Retail Banker
International, joined forces with Fiserv and Microsoft to host
a high-profile,
invitation-only business round table to place the spotlight on
mobile banking in the UK.
The overall conclusion was that mobile banking is gaining momentum
fuelled by the
ever-increasing usage of digital devices.
Go deeper with GlobalData
Mobile banking has been one
of the hottest – and most interesting – topics to dominate retail
banking in recent years. Mobile phone penetration rates are
staggering; the growth in the popularity of smart phones has
expanded consumers’ horizons of what they can do with their
handsets.
In a number of the emerging
markets, mobile banking numbers have overtaken online banking
clients.
So why has this wave of
enthusiasm not extended to the UK? What have been the barriers to
m-banking growth in the UK? In an age of operational cost-cutting
and the need to extract greater efficiencies, what place does
mobile banking have in the multi-channel mix of the country’s
largest retail banks?
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By GlobalDataIt was these sorts of
questions, and a host of others, that were analysed and debated at
VRL’s round table on mobile banking.
The event was sponsored by
Fiserv, the leading global provider of information management and
electronic commerce systems for the financial services
industry.
The following is an edited
version of the discussion that took place.
Question to Christo
Vrey, Managing Executive Digital Channels, ABSA: ABSA has been one
of the most successful banks anywhere in the world in growing its
mobile banking customer numbers. What lessons might banks in the UK
learn from ABSA’s experience and where are you currently, in terms
of numbers?
Christo
Vrey: Absa currently has around 2.5m mobile banking
customers and 6m using its mobile messaging service. This compares
with 1.2m internet customers.
ABSA has been on the
m-banking journey for quite a while – since 2000.
The first five year period
was the most stressful. We then started to promote a comprehensive
marketing of the service.
We had people physically
walking the queues in-branch, demonstrating the offering and
showing customers the time saving component of
m-banking.
We also enjoyed great
leverage from our SMS messaging service – we send out around 17m
SMS messages per month.
It took ABSA years to get to
onem m-banking customers. After that, the growth in numbers has
been huge and that has helped us drive down the channel cost-income
ratio from hovering around 90% two years ago, to about 40%
today.
Douglas Blakey,
Editor, Retail Banker International:
Where next do you go with this, what are your current targets for
the service?
Christo
Vrey: We are targeting the SMS messaging users. We know
that we have accurate mobile numbers for about 99.9% of those 6m
customers. The current m-banking acquisition rate is around 80,000
to 90,000 each month. So we can get to 3m then 4m m-banking
customers in the next three years.
Gerhard Romen,
Director Mobile Financial Services, Nokia: What m-banking services
does your service encompass?
Christo
Vrey: It offers full-service functionality. Customers can
make third party payments. For example, we were the first bank in
the world to use Western Union for cross border payments via the
mobile channel. The strategy is to bring value added services to
the core of banking and to the bulk of our customers.
One of the services taking
off in South Africa – and we have led the way here, is cardless ATM
transactions. I can send money to anyone in South Africa by sending
an instruction to the recipient’s cellphone.
They can then go to an ATM
and withdraw cash without having a bank card – all they need is
their cellphone.
Stephanie Coleman,
Head of Customer Experience, Citigroup: Have you seen a change in
customer behaviour as a result of mobile banking taking off? Are
customers switching from using the branch to their mobile? Also, is
it making customers more financially aware, are they struggling
less, not going over their limit so much?
Christo
Vrey: We have observed a number of behavioural
changes.
There was a big decrease in
fraud and the messaging service really drove behaviour. By
receiving a message on their handset when a transaction occurs on
their account, gives customers the chance to respond [to the
bank].
We have also observed that
some segments of the market, for example, those aged under 30 –
that is about 25% of our m-banking users, -behave in a distinct
way. They make use of our value added services such as music
downloads and ringtone downloads.
The transacting time has also
changed. Typically, online users will bank from 8 AM to 9 AM, 12 to
1 PM and 5 PM to 6 PM.
Mobile users will transact
all hours of the day, but especially from 8 PM to 10 PM in the
evening. It speaks to the convenience factor of the mobile
channel
On the marketing and
education side and how we can educate customers: we see a 35% take
up in leads generated by the SMS campaigns.
That compares to only 1.5% to
2% from online campaigns.
Tim France-Massey,
Head of Mobile, Royal Bank of Scotland: It would, I think,
be fair to say that compared to some countries in the emerging
markets, customers in the UK have so many channel choices. A branch
on every main street, ATMs, online, 24/7 call centres.
When we introduced mobile
banking at RBS/Nat West, people did say to me that they were not
sure why we needed mobile banking. Customers and staff, would say:
‘I can do internet banking when I get home’.
