Citi’s mobile banking strategy in the US has been derided for low take-up rates, but the bank has now signalled a significant shift in strategy. Trying to position itself as a global leader in m-banking, Citi is moving away from its previous focus on downloadable ‘thin’ applications. William Cain reports.
Steve Kietz, Citi’s executive vice-president for innovation, said downloadable m-banking applications have had their day, signalling a change in tack on the bank’s mobile strategy.Citi, blighted by low m-banking uptake in its US business (see RBI 594), is looking to develop browser-based applications, similar to the system used by Bank of America, which now has over 1 million users. CitiMobile, launched in April 2007, has just 20,000 customers, primarily because of the system it has been operating on, a downloadable, closed proprietary platform application which takes up to seven minutes to download.
Kietz, speaking at RBI’s recent Innovations conference in Singapore (see RBI600), said: “The downloadable application might have had its day. It’s very handset dependent and carrier dependent. It’s slow – our US system took six to seven minutes to download. Then you have to worry about where the application goes to, what sub-menu, etc.”
Bank of America, which picked up RBI’s Best Multi-Channel Strategy Award earlier this year, registered 1 million users just 12 months after its mobile banking product was launched, and said it had over 100,000 users daily on peak usage days. It was successful on a range of handsets – not just Apple’s iPhone – but also RIM’s Blackberry and Microsoft Windows devices.
Kietz added: “We are confident we will be good at mobile browsing and can figure out what operating system a customer is on. [The problem is that] there is so much variability in the individual device, when you come to do the download. You do the downloadable application and then you have to do more settings changes. The customer has to figure that out, or we have to figure out a way to program for it, which is why we have now changed our focus.”
He described three main stages in the development of m-banking, which mean different products are appropriate at different times.
Stage one solutions feature lower-value activities, like simple account activity inquiries, that require limited interactivity. At this stage, customer awareness needs to raised, and the convenience of the product promoted.
Stage two solutions typically feature slightly more valuable activities, like integrated mobile account management, that require additional interactivity and security. When this point is reached, usage and retention can be driven through the adoption of interactive banking services, like fund transfers.
Stage three solutions offer the most value to consumers, and many countries in Asia-Pacific are at this stage. Typically it includes services like near-field communications (NFC) functionality for m-payments and location-based products using GPS.
“Stage two is driving usage and retention – how do we get people using m-banking? And I think that’s part of the US story. Citi, Wachovia did the downloadable application in 2007, a couple of smaller banks did it also in 2007. But Bank of America’s team came out with the mobile browser application, driven by the iPhone, and it turned out only 20 percent of their users were iPhone users, and that turned the whole market.”
Kietz said it is predicted 70 percent of worldwide banks would offer m-banking by 2010, with the US catching up Asia and Europe in terms of availability of the services. He added that between now and 2011, the number of people accessing banking services through mobiles would increase ten-fold and the value of their transactions would double.
Where’s the return on investment?
One of the big questions in mobile banking is where the return on investment comes from, which Kietz believes has held back a lot of banks. Citi was a big spender in the first round of mobile banking investments in the US, even though it was hard initially to see whether it would be a revenue generator – through extra services and fees – or a cost cutter – through reduced client enquiries to call centres.
On the revenue-generation side, banks can use the mobile device for issuing SMS text messages to promote services. In Japan, for example, Citi is particularly strong in retail foreign exchange trading. Kietz believes the bank can generate extra fee income by texting customers when there are big moves in the forex markets, alerting customers to potential trading opportunities, and embedding a URL in the text allowing the customer to link straight to their account.
M-banking could also operate as a cost cutter, as it can reduce the number of enquiries going into call centres. Figures vary for the cost of each individual telephone call fielded by banks – at Citi, Kietz said it varies from $5 in the US to around $1.50 at its Indian call centre. Recent Citi research suggests, in the US, that mobile browser offerings can reduce these calls by 50 percent. Kietz said the numbers add up quickly if you can get people to call customer service less.
But CitiMobile is just a small part of Citi’s overall m-banking strategy, and it has been closer to the cutting edge of the technology in its Asia-Pacific businesses. It recently launched an iPhone application in Hong Kong, and also plans to unveil the same product in a Western market before the end of the year. In March, it set up a joint venture with SK Telecom – the biggest South Korean telecom – to develop its m-banking proposition, Mobile Money Ventures. The business aims to develop a mobile platform that features all key banking services, linking them together through mobile and online.