Banking is about to have its “Uber” moment.
A confluence of trends means that, by 2020, traditional banks will not be the necessity that they are today. Instead, people will be able to assemble their own services from a variety of providers.
In this new world, competition will be based around the experience provided, not the product offered. And, more often than not, the experience will be driven by mobile devices.
We conducted an 8-month study to understand exactly how customers are using their smartphones for retail banking. Using digital activity logging technology, as well as surveys, we were able to see (and learn from) every smartphone activity – at a millisecond level – of our U.S. panel of over 800 people.
The objective of the research was to understand how people use their smartphones to bank. What are the patterns – the combinations of interactions and perceptions – that represent the state-of-the-art in smartphone banking today?
Smartphone banking is getting faster. We found that the durations of smartphone transactions are very short – on average, just 28 seconds. Other key findings include:
Together, these data suggest that banks should optimize for mobile moments comprised of high frequency, low-duration banking behaviors. Such a design should prioritize a quick login, optimize transaction times, present information pre-login, and even consider retaining states between sessions.
This also raises intriguing questions around the future of interactions between people and their banks. How do banks ensure ongoing relationships with their customers? Likely, it will mean that banks must create touch points that bring their brands alive. From live events and pop-up stores to phone calls and annual financial reviews (along with many other methods), banks must create opportunities to speak with their customers.
What triggers people to pull their smartphones out and begin to use them? We found that most of these triggers were self-directed. Text- and email-based alerts also scored highly, with the future of wearable-device-based notifications (glances) representing a growing opportunity.
Banks have an obligation to alert and communicate with their customers. When necessary, triggers should be used to prompt customers at the right time. SMS and app-based alerts are table stakes.
Leading banks must shift from simply generating data to creating intelligence that can be used by banks and customers alike. For example, intelligence can be used to alert customers of issues (such as low balances). More so, it can be used to deliver smarter recommendations around transferring money into savings, flag a high-spending period, or communicate the likely under-insurance on a home.
New messaging platforms also represent an opportunity area for SMS banking. We anticipate that more banks will integrate with messaging platforms such as WhatsApp (600M users), Facebook Messenger (500M users), or WeChat (aka Weixin, with 468M users) to provide urgent banking information, customer service, and even payment capabilities.
Branches remain an important – if not essential – channel. Indeed, a recent study shows that customers prefer branches for complex services such as sales and advice. We’re also seeing the development of a set of new branch options of varying sizes and sophistication.
Our study examined the frequency of branch visits and found that:
The smartphone is no replacement for quality human-to-human interactions, but (increasingly) those interactions can come through purely digital channels or a hybrid experience of digital and in-person. These data suggest that the branch will remain an important – but diminishing – channel and that we’ll see a shift towards a hybrid, digital/physical mix with a focus on consultative and advisory services.
Customer experimentation with mobile payments is common. A majority (58%) of participants in our study reported having used mobile payments on their smartphones at least once, And among those who use mobile payments, we saw a median usage (frequency) of 3.3 times per week.
In five years, the payments landscape will be transformed; we may see a time when Google and Apple – or other technology companies – will control much more of the retail payment landscape. Those transactions may still use specific account numbers, and credit may be offered, but the power in those relationships will swing from bank-issued cards to smartphone and wearable technology vendors.
How do banks maintain relevance in this environment? First, they should focus on adding value beyond the transaction – through financial advice and consulting services, for example. Second, they should be as easy to do business with as possible (to minimize churn) and allow people to manage their money via these smartphone tools. They must focus on the customer experience, particularly by optimizing their app-, mobile web-, and web-based offerings.
Wearables represent a key aspect of mobile technology’s future. Still, this innovative category remains lightly used. Just 10% of respondents own a smartwatch, with only 1-in-4 (24%) of those using it for financial management.
For the most part, smartwatch users reported activities that mirrored smartphones, including reviewing balances and transferring money. But other activities surprised us: Paying bills and reviewing budgets came in as the fourth and fifth most frequent activities (respectively).
We’re still early in understanding the full potential of watch apps, but they’re useful for much more than just paying bills, reviewing balances, and approving transfers. For example, Betterment offers fund allocation, while Robin Hood enables the buying and selling of stocks. Apps are already being developed to do much more, with voice inputs and personal assistant technology further contributing to the proliferation of these devices.
At this point, it would be wise for banks to invest in evaluating this technology. Over the next few years, banks should lay the groundwork for widespread adoption.
Banks are increasingly focused on reducing costs and maintaining the status quo as they grapple with limiting budgets and waves of new technology. So, in terms of prioritizing innovation, how should banks balance their investments between incremental and new features?
Many participants (22%) mentioned a desire for their mobile banking app to add new features, such as mobile check deposit; however, more consumers (34%) simply want their existing apps to work better. They mentioned a better user experience (16%), an app that doesn’t crash (5%), the ability to customize alerts and better account information (10%), and better performance (5%).
In addition, the third most common response was that people wish that their apps rewarded them for mobile banking – some sense of sharing the cost-savings from using the digital channel. And in terms of security, 7% called for improved security, with half being interested in biometrics features specifically.
Contemporary mobile banking usage shows that smartphones are the indispensable connection point between banks and their customers. People are blending the digital and physical channels in the store, at the branch, and on the go. Therefore, banks must transform themselves to respond – they must be more agile and connect across organizational silos by design.
Banks should continue to improve performance and simplify their mobile experiences, but they must also have a strategy for creating deep and meaningful interactions with customers outside of those 28-second interactions. Such a strategy should be founded on an understanding of the person, not the user or customer, and should be more sophisticated than customer journeys.
The experience-led bank must change its calibration to reach the customer. Understanding people’s patterns and tools; embracing the blended reality of smartphones, web, call centers, ATMs, and branches; and opening the door to innovation will enable the banks of today to still be essential in another decade.
To see more key findings and read about their implications, download the full study below.