Introducing Celent Model Bank 2017 Awards

Introducing Celent Model Bank 2017 Awards
As my colleague Dan Latimore wrote in the article that began this series, 2017 was the best ever year so far for Celent Model Bank programme in terms of quantity, quality and diversity of nominations. As we went through the judging process, we felt a range of emotions – grateful and privileged to receive so many amazing stories, and daunted by the prospect of having to pick the most worthy award recipients. In the end, we are excited and confident about our selection of winners, yet we are sorry that we could not recognize so many others that clearly also deserve recognition.

Over its ten years of existence, Celent’s Model Bank programme has always changed and evolved. In the last few years we have been awarding multiple initiatives in a small number of categories – for example, last year we had four winners in Digital Banking Transformation, the busiest of seven categories. While all the awards within the category were equal, we knew that some institutions craved for more exclusive recognition. This year, we decided to take it a step further and to introduce specific named awards with only a single winner for each award.

After long deliberations, the judging panel decided to recognise 21 initiatives as winners of the following Model Bank 2017 awards:
  • Consumer Digital Platform – for delivering an outstanding digital experience for consumers. The award is open for traditional financial institutions, digital-first, and challenger banks.
  • Small Business Digital Platform – for delivering an outstanding digital experience for small businesses.
  • Corporate Banking Digital Platform – for delivering an outstanding digital experience for corporate clients.
  • Consumer Banking Channel Innovation – for the most creative use of consumer channels, or the most effective channel integration.
  • Branch Transformation – for the most compelling branch transformation initiative, including branch format innovations and creative use of live agents.
  • Product Innovation – for demonstrating the ability to launch multiple innovative products.
  • Open Banking – for the most impressive API strategy and results so far.
  • Payments Product – for launching the best consumer or business payments product.
  • Lending Product – for the most impressive consumer or business lending or collections initiative.
  • Fraud Management and Cybersecurity – for the most creative and effective approach to fraud management or cybersecurity.
  • Risk Management – for the most impressive initiative to improve enterprise risk management.
  • Process Automation – for the most effective deployment of technology to automate business processes or decision-making.
  • Employee Productivity – for improving employee training or collaboration, incentivising employees, or enabling mobile agents.
  • Payments Replatforming – for the most impressive project to improve payments back office, e.g. payment services hub implementation or cards replatforming.
  • Core Banking Transformation – for the most compelling initiative to transform a traditional core banking platform.
  • Banking in the Cloud – for innovative approaches to implement a banking platform, e.g. deploying in the cloud.
  • Banking as a Platform – for creating an ecosystem of partners via a banking platform that connects and enables third parties.
  • Emerging Technology for Consumers – for creative deployment of emerging technologies for consumers (e.g. AI, ML, API, biometrics, wearables, voice, blockchain, etc.)
  • Emerging Technology for Businesses – for creative deployment of emerging technologies for small business or corporate clients (e.g. AI, ML, API, biometrics, wearables, voice, blockchain, etc.)
  • Most Promising Proof-of-Concept – for the most promising experiment – pilot or proof-of-concept – with emerging technologies.
  • Financial Inclusion – for efforts to bring financial services to unbanked and under-banker communities.
And of course, we also kept our Model Bank of the Year award, first introduced in 2012, which recognises one financial institution that in any given year simply stands out from the crowd and uniformly impresses Celent judges.

For the time being, only the nominees will know if they won any of these awards, as we begin working with them to distill their achievements into a series of case studies. We will be announcing all winners publicly on April 4 at our 2017 Innovation & Insight Day in Boston. In addition to presenting the award trophies to the winners, Celent analysts will be discussing broader trends we’ve seen across all nominations and will share our perspectives why we chose those particular initiatives as winners. Make sure you reserve your slot here while there are still spaces available!

Model Bank 2017: Some First Impressions

Model Bank 2017: Some First Impressions
Growing up, a family Christmas tradition was that my mother would ritualistically proclaim, “That’s the most beautiful tree ever.” It seems that way with Celent’s Model Bank awards, too. In our tenth year we’ve just been through more than 150 submissions, and just like my mother, I can say that this was the best crop yet. The quantity emphatically broke records, and the quality was outstanding. Ongoing innovation in banking technology is clearly beginning to pay off, and we’ve been privileged to learn an immense amount from all of the financial institutions that took the time to tell us about their how they’ve been using technology and innovation to serve customers better, become more efficient, and mitigate risk.

