We’re planning to take the plunge on mobile banking. But is this purely a transactional process, or are there any sales/revenue opportunities?
What is your panel’s experience with sharing IT staff, sharing IT staff between credit unions as a budgetary measure?
CHRISTINE PEARSALL, VP Marketing, Summit, Corvallis, Ore.
For revenue opportunities in mobile banking, credit unions need to look no further than the goldmine of generation Y (Gen Y).
Also known as “digital natives,” the Gen Yers at 76 million strong represent one of the largest demographic groups in the U.S. consumer market.
And yet, according to the CUNA’s 2007-2008 E-Scan Report, most credit unions are in the middle of a major decline in the number of Gen Y members.
The CTIA Wireless Association estimates that there are $243.4 million cell phone subscriptions in the United States from which nearly 90% of the 18-24 year old age group is represented.
Consider this: With many just getting full-time jobs, Gen Yers are the perfect market for auto loans and other products such as debt consolidation, credit cards and saving solutions for mortgage down payments.
CUNA Mutual’s LoanLink Center claims that 42% of total loan applications are taken between 5 p.m. and 8 a.m., and about 20% are received on weekends.
Maintaining contact with Gen Y members 24/7 through targeted, relevant messaging via a mobile banking program means there’s no need to wait for Gen Yers to come to the credit union.
By serving digital native members on their “turf,” mobile banking can allow a credit union to solve the Gen Y dilemma of membership growth and increasing product sales with one new marketing channel.
Now there’s something worth texting your friends about!
TERRY TREADWELL, Stogniew & Associates, Palm Harbor, Fla.
What are you trying to accomplish?
Sending messages to members is one solution. Replicating your online banking component is another solution. Implementing a mobile payments program, is still another solution.
Channels tend to develop first to add convenience before becoming revenue platforms. If your long-term vision is to provide new payment services, then it becomes a revenue opportunity.
Consider, for example, the Wachovia positioning strategy (check it out at their website at www.wachovia.com). They provide a customer two different ways of accessing accounts from a mobile device:
1) Access through a mobile banking application. Allows data to be imported/exported into/from supported mobile devices–customers can pay bills, view transactions, and transfer funds using a mobile banking application.
2) Access through an Internet enabled browser which is a simplified version of their Online Banking site that fits within a mobile device or PDA screen.
Mobile banking by itself, without payments, is not a profit center–members will not currently pay for access to their information–it is expected to be part of their existing credit union relationship.
However, as the new revenue model evolves and mobile phones become more central in member lives think about this: when members need money out of the nearest ATM, they go–whatever the cost.
Implementing “ATM-like” payment functionality on a mobile phone, presents a tremendous future revenue opportunity.
VIJAY BALAKRISHNAN, VSoft, Duluth Ga.
While mobile banking is not a focus for us, we track it because we are vendors in the banking and payment solutions space.
What we’re seeing is that mobile is “hot” as the new channel to offer customers.
The capabilities center around balance enquiries and transfers.
The true transactional potential will come as mobile “payments” is added to mobile “banking.”
It is early on the payments side in the US (even though there is more activity outside the US).
It is hard to predict course and speed, but when it does arrive there is likely to be a rush to capture transactional click fees.
GREG CRANDELL, EVP, Business Development, DigitalMailer, Inc., Herndon, Va.
Congratulations on planning your plunge into mobile banking–you are not alone.
Many of the big banks, including Bank of America, Citigroup, JP Morgan Chase and Wachovia have already rolled out mobile banking services to consumers–a sign this is a good area for potential growth.
In fact, Arthur D. Little projects revenues will reach $37 billion in 2008, and according to Jupiter Research, this number will grow to $88 billion in 2010.
While only some 25% of adult Americans saying they are interested in mobile banking, it’s these early adopters that often create a marketing buzz, generating product interest by spreading the word to their networks of friends.
And this demographic knows what they want to receive on the fly: loan specials, payment reminders, mini-account statements, warnings for out-of-sequence checks, and low-balance notifications.
As technology becomes second nature to your members, more focus will be put on e-marketing efforts, including mobile banking.
But it needs to be offered as a free service to your members.
Look at mobile banking as a competitive, or convenience, advantage for your credit union.
