated to use and WAP technology proved to be unstable, slow and expensive.

Banks have recently concentrated on ‘outbound’ mobile banking offerings such as SMS. Customers can be alerted to low account balances or unusual transactions. This is popular, but is done at considerable cost to the bank. Furthermore, on receipt of the information the customer calls the bank to move money around, incurring extra cost.

Interest in new ways of exploiting ‘inbound’ mobile technology is accelerating and, according to Forrester in March 2005, one third of all mobile users today would consider receiving ‘some kind’ of banking service through their phone. A good indication of the untapped need for the mobile channel is, of that third, only one quarter use internet banking. Meridea’s research shows that up to 70 per cent of consumers would like to use a simple banking application on their phone. Current handset and application technologies can deliver convenient, simple and secure services to the consumer; this was not the case previously.

Keep it simple

Will banks adopt this new mobile channel? Will consumers really use it? Yes, so long as it is simple, useful, safe and convenient. All these conditions must be met.

Applications that have moved successfully to mobile (such as email on Blackberry devices) have done so because the content is something of value to the consumer, and is presented to them in a form that is simple, convenient and secure to use. There is high consumer interest in mobile banking applications because the nature of the content (their wealth) is important to them. In the past it has been impossible to provide this content in a simple, convenient and secure form. Today’s handset, network and application technologies have removed that barrier.

For mobile banking to be positioned in conjunction with other channels, Meridea has identified four questions that are frequently asked when discussing the role of mobile banking with leading retail banks:

• Q1 How should I look at the whole portfolio of my ‘channels to consumer’ and create synergies between channels, rather than looking at each channel in isolation?
• Q2 How to quantify channel substitution?
• Q3 Why would introducing a mobile banking channel be a good thing for my bank and how will it enhance my competitive position?
• Q4 Why should I be introducing mobile banking now?
  

Log on to www.meridea.com/erf2005 to find the answers.