Mobile banking: fast-moving target

3 July 2012

Although mobile banking services have been around for years, they still seem like a relatively new concept. Their use has suddenly started to grow rapidly, largely because consumers have more sophisticated technology in their pocket. But, as Jim Banks asks Citi’s Andres Wolberg-Stok, can banks keep pace with this change and drive it forward?

The uptake of smartphone technology is revolutionising mobile banking. Not only can customers interact with their banks in the digital space more easily through better, clearer interfaces, there are some who believe mobile banking could become the dominant channel for financial transactions within just a few years.

While some banks have launched mobile banking applications that have been well received by customers, the industry as a whole is perceived to have moved relatively slowly into this space and has not fully grasped how important this channel can be in differentiating a bank from its competitors.

"Last year Citi saw an 80% growth in the use of mobile banking services."

This may be understandable given that banks are large organisations driven by vast legacy systems, but it will be less forgivable as customers come to expect more from their mobile handsets. Pressure is growing on banks to inhabit the digital space in the same way their customers do.

"Mobile banking is growing very fast in terms of adoption, and the sophistication and quality of the services offered worldwide," says Andres Wolberg-Stok, SVP/director of strategy for mobile and emerging technologies in the North America Consumer Banking division of Citi. "There has been an explosion of smartphone ownership as people upgrade their handsets. That renovation of handsets to smartphones brings banks into your pocket.

"There is a very clear motivation for banks to take advantage of that by ramping up their relationship with their customers and putting people in control of their money. This increases loyalty and engagement. In the US, mobile banking started many years ago, so it is not a new offering, but last year Citi saw an 80% growth in the use of mobile banking services. By 2015, it could overtake online banking and become the dominant channel."

Retail differentiation

With the rate of growth in IT spending among banks expected to slow down in the next few years, there is a school of thought that suggests banks may continue to focus on core IT projects to the detriment of front-end services like mobile banking. For Wolberg-Stok, this would be a highly questionable strategy.

"Some banks, including Citi, are investing more in mobile banking because it is the one area where banks can really differentiate themselves," he says. "Retail banking products are relatively commoditised, so you differentiate by how well you get into mobile devices and how helpful you are once you are there.

"It would be the worst area in which to cut back investment. It is much more than just a technology investment. The benefits go way beyond that in terms of brand and reputation."

Security: a different mindset

The increasing growth rate in the adoption of mobile banking suggests that some of the issues that caused the bulk of bank customers to be reticent about it have been overcome. The most significant hurdle was the issue of security, with customers initially being cautious about trusting sensitive financial information and access to their accounts to mobile devices. In a few short years, their attitudes have changed dramatically.

"Many banks are explicit that customers are protected against unauthorised fund transfers."

"The security of financial services on mobile devices seems to have been an early-phase concern, but now many people have gone beyond that because they now use phones for so many things," says Wolberg-Stok. "They entrust more information to their mobile phones, particularly through social media, so the debate has moved on.

"At the same time, banks are better at speaking about the security solutions they have in place. No bank would knowingly put something in front of a customer that would increase risk to them. Security on mobile devices is similar to the level of security for online banking, and many banks are explicit that customers are protected against unauthorised fund transfers."

With the problem of security seemingly solved and the penetration of smartphones growing apace, it appears that the market is ripe for banks to push mobile banking forward much faster than in the past.

The question is whether the industry has sufficiently prepared itself to capitalise on this opportunity. To do so, they must not only identify and address the technological challenges that mobile banking presents, but also define a level of service that sets them apart from their competitors. In short, they must understand how customers want to use mobile devices to interact with financial services providers, and this may require a fundamental shift in mindset.

"Banks are used to a very different way of working, so a lot of cultural effort is required to update and push the envelope of digital services," explains Wolberg-Stok. "Citi has a tradition of being at the forefront of technological change - it developed the first ATM, it was the first bank account to be managed by email and produced the first downloadable banking application - so we pride ourselves on always wanting to give customers more control.

"We know from our experience that innovation is as easy or as hard as your top management makes it. You need a visionary CEO to drive things forward."

Top-down influence

It is clear that Wolberg-Stok sees mobile banking - and a bank's entire activity in the digital space - as far more than a question of technology. Increasingly, a bank's online and mobile identity will become the face by which it is known.

"The close involvement of senior management is vital to the further development of mobile banking services."

As digital services become more fundamental to a bank's image, reputation and market positioning, strategies for services like mobile banking rise straight to the boardroom table. For Wolberg-Stok, the close involvement of senior management is vital to the further development of mobile banking services.

"Change needs to be driven from the top of the organisation, especially if the bank has large legacy systems to migrate," he says. "Luckily, our CEO has that vision. On his list of priorities, the second item is for Citi to become the world's premier digital bank. Our venture capital unit, Citi Ventures, looks for interesting start-up companies with a major focus on innovation.

"Our pace of launch shows that we are acting on the CEO's message; for example, we are the lead banking partner for Google Wallet, and our iPad app rewrites digital banking services. We are learning to move more quickly and react as new things come up that change customers' digital use."

Proof of how banks need to stay constantly alert to changes in the digital space can be found in customers' use of newer mobile technologies such as tablet computers. Wolberg-Stok notes that mobile banking is already evolving into 'tablet banking', which requires a very different approach to graphics and user interfaces.

"Tablet computers and mobile phones are used differently," he says. "Phones are more for 'info-snacking'. They provide situational solutions and involve brief sessions, so financial transactions are the most important element of banking services. Tablet use increases in the evening, when users have time and want to access entertainment like movies and music.

"You can't just make a mobile app twice the size so that it fits on an iPad screen. Tablet banking must fit with a longer timeframe of use, in which customers might want to look at their spending patterns or plan their cashflow. It should help people reflect on their finances."

Behaviour in flux

With change in the digital space happening so fast, banks must gear themselves up to fully embrace concepts like mobile banking, and create an organisational structure that allows them to adapt to change more quickly in the future. True citizens of the digital space are light on their feet.

"True citizens of the digital space are light on their feet."

"The biggest challenge is cultural - the ability to be agile and respond quickly is important in banking generally," says Wolberg-Stok. "There is a big component of non-modernity in the industry, but it can be done. It took us five months to go from a blank whiteboard to the launch of our iPad app. Yet some things that mobile banking offers are still seen as problems by banks."

What is required is the right balance between long-term strategic planning and the ability to adapt to trends that arise in the short term. Looking ahead is fine, but it must not blind banks to the here and now.

"One thing we have learnt over the last two years is that although we strive to have a comprehensive strategy in place, it must tie back to tactical execution," says Wolberg-Stok. "A five-year strategy might be too far ahead. If you go back five years, you would not have foreseen the current level of uptake of smartphones or tablet computers. So, a comprehensive strategy for more than six months is a fantasy.

"What a bank needs is a broad toolset of principles and ways of working that help it to anticipate, prepare for and meet new challenges. That way, you get fewer surprises and move more quickly. Strategy and tactics must be closely aligned."

Change in the digital space happens quickly, so banks must gear themselves up to hit the target when it comes to mobile banking.
Andres Wolberg-Stok is Citi’s SVP/director of strategy for mobile and emerging technologies, North America Consumer Banking. He joined Citi 11 years ago from an international personal finance start-up and has served in a variety of digital roles, first for Citi’s Latin America operations, and since 2004 for its US consumer businesses.