It's not all about the iPhone. It just seems that way.
USAA Federal Savings Bank in San Antonio has made Apple Inc.'s popular mobile device a key part of its strategy to deliver banking services, payments and consumer remote check deposit services to customers. And because it targets members of the U.S. armed forces and their families, that can be almost anywhere in the world.
Since the introduction of the remote deposit feature on Aug. 10, more than 300,000 members have downloaded USAA's iPhone application from Apple's App Store. Overall, more than 1 million of its members — about 14% of its 7 million customer base — use mobile banking, through the downloadable app, mobile browser or text messaging.
"Strategically, we think mobile is the way of the future," said Gen. Josue Robles Jr., USAA's president and chief executive. "You can do anything on your phone that you can do on the Web site or through a contact center. There will be a time when the phone in most households will be a mobile phone, not a landline."
Still, it's not simply the iPhone app, or USAA's pioneering work in mobile banking, that led American Banker to select Robles as its 2009 Innovator of the Year.
Rather, the iPhone app is simply the latest in a series of innovations from USAA that have helped the $35.7 billion-asset thrift roughly quadruple assets and increase deposits more than sixfold in the last decade — without making any acquisitions, and without the benefit of a branch network.
As long ago as 1995, a year after Robles joined the company after a distinguished military career, USAA was testing software that let consumers download account information to their home computers and pay bills using a dial-up connection.
Three years ago, USAA was the first banking company to give customers the ability to deposit checks remotely from home, using a flatbed scanner on the company's Web site.
And in the days before consumer check imaging, USAA was an early customer of NetBank Inc.'s QuickPost service, which let customers receive next-day credit for deposits sent through United Parcel Service Inc.'s network of stores. That service was shut down before NetBank, of Atlanta, failed in September 2008, and last month USAA began a new pilot test with UPS to provide the service on its own.
Bruce D. Temkin, a vice president at Forrester Research Inc. and its principal analyst of customer experience, said USAA's drive to innovate comes from its culture of customer service. Many of its employees, from Robles on down, are ex-military who understand the needs of servicemen and -servicewomen.
"The remote deposit product is not because [USAA] wants to be innovative on the iPhone," Temkin said. "It's because [the bank] wants to help our military guys who have gotten a check and are on a base in Germany or Iraq."
Robles joined the Army in 1966 and rose to the rank of major general before retiring in 1994. He received numerous decorations, and served as director of the Army budget and as commanding general of the 1st Infantry Division, better known as the Big Red One.
While on active duty, Robles served on USAA's board, from 1990 to 1994, and when he left the Army he joined the company as special assistant to the chairman. He became chief financial officer and controller later that year, took on the additional duties of treasurer in 1995 and moved up to his current position in December 2007.
Robles' military background has helped him understand the needs of USAA's members. While serving in the original Desert Storm campaign in Kuwait in 1990, troops had no Internet access and scarcely had access to telephones, he recalled.
"USAA way back in the early '90s was working on mobile banking, not on a cell phone but on a computer," Robles said.
That early implementation involved a blue disc that included custom software for a dial-up modem connection to the bank. "It was rudimentary. It was tough. But USAA embraced it way back then," Robles said.
Today's troops have vastly greater access to technology.
In fact, that was the inspiration for its mobile strategy, Robles said. After the invasion of Iraq in 2003, "we were getting a ton of mobile calls from Baghdad."
Ramiro Cavazos, the president and CEO of the San Antonio Hispanic Chamber of Commerce, praised Robles for his commitment to USAA's customers.
"He's very much a servant leader, who provides confidence to the members," said Cavazos, whose group named Robles its "Corporate Executive of the Year" in 2008.
He also cited Robles as a driver behind the bank's push to use technology to reach its customers. "He's very much a visionary and a great leader," Cavazos said. "I'm very impressed with their ability to stay at the forefront of cutting-edge technology,"
Jeff Dennes, USAA's executive director of mobile and money movement services, said the bank decided to focus its attention on the iPhone after it realized that 60% to 70% of the customers accessing its mobile banking service were doing so with Apple's phones. It rolled out the original version of its iPhone app in May, after introducing a two-way text message service in July 2008 and mobile browser services the previous September.
When USAA turned its attention to mobile check imaging, it built on its consumer remote-capture service, Deposit@Home, which made its debut in September 2006. Today, Deposit@Home accounts for 25% of all USAA check deposits, a number that rises to 35% if Deposit@Mobile deposits are also factored in.
While developing the mobile capture service, USAA's tech staff imaged 600 to 900 checks in tests, under different lighting conditions, using different types of checks. Ultimately, they were able to achieve a 99% read rate using the original version of the iPhone. Today's third-generation handset does even better, Dennes said.
And to make sure that shaky hands and other potential issues don't interfere with the service, the app includes an image-quality analysis tool to let users know they have at least an 80% probability the image will go through before they try to submit it, Dennes said.
Imaging is only part of a comprehensive iPhone app that also lets users pay bills, transfer funds, get insurance quotes, even download insurance cards from the thrift's parent company, the mutual insurer United Services Automobile Association.
USAA now receives more contacts through its mobile services than through customer service representatives, making mobile the company's third-most popular channel with customers, after the Web site and the interactive voice system, Dennes said.
And more innovation is coming. USAA is developing mobile apps for other handheld devices, and is working on a person-to-person payment application to transfer funds to other USAA members using their handsets.
Another effort involves mobile casualty claims, using the phone-cam to submit pictures of fender benders. "They will adjust it online and send your payment to you online," Robles said, though he acknowledged the approach might not work for more serious accidents.
In the longer term, USAA is developing a system to help its members purchase cars online, an extension of another existing service, its catalog and online purchasing service, Robles said. "We can find it for you. We can finance it for you. We can insure it for you. We can help you maintain it throughout its life cycle."
Robles said that if USAA had been a public company, it might never have made the investment in new technologies, "because we couldn't get that immediate payoff."
Without the pressure to produce short-term profits, USAA has been able to focus on what's best for the customer in the long run, Robles said. "A lot of pitfalls of public companies are due to the fact that they can't take a long-term view of life. We don't have that worry. We ask what is right for the customer and work back from that."
Its approach has paid off. USAA's assets have doubled since the end of 2004 and, while Robles says making money is secondary to serving its customers, the thrift is, in fact, very profitable. In the first six months of this year it earned $158.6 million, according to Federal Deposit Insurance Corp. data, and its 0.92% return on assets and 10.73% return on equity were both above industry averages.
That growth has helped USAA broaden its mission. In August 2008 it expanded the scope of its membership to include military retirees who were honorably discharged beginning in 1996, and on Veterans Day this year it expanded again to include all honorably discharged military veterans, regardless of when they served.
"We have limited our membership because we were afraid we weren't big enough and strong enough to take on the Vietnam generation, especially," Robles said. "We believe now we are financially strong enough and operationally strong enough."
