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Banks and credit unions have finally joined the bandwagon that Venmo and Square Cash hopped on years ago—mobile peer-to-peer payments. Through Zelle—a P2P payment network under development for six years— 30 financial institutions will offer the service on their mobile banking app, making it easier for more than 86 million consumers to split restaurant bills and pay the dog-walker by phone.
Coming years after other fintech start-ups began doing impressive business in peer-to-peer payments, the Zelle launch puts in high relief where traditional U.S. banking institutions have stood in relation to upstart competitors in mobile banking. As in, they’re more likely to be Johnny-come-latelys than pioneers.
“The need for P2P payments has been there for past five years, but it took young banking players to capture a big share of the market,” to get banks moving into the space, says Catherine Zhou, Digital Services Leader with the Financial Services Practice at Pricewaterhousecoopers (PwC). “Now the banks are here and the question is can they move the market share back to themselves.”
How Banks Can Fight Back
Steps that would make the financial institutions more competitive in mobile banking would also benefit their customers. These improvements to their mobile-banking apps and how they’re marketed would be an excellent start:
Show Them Off More
A PwC 2017 Digital Banking Consumer Survey found that consumers didn’t use their bank’s app because they don’t know if one exists or didn’t know how to use it. That signals a need for banks to increase their sign-up and education efforts. This hand-holding needs to occur in the app as well as in branches or call centers, says Bob Neuhaus, financial services consultant in J.D. Powers’ banking practice.
“The more tailored the help, the more it will be effective,” he says. Banks have been slow to realize this, though. “We’re just starting to see banks put more digitally savvy people in the branches to help customers.” Security worries—consistently a top consumer concern—also evaporate once customers try and master their mobile-banking app. “If you haven’t tried it, you probably don’t trust it,” Neuhaus says.
Stay Ahead Of The Curve
Financial institutions missed the boat on mobile payments. Now banks shouldn’t fall behind in other areas, such as trading and small business. PwC’s Zhou noted with optimism that banks are staying in sync with fintechs and wealth management firms when it comes to investment trading capabilities via mobile. “This is an opportunity where banks can rise above the pack,” she says.
Banks have additional opportunity to boost their mobile-banking offerings to business customers, according to a recent survey from the Federal Reserve Bank of Atlanta. While many of the 117 banks and credit unions in the survey provided mobile-banking services to business customers, most didn’t have specialized business functionality.
Last, banks could consider partnering—rather than competing with—fintechs to improve their mobile banking, Wells Fargo is leading the way by working with SigFig, a robo-advisor that now helps the bank’s wealth management customers to create and balance customized investment portfolios.
Add Functionality
Banks have had the biggest mobile-banking successes when it comes to simple services like checking balances for savings accounts and deposits into checking accounts, says Bill McCracken, CEO of Phoenix Synergistics, a research firm for the financial services industry. But when it comes to more complex transactions, like opening a deposit account or applying for a personal loan or credit card, customers would rather do it in person.
That’s slowly changing. PwC found that the percentage of customers who opened a deposit account or applied for a loan or credit card more than doubled since 2014. Still, the percentages remain in the single digits. But financial institutions seem aware of these shortcomings. Almost half of credit unions and a fifth of banks in the Atlanta Fed survey plan to introduce account openings in their mobile banking apps. Bank of America just rolled out a mobile service that allows users to shop for a car on their phone and apply for an auto loan, with approval in seconds.
Personalize And Advise
There are several missed opportunities by banks to use the breadth of their services and clientele to create new services and value for their customers. One is to begin connecting their business customers with their individual ones to create more value via mobile app. “When someone walks into a retail outlet, what if they could get a discount from their mobile app?” Neuhaus asks. That helps the business and encourages individuals to use the mobile-banking app more frequently.
Another area where banks should have the upper hand, but are losing ground to fintechs is personal finance management, says Andrew Hovet, a director for Novantas, an analytics and advisory firm.
Several fintech apps provide ways for consumers to better understand and improve their finances, such as Stash for investing and Digit for saving. But banks are ideally equipped to do this, Hovet argues, because they have so much data on customer transactions.
“They know how much money I make and can guess how much I save or don’t save. Then they can say: ‘People like you are able to save more because they don’t spend like this,’” Hovet says. “But banks have lost sight of making people’s financial lives easier and have become just a ledger.”
It’s not like banks don’t have ample incentive to beef up their mobile-banking offerings, and significant perils if they’re complacent and fail to do so. Consider the following findings from PwC’s 2017 Digital Banking Consumer Survey:
- Eight in 10 of smartphone owners between 18 and 24 use mobile banking.
- Three in five smartphone owners use mobile banking, up from one in five in 2012.
- Almost half of consumers use just digital sources—mobile, tablet or computer—for all their banking needs, up from a quarter in 2012.
The article 4 Ways Banks Could Make Mobile Banking Better originally appeared on ValuePenguin.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