Those who’ve followed the Model Bank Awards closely will note that our awards format has evolved to follow the market over the years. As the imperative to be more customer-centric has become more pressing, it has in turn begun to blur the lines between one of the oldest ways to divide banking: channels. And lines elsewhere begin to blur, too – for instance, should a mobile payments initiative be in mobile, or in payments, or in its own category? We’ve addressed this conundrum with five categories chosen to provide a broad cross-section of the banking landscape.
  • Customer Experience
  • Products
  • Operations and Risk
  • Legacy Transformation / IT Platform Innovations
  • Emerging Innovation
The entries were exceedingly diverse, and came from repeat submitters and new participants. EMEA led the pack quantitatively, with APAC and North America roughly the same, and the strongest showing yet from Latin America. We expected to see nominations around digital banking, branch and core transformation, and payments, to name a few, and we weren’t disappointed. We were also pleasantly surprised to see intriguing initiatives involving employee productivity, cross-selling, AI, Biometrics, and Blockchain.

Inevitably some will be disappointed; there were so many worthy initiatives that the judging was the most difficult by far. It’s certain, though, that Celent analysts will have a full plate for the next two months as we reach out to our Model Banks and complete the work of distilling their rich stories into pithy case studies that illustrate the incredible innovations banks are undertaking today.

As for what you can expect between now and April 4 in Boston, look for a series of articles from the Celent analyst team highlighting some of the many insights that we’ve gleaned along the way. We’d recommend that you check back in; as we notify the winners and begin to develop our case studies, we’ll keep you posted with a series of articles like this one that detail some of the insights.

And while space is filling up fast, there’s still time to register for 2017 Innovation & Insight Day, April 4, 2017 in Boston, Massachusetts. Find out more about last year’s event here.

Banking Third Party Risk Management Requirements are a Big and Expensive Ask

Banking Third Party Risk Management Requirements are a Big and Expensive Ask

Celent, through its work with Oliver Wyman, estimates the cost to US financial institutions of undertaking due diligence and assessment of new third party engagements to be ~ $750 million per year. Institutions are paying three times as much as their third party to complete on this exercise. The average cost to an institution to carry out due diligence and an assessment of a new critical third party engagement is $15,000 and takes the institution approximately 16 weeks to complete.

The top ten US banks average between 20,000 and 50,000 third party relationships. Of course, not all of these relationships are active or need extensive monitoring. But the slew of banking regulatory requirements for third party risk management is proving to be complex, all-consuming and expensive for both institutions and the third parties involved. In a nutshell, institutions are liable for risk events of their third and extended parties and ecosystems. The FDIC expresses best the sentiment of worldwide regulators:

“A bank’s use of third parties does not relinquish responsibility… but holds it to the same extent as if the activity were handled within the institution." www.fdic.gov

If an institution doesn’t tighten its third party risk management, it is significantly increasing the odds of a third party data breach or other risk event and will suffer the reputational and financial fallout.

In the first report of a two-part series, just published by Celent, “A Banker’s guide to Third Party Risk Management: Part One Strategic, Complex and Liable”, I show how institutions can take advantage of their established risk management practices such as the Three Lines of Defense governance model, and operational risk management processes to identify, monitor and manage the lifecycle of critical and high-risk third party engagements across functions and levels. It describes the components required for a best-practice program and shows examples of two strong operating risk models being used by the industry that incorporates third party risk management into the enterprisewide risk management program.

Unfortunately, there are few institutions that have successfully implemented strategic third party risk management programs. Most institutions fall between stage 1 and 2 of the four stages of Celent’s Third Party Risk Management Maturity Curve. But continuing to operate without a strategic third party risk management practice will leave your institution in the hands of cyber fate and the regulators.

Chat Bots: Savior or Disintermediator?

Chat Bots: Savior or Disintermediator?

