Gemalto’s study into the mobile banking behaviour of young individuals (aged 16 to 24) shows the huge impact that mobile phones have made on the banking sector. This surge in popularity is set to continue as the younger generation ages and technology develops. Patrick Brusnahan reports on the findings
In the modern day, it seems that a mobile phone is around every corner in every hand. Gemalto, an international digital security company, polled 1,184 16-24 year-olds and revealed that the devices are in near constant use. 1.2 billion people across the world use mobile phones to go online and 25% of them are young adults.
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While it’s no revelation that young people like mobile phones, a startling 97% of respondents owned a mobile or a tablet or both. 70% of respondents used their phone for over two hours a day. 38% used their mobile devices for over five hours a day. In fact, 27% would rather go without a bank account than a mobile phone. The time where a smartphone was merely a gadget is well and truly over; it is now, according to the report, ‘a way of life’.
The concerns of the younger consumer
Mobile phones are clearly having an impact on young consumers’ banking choices. 37% said that they would change bank if they were not able to conduct their banking on their mobile device. 24% of respondents believed that banking on their mobile or tablet was absolutely ‘essential’, while 36% believed that mobile banking helps them keep better control of their finances.
This rise in digital alternatives is in stark contrast to the decline of the bank branch. Over a quarter (27%) of respondents said that they never visit their branch and only 14% of young people preferred doing their banking in person. However, 77% of young people bank online monthly, at least, and 62% use the mobile apps at least once a month.
Not everything about mobile banking was praised. Security was a worrying issue as 67% of respondents were actually concerned about the security risks of using their mobile for banking. Expectations for security were incredibly high as nearly 90% felt that mobile services should incorporate the same security features as existing online services. 48% would switch banks if they felt that the banking app’s security was poor while 38% would only use the app’s most basic features.
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By GlobalDataThis, however, is not simple as not only do young people want something secure, but something convenient. These two factors do not necessarily go hand-in-hand. 30.6% of those surveyed were completely happy to access mobile or online banking services via public Wi-Fi and, in turn, putting themselves in risk of cyber crime. It is a common assumption that younger people are informed about online threats, but the report deemed it ‘surprising’ that so many risked their own online safety.
This generation is also ‘far more likely’ to air grievances over social media. According to communications agency Echo Research, 36% of young people had used a social media platform to contact a big company. 65% believed it to be a better way than call centres to get in touch with companies.
While the security concerns remain present, trust in banks among young people is high. Only 16% of respondents said that they trust their mobile provider more than their bank. Gemalto believed this to show that ‘banks have an opportunity to have a fresh start with the younger generation and use them as a vehicle to build greater trust among their entire consumer base’.
The report also focused on the changing habits of young consumers. When it comes to the quality of mobile banking, young people wanted a fully featured service with access to all the functions and access they have grown accustomed to in-branch and online. This is not just balance checking, but advanced tasks. For example, domestic transfers and paying bills, which 26% and 40%, respectively, of young customers are doing already.
User experience is crucial to keep the younger section of the market happy. If the mobile banking app was hard to use, 68% of respondents would use the app less and 37% would switch banks altogether. Gemalto said: "Banks need to realise that a fiddly, unresponsive or unreliable app could well cost them customers quickly. Apps need to be thoroughly tested, regularly reviewed and benchmarked against competing services to make sure that quality of service is the best it can be."
Security measures must be considered when calibrating the user experience, especially in terms of speed. As everything online is designed to be done in as few clicks as possible, young consumers will not tolerate going through several security barriers to carry out simple transactions on an app. Gemalto said: "Security cannot be an afterthought when designing an app; it must be included in the discussion and designed right from the start to ensure a positive user experience; whilst ensuring compliance needs are also being met."
The evolving challenge of customer retention
Traditionally, customer retention was fairly simple. People just stuck with the bank they had always used. Nowadays, with the financial crisis of 2008 and the emergence of new technologies, the situation has significantly changed.
This new generation is more demanding than previous ones. 37% would change banks simply because the mBanking experience is inadequate. In the UK alone, 1 million people switched bank accounts in 2014, a rise of 20% year-on-year. While regulation made it easier to switch than it has been in the past, the report claimed this mass exodus purports a sense of dissatisfaction with the consumer experience.
For customer retention, Gemalto highlighted two key priorities:
- Building out the service catalogue and user experience for this generation, and
- Using engaging techniques and tools to engage and upsell to your upcoming audience, from social media platforms and engaging digital content to intelligent mobile marketing techniques.