Consider it one more channel you can make available to members in today’s on-the-go society.
And while it won’t likely displace other ways of providing financial services, it will help lessen the usage of more costly channels, such as branch visits and call centers–which ultimately impacts your bottom line.
JOHN SAN FILIPPO, Marketing Manager, Symitar, San Diego
The short answer is that yes, mobile banking in its present form is merely designed to mimic the basics of online banking. In other words, you can perform inquiries, transfers, bill payments, etc.
But that doesn’t mean there’s no opportunity inherent to mobile banking.
As we all know, mobile banking debuted around 2000–and then seemed to vanish almost completely.
So why is it so hot now? Two reasons. First, the technology itself has improved dramatically. Second–and even more important–the number and demographic makeup of mobile users have taken a huge leap forward.
Gen Y’ers, who were in grade school or middle school when mobile banking debuted, now make up a very attractive segment of the consumer population. Thus, many see mobile banking as a key means to attract this highly desirable market.
Keep in mind, too, that both technology and potential market will only rise from here. In other words, in the months and years ahead, there will be more people using more sophisticated devices, thereby creating new sales opportunities that we haven’t even thought of yet.
The bottom line: for many progressive credit unions, mobile banking is a very wise investment now and for the future.
DAVID MCCONNEY, EVP/General Manager, Credit Union Core Systems, Harland Financial Solutions, Pleasanton, Calif.
To date, research shows that mobile banking is currently being used primarily for transactional purposes and as an extended channel for content delivery.
That does not mean, however, that it won’t progress and evolve into a channel for sales and revenue opportunities.
Mobile banking is fertile ground for personalized, cross-selling to members.
Using CRM tools, you can segment your market or predict member behavior and use this channel to present offers and information tailored to their anticipated needs.
The mobile channel is still in its infancy stage and has great potential for use that includes generating revenue to your bottom-line.
By integrating online and mobile banking channels credit unions can not only meet the “instant gratification” needs of their high-value members, but can also leverage a personalized marketing channel for up-selling and retention.
DAVID MCCONNEY, EVP/General Manager, Credit Union Core Systems, Harland Financial Solutions
Networking between credit unions is a great way to gather information and skill criteria about IT staff functions and expertise, however, not recommended for job sharing.
Similar to borrowing money from a friend, it is just not advisable or common practice to share employees across organizations.
There could be potential security issues, the workload balance between credit unions could present a problem as one may be dominant over another and IT emergencies cannot be predicted.
There would likely be culture differences between credit unions. Organizations like people operate\behave differently even if in the same industry. There will be technology differences and the question becomes whether the shared IT staff are trained and competent to support differing technologies at multiple credit unions.
Outsourcing is often a better alternative for cost cutting measures. Look to your core system provider who often offers IT facilities management services and service bureau outsourced options to help reduce your IT costs.
If you are still firm on sharing resources, be sure to define to a very granular level IT staff responsibilities, credit union responsibilities, schedules, dispute resolution, etc.
JOHN SAN FILIPPO, Marketing Manager, Symitar
It’s the age-old issue of supply and demand. Unfortunately, the current supply of skilled technology workers remains limited, while market pressures continue to drive the demand ever higher.
This translates to an increasingly heavy burden on every credit union’s IT budget. However, credit unions are in a unique and enviable position.
Try to imagine banks, brokerage houses or insurance companies pooling their technical resources for their common good. It’ll never happen.
On the other hand, this is nothing new in the credit union world. Our clients have formed CUSOs to share technical resources.
Larger clients have taken on IT responsibilities for smaller ones. There seems to be no end to the creativity–or the success–that credit unions are able to achieve simply because they’re willing to work together for a common good.
If your credit union is feeling pinched by the low supply of and high demand for skilled IT workers, you owe it to yourself and your credit union to explore the many options that exist only because you operate in this unusual environment.
We always talk about “the credit union difference” as it relates to members, but it’s just as powerful a force in the back office.
Readers: Ask CUJ Technology Panel Experts
Readers can leverage the Credit Union Journal’s panel of technology experts by submitting any tech-related questions for the panel to Managing Editor Lisa Freeman at lfreeman
