Canadian Treasurer

April 30, 2013

Banks’ mobile offerings continue to motivate consumer choices

SAN DIEGO— Mobile plays second in importance for consumers who are deciding which bank to adopt, according to panelists speaking last week at the annual PAYMENTS 2013 conference.

“The idea that the bank has to be a big building with pillars doesn’t exist anymore,” said Teresa Epperson, managing director at AlixPartners, a consulting and business advisory services firm.

Epperson said there is an eight per cent churn rate in the marketplace, which has remained consistent year after year. However, for 45 to 50 per cent of customers who switch, mobile offerings are very important. Those switching tend to be younger, she said.

“Among all age categories, there is a trust advantage for banks,” Epperson said. “It varies among age cohorts, however. In the younger age groups, it is there, but not that great. That trust advantage—the margin—is shrinking. It’s a great story in the sense that you have an advantage today but is a cautionary tale about the future. Banks risk seeing the future of the non-banks and digital brands that are aggressively pursuing these people.”

Ajay Nagarkatte, managing director of research at BAI said younger segments are still neglected amidst a disruptive market. “The less emphasis on this segment, the higher the chance of losing,” he said. “They are risk averse and their attitudinal preferences are different. The mobile device gives them the opportunity to comparison shop. That is where we see the explosion.”

Nagarkatte said the trust factor for banks today is still good but that time may be running out.

Robert Hedges, managing director at AlixPartners said that most people who are switching are drawn to banks that have strong mobile offerings. “People will conclude that these banks are attracting such consumers,” he said. “Instead, you hear they don’t want those consumers because they are young, they can’t make money on them and that if they are mobile oriented, they can’t sell anything else to them.”

Hedges said that such conclusions are incorrect. “The millennial issue is connected to growth issues and all revenue is connected to younger people,” he said. “There is discomfort with things we don’t understand. We have to better understand analytics and costs associated.”

Contrarily, Nagarkatte said that small businesses are focused on convenience and look for services at the branch. “For small businesses, it is not only about transactions. It’s about liquidity," he said.

Epperson said, “We do not hear small businesses saying they don’t want to go to the branch. Cash flow and having liquidity is their lifeblood. But that doesn’t mean they don’t want technology.” 




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