Old tactics, such as offering a package of bundled products for consumers in a branch, are no longer relevant. Fewer and fewer people are going anywhere near a branch now that much more convenient access is available on their phone.
Gemalto said: "Banks should be using the mobile channel to cost-effectively engage and deliver product offers and general content to the right customers at the right time, driving organic growth and customer retention and, ultimately, increasing revenue."
There are various options to make this happen. From dynamic messaging programs to deliver ‘tappable’ tailored offers and content to the pre-login mobile apps screen, to contextual messages to customers based on their activity, there’s a wide range of opportunity for banks to differentiate themselves.
Mobile can also be used for engagement not related to sales. There’s an opportunity to educate consumers further on finance with, for example, messages about digital fraud prevention or value-added content such as guides for first-time homebuyers or parents.
The benefits to this approach are many and varied. Gemalto said: "First and foremost, mobile channels cost less to serve. According to the TowerGroup, the average cost per transaction of the mobile banking channel in the United States is 2% of branch-based transaction costs.
"And for course the right marketing and advertising campaigns will boost revenues. But there is also an incredible return from the recognition and excitement that comes from being seen as an innovator by existing and prospective customers."
Regional differences
The report honed in on five regions in their research; Brazil, Mexico, Singapore, the United Kingdom and the United States. While trends were largely the same worldwide, there were some key differences.
Brazil’s young people with smartphones or tablets used them more than in any other country. Almost half (45.9%) used them for more than five hours a day. With that level of usage, it is not a surprise that security and ease of use were key concerns. 84% were worried about the security of their mobile banking services, more than any other country in the survey, and 49.9% stated that they would switch banks if an app was hard to use. Gemalto posited the theory that security concerns were high due to the prominent levels of criminal activity in Brazil, but this was merely speculation.
Mexico polled fairly similarly to Brazil, with comparable reactions for overall mobile banking usage and results for poor security or ease of use. One difference was the trust factor. 22% of Mexican respondents trusted their mobile provider more than their bank, more than in any other surveyed country.
According to the Mexican Internet Association (AMIPCI), 47% of those who do not use online banking give distrust of the security as their reason. This could be a heavy concern for the unbanked customers who may not have experience with secure traditional financial services.
Singapore’s technological astuteness comes across in the report. A greater percentage of the population in Singapore use mobile banking services than in any other country (71%). Singaporeans are also the most intolerant of security issues with more than half (50.3%) prepared to switch bank if its app is not secure.
The United Kingdom’s young people use their mobiles and tablets less than their international counterparts with only 27% using them for more than five hours. They are also the slowest surveyed to adopt mobile banking services as only 53% of them use the services. Young Brits tend to be more trusting and accepting of their bank though. Among the countries in the survey, they’re the least worried about mobile banking security with only 49% expressing concern. Less than 10% trust their mobile operator more than their bank and only 26.2% of young people would switch bank if the app is hard to use.
Gemalto said: "Whilst this should seem promising, it contrasts significantly with the rest of the British adult’s population confidence in the banking industry as a whole. [According to Ernst & Young], this has continued to decrease dramatically since the 2008 crash – 37% in the last 12 months alone, and 10% more than any other countries included in this research.
"This suggests that British banks have the most work to do to regain overall consumer trust. Perhaps the younger audience is simply a little more apathetic about the issue and apathy and distrust in the banking system develops with age."
In the United States, behaviour is similar to the United Kingdom with closely low levels of mobile banking adoption and concerns about security. They are also the second most trusting of banking as only 13.2% trust their mobile provider more and only 45.9% were prepared to switch bank if their mobile app was not secure enough.
In regards to this lack of concern, the report said: "Perhaps education and awareness campaigns are necessary to help American youth understand the risk cyber crime represents and encourage them to take protective measures accordingly.
"Indeed, many of the banks invest in anti-fraud organisations, such as Financial Fraud Action in the UK, focused on raising consumer awareness and understanding of the issues and how to protect themselves from social engineering and other criminal attempts to separate consumers from their money."
The smartphone and tablet boom has heavily affected the financial services sector. Many believe that banking through these pieces of technology is absolutely crucial. Their influence will only grow as the younger generation of digital natives grows older and its needs expand. Procrastinating when it comes to this issue would be a major misstep. As the report conveys, mobile is ‘a rapidly accelerating, unstoppable force’.
The report concluded: "This generation demands innovation, quality and security in mobile, and if you don’t give it to them, they’ll find another provider who can."