AI is becoming increasingly interesting to bankers.  Last year I wrote a blog about “Assistant as an App”, looking at how concierge apps like MaiKai and Penny are offering up AI-driven financial management services.  My colleague Dan Latimore also recently posted a blog on  AI and its impact.

The emergence of chat bots within popular messaging apps like Facebook Messenger, Slack, Kik, and WeChat similarly has the potential to shift how customers interact with financial institutions. Chat bots offer incredible scale at a pretty cheap price, making adoption potentially explosive. Facebook messenger, for example, has almost one billion active users per month. WhatsApp (soon to launch chat bots) has about the same.  These apps offer some extremely high engagement, and with app downloads decreasing, users are spending more time on fewer apps. According to Tech Crunch, 80% of the time spent on a mobile device is typically split between 3 to 5 apps

Chat bots give the bank the ability to automatically appear in almost all of the most used apps in the world.  The opportunity with digital assistants is immense, and given the nature of bank transactions, it’s not hard to imagine chat bots becoming a widely used engagement method.  Most of banking is heavily rules-based, so the processes are often standard.  Frequent banking requests are pretty straightforward (e.g. ‘send this person X amount of money’ or ‘transfer x amount from savings to checking’).  Bank-owned chat bots are also more built for purpose than some of the multi-purpose third-party products on the market, making the functional scope targetted. While chat bots are still very early days, it won't be long before these kinds of interactions are accessible and the norm. Bank of America already has one; many others have plans or pilots.

This video (skip to 7:30) shows what an advanced chat bot might be able to accomplish. The image below from the Chat Bot Magazine is another conceptual banking use case.  The possibilities are compelling. 

 

 

 

 

But while the opportunity with digital assistants is enormous, banks must be aware of how this affects their current ongoing digital strategy. For example, if chat bots overcome the hype and become a long lasting method for accessing financial services, then what effect will that have on traditional banking apps?  Will chat bots make it foolish to invest large sums of money in dedicated mobile apps? 

For all the promise this technology brings, banks need to be aware that this could be a step towards front-end disintermediation. The threat of tech companies (or other large retailers) stepping in to grab banking licenses and compete directly with incumbents was short lived.  The more realistic scenario was always relegating core banking functions to a utility on the backend of a slickly designed user interface created by a fintech startup.  The incumbents lose the engagement, even if they are facilitating the transactions.

Are chat bots a step towards front-end disintermediation, or are they an extension of the bank’s main app?  If you believe that chat bots are a stepping stone (or companion product) towards a world where the best UI is no UI, and where AI evolves to the point of offering significant functional value, then banks could be at risk.

This isn’t a call to hysteria by any means, nor am I calling chat bots wolves in sheep’s clothing, but banks need to be aware of the potential impact. As voice or message-based interactions become the norm, they will have an effect on a bank’s dedicated mobile app.  In this environment, the mobile app will need to evolve to become something different; non-transactional.

Chatbots will only further fragment the customer journey, requiring an even clearer understanding of how consumers are choosing to handle their finances and make transactions. Banks need to start thinking about how chat bots and AI fit into a long-term digital channels strategy, one that doesn’t handcuff the institution into a no-win proposition of competitive disadvantage versus wilful disruption.

Leapfrogging the bank app to go straight to the electronic assistant

Leapfrogging the bank app to go straight to the electronic assistant

 

No one downloads a banking app from their store of choice for fun, nor do they open it up to amuse themselves. Instead, bank apps are used to accomplish specific tasks – check a balance, pay a bill, send money to a friend. Despite the undeniable utility of these apps, institutions struggle to persuade their customers to use them; adoption rates, depending on the specific measure, hover around 50% and have been stuck for a while at that plateau. Furthermore, while it’s undeniable that many customers want a better customer experience, and at least some of those customers would like more and better features, digital executives struggle to find the ROI of investment in their apps. Of course, there’s the argument that it’s analogous to malls that put up Christmas and other holiday decorations – consumers just expect it, and there’s not an explicit ROI – but that’s the subject of another post.