There is certainly a
difference in the UK compared to say Kenya, where M-Pesa has done
so well- where there is not an easy and alternative
channel.
You cannot easily compare
some markets, but I can see why mobile banking would be so
attractive to people in South Africa.
Tony Emerson, Banking
Industry Director, Microsoft: A curious comparison for me
would be with Turkey. The market there is not an emerging one any
more. It has grown very quickly in population. There are ATMs all
over the place and the country’s banks are very competitive. This
is a place where I can create hash codes and get a loan via a
mobile and can create transactions to get cash from an ATM without
a card.
Nick Staib, Senior
Manager Digital Solutions, HSBC: I would suggest that
banks in the UK, have, in recent years, been focused on other
things than mobile?
Stephanie
Coleman: I think the question is really, what does mobile
really offer? I can see the benefits it can offer us as bankers.
You really need to look at it from the customers point of
view.
Customers can say, there are
branches on the high street, you have sold me going online and I
can get text alerts already. A full mobile service needs to offer
something more, something different, easier or better. It will take
a lot of effort on our part, as just making the web site available
on mobile is not enough.
I am interested in the fee
charging aspect in South Africa. Do you charge for this,
Christo?
Christo
Vrey: We do charge for payments in South Africa. But the
bulk of the revenue comes from commission on the mobile top-ups
where we act as a distribution channel.
Stephanie
Coleman: The UK consumer will say ‘you better show me a
benefit’.
We will really have to
demonstrate benefits if we are to charge for this service in the
UK.
In the early days of this
technology, some customers had a go, tried it and they did not like
the experience.
We need to address the
fundamental of: what does this service do for the
customer?
Kristian Williams,
Senior Digital Channel and Insight Manager, Citigroup: The question
for me would be: do we see mobile as an extension to our existing
channel set or do you we really develop something special on its
own?
Serge van Dam,
Director of Marketing for Mobile Solutions, Fiserv/M-Com:
I personally believe that they are distinct channels. Going back to
Stephanie’s point, a big part of it is that banks have gone out
there and sold mobile banking as ‘mobile banking’.
This does not mean anything
to the consumer. We talk internally about channels, which is fine,
but in terms of the difference between online and mobile, different
segments use different technologies and channels quite
distinctly.
The second area is around
technology. There are things computers do not have and phones do
not have within them.
Taking photos of cheques in
the US via mobile is now a mainstream application.
Data from our customers shows
a high proportion of customers using the service to check balances.
Mobile is much more time sensitive than online.
Douglas Blakey: Tim,
would it be fair to say that the RBS m-banking service has given
your brand something of a cool factor?
Tim
France-Massey: Our objective is to position ourselves as
the UK’s most helpful bank.
And there are various
elements to this in our customer charter. Mobile is an actual
tangible example of helpful banking. It enables customers to access
their account through the iPhone app.
From the start, we made clear
to customers it was to be a free service.
It has reinforced customer
recognition of RBS/NatWest acting as a helpful bank.
From the market research we
have conducted, it suggests that it has increased customers warmth
to the brand.
But it is not for every
segment of the market. Younger people aged 20 to 35 are the ones
more likely to have a smartphone. They are the ones who are
attracted to managing their lives on the go. And not just in mobile
banking – we have already seen this segment use mobile devices to
access social media. Last year in the UK, we witnessed customers
spending more time on social media sites via their mobile device
than from their PC.
Douglas Blakey: Did
this influence making the service available to non-online
customers?
Tim
France-Massey: When we launched the iPhone app, we made it
available to all customers – not just our online customers. We
witnessed a significant shift in branch and telephone customers who
did not then use our online channel. They switched to using the
iPhone service.
Customers said to us: ‘we do
not need to go to the ATM to check our balance’. So, yes, there was
a cool factor. If somebody buys an iPhone, they will visit the app
store to buy downloads. While they were there, they saw the NatWest
app.
We are still ranked number 1
in the app store for financial services and rank number 5 in the UK
for all app downloads.
People could not help seeing
the app and would show it off to their friends. We became aware
that people were going into the branch to open accounts just so
they could have the iPhone app on their phone as well.
So that has had an unexpected
customer acquisition benefit for us, even though the launch was not
designed as a new customer acquisition tool.
Christo
Very: We saw a very similar experience in South
Africa.
Mobile is not just another
channel for our online customers. About 35% of our customers use
both online and banking while 65% only use mobile
banking.
Douglas Blakey: Where
are you, Tim, in terms of your targets? Are you ahead of
schedule?
