Taking the Pulse of Mobile Banking in the U.S.

The Federal Reserve Bank of Boston has released an overview of mobile banking and mobile payment adoption; and since it’s a government report it has the snappy title of “Mobile Banking and Payment Practices of US Financial Institutions: 2016 Mobile Financial Services Survey Results from FI in Seven Federal Reserve Districts”. 

While it may lack a catchy title, it is always good to see results from surveying real financial institutions. Most reports that I read don’t give a full picture, and like this one, their surveys can lead to some dubious conclusions. However, by piecing them together a full picture can start to appear.

In this fed survey, we re-learn some things we already know – mobile banking is “ubiquitous”, with 89% of the financial institutions (FIs) surveyed saying they already offered it (causing one to wonder about the 11% holdouts…) – and nearly all provide apps that support iOS and Android. But this survey also brings a few interesting statistics which I’d like to share - with a bit of commentary.

“Among FIs offering and tracking business mobile banking adoption, more than half (55 percent) still have adoption rates less than five percent.”

For those of us who have been in the mobile financial services world for a while, reporting adoption rates of less than 5% for business apps is one of those shockingly low numbers that fails to shock. Today, one of the ironies in financial services is that, in earlier eras, it was innovations from corporate banking (who had the budget) that eventually impacted innovation in the retail side; today it is the reverse.

I peg the “big bang” of this change to be eleven years ago – specifically, January 9, 2007 – when Steve Jobs stepped on stage and introduced the iPhone. Reverberations from that change are still being felt today. At that time, the dominant mobile device was the Blackberry – a device that was blessed by our corporate overlords and had back-door security capabilities for our IT departments.  Apple’s iPhone wasn’t about business – it was about people.

The camera on the Blackberry was an afterthought that many corporate IT staffs disabled anyhow. But the developing camera capabilities on the new class of consumer devices was central and enabled banks to offer transactional capabilities to their customers, most notably depositing a check from anywhere. The days of mobile banking simply being a “view my money” technology were changed forever.

One of the paradoxes of the current business banking landscape is that C2B and B2B checks account for roughly two-thirds of all check deposits – if you’re one of those people who think checks are disappearing rapidly, you’re not looking at the data – but the business arm of most banks have been slow (see 5% statistic above) to offer or optimize any useful mobile capabilities for their customers.

Let’s say you’re an employee for a small business. You commonly visit small shops or homes and are given checks to pay for the services or products you deliver on behalf of your employer.  You take those checks to the office where they sit until someone physically takes them to the bank or ATM for deposit – a delay and process that costs money.  After you’ve given the checks to your employer, you then get a check from someone made out to you – maybe it’s a rebate check or a check from a friend. Unlike your employer, you’re more likely to deposit that with your smartphone.

Thus, just as the Blackberry gave way to the iPhone, the business side of banks need to learn from their retail banking peers.

Here’s another statistic from the report:

“Of those FIs tracking customer adoption, 54 percent now have more than 20 percent of their retail customers enrolled in mobile banking; and 44 percent have more than 20 percent actively using these services.”

I’m not sure how to interpret this particular statistic apart from thinking “this doesn’t smell right”.  There are many reports, such as Bank of America’s Trends in Consumer Mobility one, that peg mobile banking usage in the U.S. at about 62%.

Of course, 62% is greater than 20%, but with apologies to the Fed, I think this one is off somehow.  The salient points for those seeking to drive greater digital adoption are:

-       Mobile banking usage has more or less plateaued in the U.S. a fact widely reported by those who follow the adoption trends.

-       The easy days of early adopters flocking to a financial institution’s mobile app through their own initiative and enthusiasm have passed.

-       The next growth spurt is going to take focused effort from financial institutions.

-       Financial institutions, in general, aren’t taking the right steps to intentionally drive greater digital adoption.

To many in the FI industry, that last statement might sting a bit; but I’ve rarely spoken with an executive who thinks their FI is firing on all cylinders. Here are some questions a bank might ask as they push to drive adoption of their digital services:

1. How do I match up compared to my peers?  Perhaps your institution isn’t the same size as very large banks, but many of those large banks publically report their adoption numbers to analysts (see slide 21 here) and you should be tracking those.  Also, vendors can often give you a pretty good idea of how you’re doing comparatively.
2. When a customer walks into one of our branches, what happens?  This seems like an odd question, but increasingly the correct answer is “they are met by a representative with a tablet”. Sometimes referred as ‘digital ambassadors’, these branch employees not only begin to help the customer but are also helping themselves by walking the customer through using their own mobile device. Many people don’t use mobile check deposit simply because nobody from their bank has taken the extra minute to show them how.
3. What is your definition of a booked account? Banks have various ways to determine if a new account is completely opened, or ‘booked’. The most common metric is whether or not the account is funded (many new accounts are ‘ghost accounts’ that never get funded/used). But I was working with a smart bank recently that now includes “do one mobile deposit with the customer” as part of their booked account definition (they have pre-printed low dollar checks at the ready for exactly this purpose). Branch employees are not credited with a fully opened account unless this step is completed.
4. What does success look like to you, and who in your institution agrees (or disagrees) with you? I often detect a laissez-faire attitude on the topic of digital adoption in many banks, which is counter-intuitive given how vital it is to the success of any FI. When asked their opinion that, say, 12% of checks being deposited by their retail customers are coming in via the mobile channel, I’ve heard sounds of contentment and pride.  But many banks are above 20%, and frankly, the numbers should be well north of 30%. Cast in that context, 12% is pretty terrible.  I think many financial institutions would do well to drive a ‘stake in the ground’ within their organization about what success looks like, and 15% or 20% mobile penetration for check deposits isn’t it.  Establishing an aggressive number, getting all stakeholders on board, and stealing ideas from others who are ahead of you, can go a long way to creating momentum.

By the way – the reason why FI’s should pay close attention to their rate of check deposits in the mobile channel is because it is a bellwether of progress towards broader digital adoption.

As I’ve written before, if you can’t get customers to take a photo using the app on the phone in their pocket, what makes you think they’ll use your Artificial Intelligence-infused chatbot to purchase a car loan? 

Digital adoption begins today, solving the problems people have today. If you can’t get that right, your FI is not going to be valued above, or even in-line, with its peer group.

Learn More - Related Research

For further reading, let me recommend these two excellent reports done by organizations I admire:

1. Bain & Company: Evolving the Customer Experience in Banking: ‘Alexa, Move My Bank Accounts to…”
2. Futurion: 2017 Mobile Deposit Benchmark Report: Consumer Behavioral and Attitudinal Research
3. Also, don’t miss this insightful column by Kevin Tynan from Liberty Bank for Savings in Chicago, is well worth your time.

Enjoy the journey, digital travelers!