What if consumers could perform their basic banking tasks without ever having to open up their banking app? They could say, “Siri, what’s my bank balance?” or “Alexa, pay the water bill out of my main checking account.” While we’re not there yet, consumer desire for convenience (aka “seamlessness” or the “frictionless customer experience”) knows no bounds. My experimentation with Siri and Alexa, together with my preliminary research into Artificial Intelligence in banking, have led me to hypothesize that this scenario is a lot closer than many bankers might imagine. In the obligatory Uber example, the payment is invisible; what happens when the consumer makes this happen in all other sorts of interactions?

How are you prepared to offer your customers this new level of service? Do you have APIs that will let this happen? And is there a strategy to go beyond simply fulfilling a request and offering more insight, advice, or perspective than simply what being asked for? Like European banks facing the challenge of PSD2, all retail institutions can look at this as a moment where they’ll be relegated to the background or one where they can revamp their service models to build better, stronger, and deeper customer relationships.  

Stop Throwing Money at Cybersecurity

Stop Throwing Money at Cybersecurity

cyber-operational-risk-150x1501 Most cyberattacks succeed because of weaknesses in people, processes, controls and operations. This is the definition of operational risk. Therefore, it makes sense to tackle cyber risk with the same tools you use to manage operational risk.

We continue to prove that the approach of the IT department managing cybersecurity is not working. Cyber risk is typically treated in parallel with other technology risks; the IT department is motivated to focus on securing the vulnerabilities of individual system components and proffers a micro view of security concerns.

My new Celent report on Treating Cyber Risk as an Operational Risk: Governance, Framework, Processes and Technologies”, discusses how financial institutions are advancing their cybersecurity practices by leveraging their existing operational risk frameworks to centralize, automate and streamline management, technologies, processes, and controls for a sounder and more resilient cybersecurity.

The report identifies and examines the steps required to achieve a risk-based approach to a sustainable and, ultimately, a measurable cyber risk management strategy:

1. Establish a long-term commitment to drive a top-down, risk-based approach to cybersecurity.

2. Recognize that the traditional approach of the IT department managing cybersecurity is limited and that most cyber risks are weaknesses in people, processes, controls, and operations.

3. If you have not already, consider deploying the NIST cybersecurity framework and tailor the framework to fit your individual cybersecurity requirements. The framework lets you take advantage of your current cybersecurity and operational risk language, processes and programs, industry standards and industry best practices. Both cyber and operational risk should be informed by and aligned with the institution’s enterprise-wide risk management framework.

4. Move your organization along the cybersecurity maturity curve by building dynamic risk models, based on shared industry data and assumptions, to measure and monitor cyber threats and pre-empt those attacks.

5. Stop throwing money at the problem. Educate decision-makers on why and how breaches happen. Do not purchase in siloes or under pressure, select the right expertise to identify the issues and carry out due diligence on products.

6. Use the NIST’s five functions to navigate and manage cybersecurity technology requirements and purchases.

7. Know what technology you want from your vendors; know what advice to seek from your consultants.

8. Acknowledge that cybersecurity is the responsibility of every employee and human behavior is the most basic line of defense. Institutions cannot hesitate in the goal to educate their employees, third parties and customers.

The Mobile Banking and Payments Summit – Impressions from Day 2

The Mobile Banking and Payments Summit – Impressions from Day 2

A couple weeks ago I attended the Mobile Banking and Payments Summit in NYC for the first time.  There was an impressive list of experts from institutions such as JPMC, Barclays, Citibank, BNP Paribas, the Federal Reserve, USAA, Capital One, BBVA, and Moven, among others. I was only able to attend the final day, but it didn’t disappoint.  The day focused mostly on mobile wallets, with a few main points shared below:

