Mobile Banking 2.0 – learning lessons from the payments industry

According to research published in July, 57% of UK smartphone users would feel more confident buying goods and services by mobile if they could use apps provided by their bank. Clearly this shows a refreshing degree of consumer trust in banks, alongside a willingness to dive into the world of mobile payments if only their bank is going along for the journey, writes Paul Makin

According to research published in July, 57% of UK smartphone users would feel more confident buying goods and services by mobile if they could use apps provided by their bank. Clearly this shows a refreshing degree of consumer trust in banks, alongside a willingness to dive into the world of mobile payments if only their bank is going along for the journey, writes Paul Makin

However, as McKinsey and Company stated, at the end of 2012 there were 1.7 billion people in the world that own a mobile phone but do not have a bank account. Surely as well as considering m-payment services, the banks should really be looking to get Mobile Banking offerings up to standard and attracting a new customer base this way? The smartphone-wielding modern consumer certainly doesn’t want, or need the hassle of having to speak to a bank, or even worse still having to visit the bank.

This is especially true for the ‘digital native’ generation. Digital natives- defined by the Oxford dictionary as "people born or brought up during the age of digital technology and familiar with computers and the Internet from an early age" – may never have seen a cheque and just won’t be prepared to fill in forms to register for a bank account. They certainly won’t want to wait days – or even weeks! – to get approval. Furthermore and even worse for the banks, the digital native may well not bother with a bank account at all, instead opting to use one of the new, modern technology-embracing P2P mobile money schemes, effectively a mobile-powered prepaid card on steroids.

So how do the banks compete with these mobile money schemes and win over digital natives and others? Education, familiarity and regularity combined are certainly key. Take the example of Visa who spent millions of £s enlisting the help of Usain Bolt in the build-up (and during) the London Olympics trying to educate people around contactless payments, only to find that education alone wasn’t enough.

Contactless payment use has now began to gain traction slowly, thanks primarily to more and more retailers accepting this option and Transport for London introducing it for travel on buses across the capital. So as contactless payments became part of people’s daily landscapes, they became more prepared to use it widely and are now more accepting (and even expecting) to pay by contactless.

This will be the key for mobile banking 2.0. The banks’ first port of call should be to look at the payments world and the innovators there for inspiration and best practice ideas in consumer attraction and behaviour change management. The retailers can certainly offer advice on incentives, via discounts and couponing, which they have used to encourage consumers to try new forms of payment and foster repeat behaviours.

As with any new technology there is a level of concern over security, which creates some hesitation, but as consumers get more and more confident tapping their contactless cards, or opening up their ‘mobile wallets’ for payments, it becomes more comfortable and natural to access financial services this way.

Modern consumers have a short attention span. Immediate, problem free transactions make them advocates but delays or problems make them quickly look elsewhere. So, with analysts IDC recently forecast that over £1 trillion in transactions will be made through smartphones by 2017, there are clearly key lessons here for banks as they look to harness smartphones and tablets for the next phase of Mobile Banking. The digital native consumer in particular will expect to be up and running with a mobile bank account quickly and easily and for the process to be smooth and problem free from the start. What’s more they will expect all of this to be achieved via a phone or tablet, with no need for form filling or branch visits!

Understandably with banks currently having to adhere to strict regulations around KYC (Know Your Customer) and other aspects of customer due diligence, this is easier said than done. There is plenty of work that needs to be done by both the banks and the regulators to facilitate easy, secure, problem free mobile banking for all. This needs to happen, and happen quickly, to grab and keep the attention of this potential new market segment.

Get this wrong and the digital native will quickly lose interest and look to alternative forms of banking from already known and trusted digital innovators, but get this right and you have a new generation of long term users and advocates. Already most mobile banking users appear to be happy to be advocates and recommend the service to others and it surely follows that the more people are able to use their phones for money transactions and transfers, the more they will expect to be able to do so.

The bank that fully adopts this way of thinking early will not only gain a major head start on the competition, but might also tap into the new and previously unbanked and digital native markets….

Which banks around the world have already started down this road and will soon appear as market leaders in the digital space?