Tim
France-Massey: We had to put together a plan at the launch
of the iPhone app. We had had a mobile banking service since
2007.
But the initial customer
experience would always be very poor. We had to have Java apps
downloaded onto several hundred handsets.
Installing applications over
the air onto these devices meant that one had to apply on one
channel – the internet- and then receive a text message and then
follow the link. So it was really poor and the settings would not
always work.
But with the launch of smart
phones, it meant one or two clicks and you had installed the
app.
So the focus for us was on
high end phones as opposed to lower end handsets.
As an added bonus, there was
the question of security. Customers did not have to install mobile
security. So that was another key reason to focus on iPhone first –
it solved the problem of distribution of the app and it created two
factor authentication.
Yes we did make some
predictions based on demand we had witnessed and these were modest
at best. In the two-and-a-half years prior to the launch of the
iPhone service, we only had a few tens of thousands of customers
using our initial mobile banking service.
But when we launched in
November 2009, the iPhone apps went through the one month target on
the third day.
Douglas Blakey: And
you gained some help from Apple?
Tim
France-Massey: Partially because of the visibility we got,
it gained a life of its own.
Apple was looking at its
advertising campaigns for the New Year and asked us if they could
use NatWest in its own ad campaign.
So we were, for example, on
the back of The Sunday Times every Sunday for two months
after we launched. About 1.2m people in the UK had an iPhone at
that time.
Now the figure is about 3m.
That is maybe, only, about 5%: one in 20 mobile handsets in the
market.
However, people with the
iPhone are far more likely to access mobile internet than people
using standard mobile phones. That 5% of people are very active on
the mobile web.
They are active by a factor
of more than double, in connecting to the web through their phone
than using any other channel.
Stephen Marsh,
Programme Manager, Tesco Bank: One of the reasons that
mobile did not take off in 2002 was the user experience.
In 2000 to 2002, WAP, Java,
downloads, getting the right settings, all meant that the user
experience was very poor. Only now do we see handsets out there
which have fixed that.
There is this turning point
and Apple have come on and showed the way. Here is the benchmark,
it is easy to download and easy to use. One problem is: what is
next in terms of apps? There are different app stores. What
platform do you use? Again the mobile industry has an opportunity
to be dominant players, to deliver the user experience.
Gerhard
Romen: I recall back in 2003, all the talk was about the
success of Motorola with its Razor handset.
Again, we are witnessing an
evolution. First we had WAP. Then Java was available on phones from
about 2002 to 2003.Now we see the next evolution with the app
stores. We will have different versions of phones and
interfaces
Apple has first mover
advantage. Within 2 or 3 years first mover advantage goes
away.
We will have diversity just
like in cars-we have diesel, we have electric, we have petrol cars.
It should not be forgotten, with all the talk about Apple, that
Nokia still has a 40% market share in smart phones.
Tim
France-Massey: When we look at customer behaviour on our
website, we see that more than 50% of people are trying to log in
or access the web using an iPhone or an iPod touch.
Blackberry and Android will
be the next biggest and then the other devices.
One device stood out as
representing people using the mobile internet and that was
iPhone.
I question if we try and
solve mobile banking for every type of mobile phone out there –
that would be about 5,000 to 6,000 different permutations. We will
be in this situation for years.
And there are the maintenance
and security issues – they are so huge as to dwarf any benefits. So
everyone has to make their own decisions.
Our view is that the 80:20
rule works pretty well here and for everyone else we have the SMS
service. Those customers without a smart phone, are not using
handsets designed for downloading apps or doing internet browsing.
Those people probably only use their phones for voicemail and
messaging -so give them messaging.
Craig
Hutchinson: I used to be a colleague of Tim’s at RBS. I
worked on the marketing campaign for the launch of the iPhone
app.
The very fact we launched in
the app store, generated a lot of customer interest and a lot of
interest in the bank among the staff.
A lot of non NatWest
customers also were signing up to download the app. Consumers would
say that they could see the success of the app launch.
They had downloaded the app
but were not yet customers of NatWest. Now they had to do something
else – they went to the branch or went online to open an
account.
The success of hitting the
first months target in three days: well, not many bank launches
have that kind of instant success. Interest internally at the bank
was just as important. It definitely changed peoples mentality and
it opened up other opportunities.
Perhaps there are segments of
the market out there who really do want mobile banking in favour of
other channels, students for example.
Ashley Meachin,
Digital Banking Director, Lloyds Banking Group: My take
from Lloyds’ perspective, is the need to offer a consistent
experience across all channels.
Looking at the NatWest
experience, it is really quite an overt different
channel.