  • Mobile wallets have been challenged by industry barriers:  The old rule of thumb with a payments scheme is that it needs to please three parties: the merchant, the bank, and the consumer.  These products and solutions have traditionally fallen short of one or more of these objectives, essentially stalling a lot of the progress.
    • There’s still plenty of fragmentation in the market:  Android is an open system utilizing Host Card Emulation (HCE), while Apple is a closed system using a secure element.  There are others beyond that, but it’s largely contributed to a lack of standardization and unimpressive overall adoption.  We know this is largely understood by banks and merchants, and many are willing to play along for the time being.
    • Consumers can misunderstand mobile wallets: Many users of Apple Pay, for example, have a poor understanding of how the system actually works, with many assuming Apple is in control of their card details.  While the system is safer than traditional cards, the perception that it’s less safe is keeping many users from adopting it.
    • Getting the marketing right is tough: Often, the mobile wallet really isn’t about the payment so much as the experience around the payment.  It might be easier or there might be a whole host of incentives like rewards wrapped around it.  The potential is there, but until recently the market hasn’t been.
  • But many barriers are beginning to fall away, and there’s hope for adoption: For years, the industry has been declaring that FINALLY this year will be the year mobile wallets take off.  The industry has been crying wolf for a long time, but there are some promising developments that hope to make mobile wallets a larger share of the payments universe.  Currently in the US, 55% of merchants have updated their payment terminals, and 70% of consumers have chip cards.  The chip card does a lot for security, but the argument is that it adds friction to the checkout experience.  With the card dip taking away from the user experience, the expectation is that mobile wallets will finally offer enough UX improvement over traditional cards that consumers might opt for them during payment.  It’s also reported that more than 50% of millennials have already used a mobile wallet at least once.  This includes Apple Pay, Android Pay, or Samsung Pay.  The growth in adoption with younger consumers is a good sign that broader adoption might not be too far behind.

My colleague Zil Bareisis has written about this quite a bit, and agrees that adoption could be driven by the emergence of EMV as well as an increase in handsets that support wallet payments.Wallets are also striking partnerships to add value, including introducing merchant loyalty, coupons, etc.The launch of Walmart Pay is a great example of a retailer applying these concepts internally, facilitating even greater adoption. For more information see any of the number of reports Zil has written on the topic.

  • Midsize institutions have a few paths to follow implementing a mobile wallet: Banks want to be a part of the adoption, but have so far taken a wait and see approach, unsure about the potential of existing wallets, and still trying to figure out what it means for them as the issuing bank. There are three primary ways a midsize or smaller bank can try to launch a wallet:
    • Building an internal wallet: This provides the most control, customization, flexibility of functionality, and control over the release schedule.  The drawbacks are that it can be a complicated task, a large investment is required, the institution needs sufficient subject matter expertise in-house, and there would be no Apple NFC support.
    • Buying a turnkey white label wallet: A turnkey solution would have the benefit of being plug-and-play, there would be some customization options, functionality would be built in, fewer resources would be involved, and the vendor would provide some subject matter expertise.  There would, however, be less control over the product, the wallet could be processor dependant, and the roadmap wouldn’t be controlled by the institution.
    • Participating in an existing wallet: For many this is the road that will result in the largest adoption.  The options are fairly universal, with Samsung, Apple, and Android offering networks here.  Its plug and play, easy to get traction, includes a lot of choice, and frictionless.  The drawbacks are mainly the lack of customization options or control over the direction of the wallet.

We often say that we go to these conferences so that our subscribers don’t have to.  This is just a short summary of the day, and obviously there was much more detail shared. We encourage all of our readers to attend these events, but will be there in case they can’t make it.

Impressions from Finovate Fall 2016

Impressions from Finovate Fall 2016

A few weeks ago I attended Finovate Fall 2016 with a few different colleagues of mine in New York.  For those who’ve never been, Finovate hosts three main events (New York, San Francisco, and London) where more than 70 fintech companies are able to present new concepts, services, or products in a rapid 7-minute format.  Traditionally, the San Francisco event has catered to more of the pure start-ups, while the New York event gives larger, more established vendors the opportunity to show off their newest ideas, although typically there’s a bit of a mix between each.

