Yeah, yeah. Allison Landers knows all about smartphones and how quickly they've been proliferating.
As an executive in Key Bank's online and mobile services division, Landers is more than aware that iPhones, Blackberrys and Androids have been the driving force behind the faster-than-expected rate of adoption for mobile financial services these past two years.
But since launching mobile banking services in 2009, Key has not exclusively catered to this subset of tech-savvy customers. The bank doesn't even offer an iPhone application yet, keeping most of its focus on less flashy offerings: an SMS text-based service and a website designed specifically for mobile phones. This lets Key reach more customers than it could through services intended just for those with smartphones.
"We have applications for the Blackberry and Android," says Landers, a senior vice president at Cleveland-based Key, "but it was really important for us to provide for our clients that don't have the smartphones-which today is three-quarters of them, and in the near future may still be half. And half is a lot."
What Key faces is the dilemma all banks have. While they can plan strategies around heady predictions about digital wallets, point-of-sale payments and the potential marketing revenue associated with smartphones, they must balance the urge to make investments for the long term against the needs of today's customers-and a majority of them use standard cell phones.
In a recent survey tracking multichannel bank trends, the consulting firm Novantas found that only 36 percent of bank customers between the ages of 30 and 54 had smartphones, and only 13 percent over age 55 had such devices. Among segments of consumers who primarily use branches and automated teller machines for bank transactions, 80 percent do no mobile banking at all.
"I think what banks are trying to do is use mobile as just another point in the distribution channel," rather than a stand-alone service, says Marc DeCastro, research director for consumer and community banking at IDC Financial Insights. "They're signing up people left and right for mobile, but that doesn't mean adoption and use is going gangbusters."
As a result, it doesn't look like mobile will replace the more costly branch banking channel any time soon.
Even smartphone users under the age of 30 appreciate a bricks-and-mortar presence. The Novantas survey found that 62 percent of "emerging" mobile customers would not open an account at a bank with inadequate branch and ATM networks.
Of course they want their apps too, and banks have been developing and pushing those out at a torrid pace.
According to blogger Jim Bruene of Netbanker, the number of banks and credit unions that have introduced iPhone-compatible applications for customers has mushroomed to more than 1,500 institutions-with the number issuing apps for Android devices expected to grow quickly as well.
Landers says Key should have an iPhone app ready by the end of the year. But that's just part of a broader plan to make mobile mainstream, and not a sign that the bank is backing away from customers who rely on standard cell phone texts for mobile alerts and real-time balance inquiries. The bank, in fact, last year was among the first that didn't require its mobile users to be simultaneously enrolled in online banking.
"We definitely want to keep both smartphones and regular phones in mind," Landers says. "People with smartphones have these greater expectations. They pay a lot of money for their data plan and their devices, and in a lot of ways they are replacing what they used to do on the PC. But our text-banking adoption has been significantly greater than our mobile-browser banking adoption, and I think people will continue to use their [current phone] capabilities for different information, and in different ways."
Key is not the only bank to approach mobile with this point of view.
"From what we hear," says Brad Strothkamp, a principal analyst covering mobile banking for Forrester Research, "a lot of banks are trying to make [texting] two-way banking, so it's not only alerting or receiving balances, but also conducting transactions based on alerts."
But so far, it's only the smartphone crowd that seems to be moving the chains.
The Novantas study showed that smartphone owners are more likely than standard-phone users to check their balances, transfer funds, research products or contact customer service through a mobile device.
To mobile expert Richard Crone, president of Crone Consulting, the writing is on the touchscreen.
He says banks are "swimming downstream" if they are sacrificing smartphone utility investments in favor of text or mobile browser solutions.
Within a year or two, he says, "there will be more smartphones in circulation than feature phones. You can see that given these trend lines, the feature phone isn't going to matter at all."
This wouldn't necessarily be a negative development for banks.
With smartphones, Crone argues, banks may be able to quench their thirst for new revenue streams through the delivery of rewards programs and point-of-sale marketing as debit and credit customers make more use of mobile.
"We're being crushed in terms of revenue being taken away by Durbin," Crone says, "but advertising rates have never been regulated."