I would say the key
consideration should be: What do consumers want to do and I think I
am in a slightly different place to some of my colleagues here. I
think that consumers want to interact with service providers in a
way that suits them at a time that suits them.
So, we run the risk that as
an organisation we try to manage our customer experience with us
from our side of the fence rather than their side of the
fence.
So at Lloyds I am talking
much more about people doing their banking with us in a way that
suits them, regardless of their location or what they have around
them to access us. So we have ebbed and flowed about whether mobile
banking includes mobile payments.
Does it, for example, include
or exclude SMS messages. As an industry, we need to recognise that
consumers increasingly want to be in control. They want things to
be easy for them.
We have a multitude of ways
of communicating with them. We have the same sort of data as Tim at
RBS.
Each month we see a 10%
increase in people accessing our website from a mobile device of
one type or another. We know there is a growing expectation among
customers that we will help them interact with us using what they
want to interact with, so some want text alerts.
Others want to make payments
on the move. Other customers just want to check balances. Branch
networks have an important role to play in opening current
accounts.
My only slight tempering of
the debate so far would be: When we talk about mobile banking what
do we mean? What about YouTube? Is use of that part of mobile
banking? Having a presence on sites such as Twitter? Where does
that sit in terms of mobile?
Tony
Emerson: The vision Microsoft has is that it will be all
about customer choice.
There are parallels with the
past. Think of AOL, MSN – they were not originally web pages and
then we settled on some standards and the same thing here will
happen over time.
We have an app store there
will be app stores for Nokia and for Blackberry.
It is never going to be
something that is perfect for every platform but we will see that
standards will push people to commonality.
Christo
Vrey: In every market there will be differences but I
would suggest that in every market at the principle level, the best
place to start is: what is the customer value
proposition?
Sometimes, banks around the
world get sidetracked from that.
Stephanie
Coleman: Again I am thinking, is this type of lifestyle
management something that customers will pay for?
Gerhard
Romen: I would ask: What is it there for? Is it there to
serve the convenience of the customer or to lower channel
costs?
Thinking back a few years,
take the example of mobile phones with cameras. Did we think, when
they first appeared, that people would use them and they would
become a standard feature on handsets?
Take that idea and say what
is different in mobile banking? Could it become a standard feature
like a camera on a mobile? In India we are on our way to turning
mobile re-sellers into mobile money agents or extended bank
branches. They offer cash in and cash out and a few other
services.
The overall numbers are quite
interesting. In India there are onem phone shops but only 70,000
bank branches around the country. That offers scope for a real
expansion of the mobile channel.
Christo
Vrey: The sexy stuff lies in the apps and the downloads.
What would be the UK-centric killer app at the lower end of the
market?
Craig
Hutchinson: The killer app for me would me, would be: What
will make a consumer do something different?
Is it in the person to person
payments arena? If I decide to take my mobile phone out and use
that instead of handing over a tenner is that, say, the point at
which I take that decision? Is there something in it for me; is it
more convenient for me?
Ashley
Meachin: I think that we are in danger of running way
ahead of the consumer here.
I wish I could remember to
whom to attribute the famous quote – but I think the old statement
is true: “We over-estimate the short-term effect of technology and
underestimate the long-run effect.”
I think, that on mobile
payments, we are ahead of the curve. In the long term, the upside
will be difficult to imagine.
For me, in the short term,
the consumer demand for it is not there. We can listen to Tim and
the statistics from RBS and say: ‘that is stunning’, but it
represents a tiny proportion of the UK population.
Craig
Hutchinson: There is a lot of interest in P2P
payments.
With cheques going out in the
UK in a few years, someone can step in. It is a very simple
proposition to make payments by mobile phone. All that is needed is
their mobile number.
Faster payments are already
here – and though expensive – it means that already there is an
infrastructure in place for P2P.
If one of the big non-bank
players comes in, they could prosper in P2P. In a similar way to
PayPal taking Visa and MasterCard out of the loop.
Ashley
Meachin: Be careful – I do not think we can say that banks
are being taken out when you look at the volumes – the volume on
PayPal compared to Visa and MasterCard?
Would non-banks have the
appetite for the type of capital required to support the
infrastructure?
Particularly in the UK, we
have a several hundred year’s reputation in this area.
Christo
Vrey: Ashley makes a very valid point, if we look at the
where the value is.
In Kenya, for example, when
business really grew, the regulators got involved in a big
way.
We witnessed in India, a
suspension of all mobile banking operations by mobile operators for
a while until regulations were in place.
There are few other successes
worldwide. A balance needs to be struck between banks, mobile
operators and telcos, governments and regulators.
