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.
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.
- 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.
- 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.
- 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.
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.