In some ways, mobile is like a religion in the banking industry. It even has evangelists, who spout off statistics like a preacher does Bible verses as they make their impassioned pleas for banks to prepare for a mobile future.
But figuring out the right strategy is a complex proposition. There is forecasting involved, about where technology is going and what consumers might do. And there are goals to settle on. Can enough routine transactions be moved to mobile to justify closing branches? Can branches, free of the foot traffic from deposits and checks, be reoriented around sales to boost revenue? Can't we just wait on all this to see what happens?
"We did some back-of-the-envelope analysis and for banks just to break even—and by break even I mean just earn their cost of equity of 13.5 percent—they would need to either close half their branches in the U.S. or increase their revenue per customer by 18 percent," says Gerard du Toit, a partner at Bain & Co. "Neither one seems possible."
He sees mobile as banks' salvation.
Bain's research shows lots of room for shifting basic deposits, withdrawals and transfers into the mobile channel, with the opportunity to improve customer loyalty in the process. Those who use the mobile channel are far more likely to have products beyond just a checking account and are more likely to recommend their bank to a friend, according to a Bain survey.
Such data points do little to sway the nonbelievers. "Don't give me this loyalty stuff," grumbles card industry veteran Andrew Kahr, now a principal in the financial product development company Credit Builders (and a frequent blogger on AmericanBanker.com). He says he has yet to see a study showing a real impact from mobile on the bottom line.
Even if new mobile services take off—as analysts predict will happen with photo bill pay, for example—Kahr expects they will end up as just another freebie, rather than a revenue generator. "Are we supposed to get excited just because some consumers get more without paying more?" he says. "How altruistic!"
Kahr is also skeptical about the potential for closing branches, as a top consideration for people switching banks is still proximity. Yet perhaps this is one way mobile represents a paradigm shift.
Guggenheim Securities analyst David Darst says consumer trends like mobile banking adoption already are having an impact on banks' willingness to shed branches. He predicts branch closings will accelerate this year, not purely out of economic pressure, but also because of customer migration to electronic channels.
Gary Webb, executive vice president of operations for First Financial Bankshares in Abilene, Texas, says his company rolled out a mobile banking app last March, for the sake of customer convenience. He says 17 percent of checking account customers already use it. (Online banking is at 47 percent.)
Significantly, 4 percent of mobile customers use that as their only electronic channel. "I think that's a pretty big number," Webb says. "So I expect in the future we'll see a much larger portion of our bank customers going to a mobile only channel."
He agrees with Kahr that whatever mobile services the banking industry introduces are likely to end up being free. "I think we'll find, if it's not free, customers will not adopt the technology, or they'll go somewhere where they can get it for free," Webb says.
But unlike Kahr, he is fine with that. "My question back to you is, 'What's a customer worth?'"
The $4.5 billion-asset First Financial does save money when a customer forgoes the call center and uses a mobile device to make a balance inquiry or transfer funds, Webb says. But call center volume hasn't dropped since the app's release. Instead, overall transaction volume is up, with mobile accounting for 10 percent to 12 percent of the total. Webb says this is partly because mobile customers are so active. They make more frequent balance inquiries than the average person, for example.
As mobile matures, Webb expects more savings and revenue opportunities to come along for banks, though.
Here's how some of the believers in mobile banking see the future taking shape.
More features make mobile more useful and more popular
Mobile growth is a virtuous circle. As more bank customers migrate from online to mobile, they'll want more functionality. And as banks roll out new capabilities, more people will gravitate to mobile.
Though some bankers think the hype around mobile is excessive—it's mostly a lot of balance inquiries after all, isn't it?—others see a sea change already underway.
Tom Trebilcock, who oversees mobile strategy at PNC Financial Services, says the explosive growth of mobile deposits is a signpost of the future.
"The number of texts we send out a month is growing at a rapid pace. Today it's mostly about balances, but as it evolves, it'll be more into bill payments and transfers—the bread-and-butter of banking," says Trebilcock, PNC's vice president of ebusiness and payments.