Mobile Banking: The Monetization Code
Mobile banking in its current form—complete with company-specific apps and services to match—has been with us forever, or at least five years, whichever comes first. Either way, in tech years, that’s an eternity. So why does it still feel like the financial services industry us still trying to figure out what to do about this whole mobile thing?
One reason we’re always playing catch-up is that there’s a lot to catch up to. Technology delivers progress in its purest form, which innovations come down the pike on a regular basis. However, mobile advances seem to arrive faster than ever before. There are always new apps, new channels and new capabilities, and far from being tentative about changing too much too soon, users jump from one bandwagon to another with relish. Meanwhile, the servers in the back room have to ensure that it’s all compatible, not mention secure and compliant, and that’s a whole lot more difficult than trying out a free download to see if we like it.
That said, it’s still sobering to hear that we haven’t yet really cracked the code on how best to monetize this phenomenon, if indeed we can. Here’s one indication: “The 2014 Monetizing Mobile Banking for Small Business Customers Study,” a new research initiative from consulting firm Simon-Kucher & Partners, tells us that, unlike consumers, many small businesses are willing to pay for mobile banking services—perhaps a small monthly fee of $5 for peer-to-peer transfers, or to add money to prepaid cards.
It’s good to ask these questions, of course, but shouldn’t we have figured out the answers by now?
For the record, the study also reveals the diversity of the market, which is a nice way of saying that it’s still emerging. Fully a third of the respondents report using mobile banking on a weekly basis, while on the other end of the spectrum 18% say they see no need for such services at all. The numbers are similarly widespread for online banking.
To put this in perspective, let’s understand the basic elements in this equation. First, the only thing small businesses have in common is that they’re small; in every other way, they’re completely different. A corner deli and a dentist’s office might be neighbors with the same number of employees, but their business needs are hardly similar. More to the point, waiting for a mass market in the traditional sense is an exercise in futility. By the time a sizeable segment of the target demographic has adopted a particular mobile platform, channel or app, there are multiple options already available and finding an audience.
It’s not that the market for mobile banking is still emerging; it’s that it will always be emerging. It will never settle down.
So what should the industry do about this? There’s clearly a huge market out there, with banking customers hungry and waiting for capabilities they don’t have, even if they can’t or won’t articulate specific preferences. We’ve covered on this blog how customers are rapidly eschewing branch banking to go digital, and that trend continues with mobile. For example, M&T Bank claims that 65% of its online customer base, some 700,000 customers, have already registered for mobile services, and the numbers keep growing.
However, we might have to acknowledge a harsh reality—waiting to see what these customers want is often a mistake. In a traditional sense, the wise course of action would be to see which specific technologies users prefer, these developing services for those sub-markets. But technology isn’t traditional, and mobile is even less so. This is why following the lead set by others means always being behind the curve.
Trying to stay ahead, meanwhile, means investing in platforms that either don’t catch on or, worse, go from killer app to legacy overnight. It means making blind choices and predictions. It means risk.
So, mobile banking is risky business. But when done right—when the monetizing model is just right—it’s also very good business. It’s up to us to figure out the difference, and we need to do it soon.