As a temperature gauge for the industry, I don't think there’s a better event. The ideas generally reflect where the industry is at in its thinking, and what the major trends are for fintech.  For example, 2-3 years ago the hot topic was PFM, big data, and mobile wallets.  Last year, mobile onboarding, customer acquisition schemes, and AI were the most prevalent.  Parsing through the hype and the reality is typically one of the more fun aspects of attending.  This year I noticed a few things that caught my attention:

  • Chatbots, Natural Language Processing (NLP), and general communication solutions were common: Companies like TokBox, Personetics, Kore, and Clinc were some of the more compelling examples here. These solutions were prominent in 2015, but the biggest change was the maturity of their capabilities.  Last year, what stood out to most attendees were the many demos that fell flat.  A handful of presentations completely bombed on-stage, and even those that made it through the process were often shaky and the inputs looked too rigid.  These technologies have advanced quite a bit in the last year, and the proposition for banks is becoming much more attractive. 
  • PFM was hidden behind data analytics:  PFM hasn't been a discussion topic in the industry for quite some time. The initial round of PFM deployments were troubled by poor execution and unmet expectations by financial institutions that piloted them.  Many financial institutions we’ve spoken to become immediately sceptical of a vendor solution that even uses the term.  Celent has been talking for some time about PFM merging with online banking and essentially becoming the landing page.  What was traditional PFM (spending breakdowns, budgeting, savings goals, etc.) is now just digital banking.  New methods of financial management demoed at Finovate, however, show PFM under disguise as platforms that leverage data analytics.  MapD was one that stood out. Clean data has always been the holy grail for PFM, and it’s always been one of the biggest issues.  More solutions focused on getting the data analytics right, creating financial value for the consumer, and cleverly disguising what should have been PFM from the beginning: insights unpinned by advanced analytics.
  • Not many payments products or solutions leveraging blockchain: Surprising to me were the lack of payments startups as well as any startup leveraging blockchain. My thinking is that many of the solutions around blockchain are still in their early days, and probably not ready for prime time.  Also, while I know of a number of startups leveraging the technology, they are more bleeding edge, and may have been attracted to the spring Finovate, which focuses much more on early-stage fintech companies.  The lack of payments schemes was also a surprise, but it could be that Apple Pay has taken some of the wind out of the sails of fintech companies trying to solve very similar issues.  Mobile wallets and payment products typically require a lot of industry leverage to make work.  You have to satisfy the merchants, the banks, and the consumers, and most have failed to reach sufficient scale.  Many in the industry said it would have had to be a larger more established firm, and indeed the launch of Apple Pay confirmed that prediction.

 

Finovate continues to offer great insight into where the industry is at and where it’s heading.  We’ll continue to attend these events and provide some more analysis. Feel free to comment on your perceptions, if any, from the event.

Where Will We See You Again?

Where Will We See You Again?

When the leaves start falling, it usually means one thing for Celent analysts – the conference season is getting into full swing and it’s time for us to hit the road big time.

The team is already busy at SIBOS this week, with BAI and AFP coming in a few weeks. Personally, I am looking forward to speaking on customer authentication at Mobey Day in Barcelona on October 5-6, as well as attending Money20/20 in Las Vegas on October 23-27.

Such high profile events are always great places for catching up with our clients and other industry experts. They are also perfect for getting up to speed with the latest developments in the industry, or, as my colleague Dan Latimore says, “soaking up the zeitgeist”. Dan will also be joining me at Money 20/20.

This year, we will be keeping an eye on (amongst many other things):

  • Which of the latest initiatives look most promising to (re-)invigorate mobile payments? Will it be Apple Pay and Android Pay on a browser, the networks’ partnerships with PayPal, 'Merchant' Pay, or something new that will get announced at the events?
  • Adoption of and developments in payments security technologies, from EMV to biometrics, and from 3DS to tokenization.
  • Innovations that drive commerce and help merchants, from bots to APIs that enable deep integration of payments into the merchant’s proposition. Also, creative application of analytics, whether to help merchants increase conversation rates, extend a loan, or deliver the most relevant and timely offer to the customer.
  • Where will blockchain fit into payments world? Ripple continues to gather momentum with cross-border payments, the UK is exploring the use of distributed ledger technologies as backbone for a domestic payments system, while IBM is partnering with China's Union Pay around loyalty. What other payments-related innovations can we expect from the blockchain community?

What will you be looking for? If you’ll be in Barcelona, Orlando, Chicago or Vegas, we look forward to seeing you. If you haven't registered, now's the time. And because of your relationship with Celent, you are entitled to an additional $250 discount off the Money20/20 registration fee. Combined with the Fall Final special you save a total of $725. Simply enter promocode Celen250 when you register here.

