Are You Cutting Edge or A Dropped Call?
Many credit unionsoffer mobile banking, but they are struggling to keep up with members' clamoring for the more sophisticated services that mobile devices can deliver.
Simply put, mobile devices have changed the way people interact and conduct their lives, driving demand for the next generation of products and services.
Credit unions are emerging from the financial crisis in search of new revenue streams, ways to rebuild member loyalty, and access to new markets. The world of mobile money management-mobile payments and mobile banking capabilities-represents one such opportunity. Recent research suggests it may actually be essential for any financial institution looking to outperform-perhaps even survive-over the next decade and beyond.
Thus far, however, CUs have been slow to roll out these money-management services. Many have been hamstrung by security concerns, inadequate technology, and an uncertain regulations. Above all, cost has remained an issue, and finding money to invest in new initiatives is harder than ever. But there is long-term value of developing mobile money-management systems now, rather than waiting for a warmer economic climate.
Increasing numbers of consumers around the world are managing their money and making purchases through their mobile devices. Users of mobile financial services more than doubled from 2007 to 2008, and now number more than 42-million worldwide. Demand has nowhere else to go but up, as the expectations of younger consumers-who will soon be entering their peak earning years-become increasingly sophisticated.
Mobile phones have increasingly become enablers for their daily activities, from communicating to shopping to banking. But the banking loyalties of these young consumers will soon start to solidify, so institutions can not hesitate to secure these relationships for the long-term.
CUs that can offer mobile banking services will be able to generate revenue streams from a growing number of mobile transactions, giving members the ability to perform the same tasks on their phone they do online.
As growing numbers of U.S. consumers-particularly those under the age of 30-interact with their financial institutions on their mobile phones, it also opens an opportunity for credit unions to cross-sell their other products.
Revenue streams are also available in the mobile payments area, as customers become increasingly comfortable using their phones to pay for movie tickets, take-out food and gas. In this context, the phone can be used as an equivalent to a credit card or wallet-with payments taken directly through the phone-or by using emerging near field communication (NFC) technology to execute a payment directly with a kind of "point and click" functionality. Imagine widespread technology that lets consumers use a phone at a vending machine to pay for a drink.
While credit unions seem to recognize the importance of the mobile channel, what they actually offer over mobile devices remain relatively unsophisticated.
For their members, mobile banking is roughly the equivalent of using an ATM. Viewing a simple screen, members can check their balances, view a monthly statement and perhaps make a payment. While that low level of functionality can be implemented fairly quickly and inexpensively, it does not drive wide usage, since members tend to find the experience unsatisfactory.
To engage mobile members more fully, credit unions need to offer the same kind of rich experience their members now enjoy online. Thus, mobile phone users should be able to fill in loan apps, access budget planners, deposit checks, buy products and perform other routine tasks.
The Big Problem
A big part of the problem has been technology. Many CUs have been stymied in creating a robust platform to enable a wide range of money-management capabilities directly through multiple kinds of mobile devices.
Credit unions will need to move quickly from launch to low-cost operations, while also protecting against advances in technology and maintaining high standards of security. "State-of-the-art" technology is lucky to last 18 months before it starts to behave like an out-of-date legacy drag on performance. Credit unions need to keep technology, security and services in line with the rest of the industry without large ongoing capital investments.
Some FIs that were early developers of mobile money-management services have found themselves locked into first-generation closed systems that can't be opened up to add new services or capacity and are now expensive to maintain. Others have created offerings for a limited number of phones, but an open solution providing a wide range of options on any phone has proved elusive.
Mobile money-management platforms must be capable of scaling to deal with growth in the numbers of users and with sudden peaks of usage. The system would need to handle peak loads of many hundreds of transactions per second at certain times of day.
With consumers demanding greater convenience in their banking relationships, credit unions face relentless pressure to step up their mobile game. If they do not, they risk losing members, missing out on new markets and being squeezed out of a potential source of growth.
Michael Eagleton is global head of mobile money management services at Accenture. Ted Landis is senior executive and head of Accenture's payments industry practice in North America.