Mobile money is a paradigm that presents businesses with new challenges. It poses a basic question: what elements of infrastructure, services, money management and commerce do businesses actually want to provide for their customers via a secure mobile experience? How do they want to define these experiences for those customers?
‘Mobile’ in business does not simply refer to handsets, it represents a mind-set and a new reality. The web was all about customers coming to you, but mobile is about you going out to customers, as and when they want you to, via whatever technology, platform or device suits them. Some banks have already moved far beyond asking ‘what should we do via mobile?’ to ‘tell me why this solution is not mobile?’ Let’s be clear, as the youth of today become the banking customers of tomorrow the traditional approach to banking, irrespective of whether paper was preferred over plastic, cheque or chip and PIN codes, is not well placed to be a future template for success as money and customer loyalty become increasingly mobile.
In terms of bank brand value and engagement, we are living through an unprecedented shift from corporate to consumer control. Every day, we become more mobile and it is not only in financial services where this plays out. Businesses of every shape and size, social networks, mobile network operators and advertisers are all battling for consumer engagement as consumers seek simpler, more connected, compelling and integrated experiences. Every established business is threatened by disintermediation being disenfranchised or disrupted from the brand experiences that were so familiar yesterday.
There will be winners and losers in this new environment and for banks and financial institutions this is a reality. In a world of digital connections, consumers find what they want quickly and brand challengers can quickly become brand champions. Banks traditionally take a long time to make and implement decisions, thus the disintermediation threat is doubly disruptive.
While the web fundamentally changed how we do business, work and communicate, mobile with its ‘always on, always with you’ dynamic extends this transformation from our desktop lives to everything we do. Mobile is a bridge between our digital and physical worlds, a reality some financial institutions and payments companies are only now starting to aggressively experiment with and capitalise on.
The increasing power we have to make connections socially, financially, commercially and emotionally with the tap of a finger on a mobile device or tablet is quite simply transformational. Businesses have never really been able to take consumer relationships for granted over a sustained period of time, yet banks have traditionally and naturally been providers of banking services. That is now changing, as new organisations exploit opportunities and rapidly move to create new customer acquisition and engagement channels across financial services via mobile.
The Threat: Losing the Customer Relationship
The risk remains that banking could quite simply become overtly commoditised, with the consumer relationship shifting ever faster towards ‘non-bank’ brands through the deeper, more compelling real-time engagement they offer. Channel-focused businesses such as Google, Amazon and Apple are strengthening their hand in the battle for consumer engagement. New entrant businesses are experimenting, adopting quick-win strategies designed to build a deeper understanding of newly-acquired customers. The ‘big data’ dividend reaped from this could provide a significant disruptive-mover advantage in delivering game-changing financial services.
For the consumer, the journey from banking to payments and commerce may be very short. To be frank, a consumer of banking services probably doesn’t care how much time and money you spend building your brand as their allegiance to any brand is disrupted daily. This means customers become increasingly open to their banking needs being met by businesses that have no track record, reputation or experience as regulated and trusted financial institutions. We already see how consumers consider, or have a preference for, using PayPal, Google or Apple for their banking requirements. In a June 2012 survey by consulting group Carlisle & Gallagher, eight in 10 consumers interested in mobile wallets said they would use PayPal as their mobile wallet provider, while six in 10 would use Google and the same proportion would use Apple. A ‘worst case’ scenario could see financial institutions marginalised from their consumers and reduced to simple utility providers.
To address this, financial service providers must ensure they lead in shaping, and are seen to shape, the development of mobile money and how you bank, pay or shop via your mobile or handset. A study by business advisory firm AlixPartners earlier this year found 39% of consumers regard having a mobile offering as either ‘extremely important’ or ‘important’ in their decision to switch primary banks. Having a mobile money offering as a bank is a foundation for future competitiveness.
Financial institutions have such an important role to play as the mobile money space continues to evolve. They must make sure they do not lose ground in an industry that many would argue they ought naturally to own. Essentially, this centres on defending and extending their role in the payments industry via an integrated, collaborative and networked approach to the mobile channel.
That there is a consumer appetite for such services is a certainty. Monitise’s own mobile money technology platform, which processes payments and transfers of more than US$20bn annually, has found that on average mobile bankers check into their accounts to engage with the services available more than 20 times a month. By contrast, customers who go into their branch do so once or twice a month. Internet bankers who go online to check their balances and move money do so five or six times a month. Ubiquity, immediacy, bank grade security and utility all play a part in making consumers increasingly active in using financial services via mobile.
Mobile Money Value Layers
So what is the opportunity to leverage mobile money to provide consumers with a valuable, brand-building experience?
Think of it as a three-step roadmap that initially encompasses relatively basic solutions such as informational banking services; followed by second-generation services spanning customer relationship management (CRM) integration, segmented propositions, actionable alerts, person-to-person (P2P) payments and personal financial management; and then third-generation mobile commerce. Here the array of services is broad and incorporates text-to-buy, mobile point-of-sale (POS), shopping, location-based services, social network integration, ticket purchase, multiple languages, charity apps and mobile invoicing. The only way you can run a mass market payment service is by partnering across such schemes. It is here, within these value layers, that the additional average revenue per user builds significantly via the likes of shopping, loyalty, rewards and retail services, thanks to the connections to the wider ecosystem and the bridge built across the offline and online world.
What is the upside for financial institutions? Cost reduction, new and enhanced income streams, customer attraction and retention, cross sales, innovation, a more customer-focused service, and the ability to be always open for business. What is the downside to ignoring the mobile channel? The bank as we once knew it becomes redundant, a dumb pipe amid the rise of the smartphone.
In the current battle for consumer business, trust, engagement and retention, financial institutions that do not have a mobile strategy in place – regardless of their past successes or established brands – will fare worse than those who failed to establish a web presence 10 or 15 years ago. It will amount to ignoring how consumers want to manage their money, and wilfully inviting the threat of disintermediation into an exploding market where banks already have the inherent advantage and customer relationship.
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