Mobile banking adoption growth is slower than you think

Mobile banking adoption growth is slower than you think

In March of this year the Federal Reserve released the newest iteration of its consumer survey report on mobile banking, Consumers and Mobile Financial Services 2016. One fact that sticks out is how slow mobile banking adoption has been over the last few years.  While 53% of smartphone users have used mobile banking in the last 12 months (nowhere near “active”), that number has only grown 3 points since 2012, a CAGR of just 1.9%! This is hardly the unrelentingly rapid pace of change espoused by many who thought evolving customer behavior would overwhelm traditional banks’ ability to adapt.

1

Obviously there’s a disconnect between the hype surrounding mobile banking and the reality of how consumers are actually interacting with financial institutions.  But why then have forecasted rates of adoption not been realized?  There are a few possibilities.

  1. Mobile banking is reaching peak adoption: In the consumer survey by the Fed, 86% of respondents who didn’t use mobile banking said that their banking needs were being met without it.  73% said they saw no reason to use it. While the idea that mobile banking adoption would peak at around 50% doesn’t intuitively make sense for those in the industry, it’s obvious that many consumers are perfectly fine interacting with their bank solely through online banking, ATMs, or branches; they may never become mobile users.
  2. Mobile banking apps need improvement: It’s likely that many mobile banking apps still aren’t mature enough to ease some of the UX friction and convince a large portion of consumers that they provide sufficient value. In the same Fed survey, 39% said the mobile screen is too small to bank, while 20% said apps were too difficult to use.  With three-fourths of non-using respondents (mentioned in the previous bullet) finding no reason to use mobile banking, apps may need to improve functionality and usability to attract end users.  The correlation between features offered and mobile consumer adoption is also well established. Mobile banking apps may have reached an adoption peak relative to their maturity, and institutions will likely see adoption grow as apps advance and as demographics increase usage.
  3. Channel use is a lot stickier than perceived: Consumers are still consistently using the branch.  The two figures below illustrate what’s happening. The first graph comes from the Federal Reserve report on mobile banking usage, while the second is taken from the Celent branch channel panel survey taken of more than 30 different midsize to large banks.  On average, 84% of consumers surveyed by the Fed report using a branch, while respondents of Celent’s survey see 83% of DDA/savings accounts and 79% of non-mortgage lending products originated from the branch channel.  Mobile only has a 2% share of total sales.  While many institutions find it difficult to attribute sales across multiple channels and have a well-known historical bias towards branch banking, these stats don’t support the notion that consumers are migrating away from the branch and towards mobile banking.  We’re aware these numbers don’t take into account transaction migration, and likely the sales mix will shift as more banks launch mobile origination solutions, but regardless, it’s obvious the branch is still the most used channel by far.

 

Capture2 Capture3

Mobile banking isn’t taking over the financial lives of consumers as much as institutions and many analysts predicted it would, and at least for now is settling into a position alongside other interaction points. Consumers are clearly opting to use channels interchangeably, and it’s not obvious that mobile will have any predominance in the next few years.   As a result, banks need to move away from arbitrary goals surrounding channel migration and instead let the consumer decide what works best for them.  This certainly doesn’t imply that institutions should stop developing mobile—there’s clearly lots of areas for improvement—but it’s important to not get swept up in the hype surrounding emerging channels.

Remember, more than 60% of FI customers aren’t enrolled in mobile banking, and it accounts for only 2% of sales. Focusing so intently on capturing such a larger share of mobile-first or mobile-only consumers risks misaligning bank resources towards projects that don’t offer the maximum value. Banks shouldn’t be rushing into things—they’ve got time to do this right and in an integrated way.

Financial institutions need a mobile strategy for younger consumers who will most certainly prefer mobile, but older consumers aren’t going anywhere anytime soon. Mobile, at least for now, isn’t the end-state. Mobile-only banks aren’t going to take over the world anytime soon and institutions should be considering the broader proposition of digital in the organization. ​​​​This means a solid digital strategy across all channels, and a focus on driving the experience, not pure adoption.