In the past year, banks across the US have closed over 1,300 branches due to increasing number customers that use mobile banking for daily transactions. Like the US, many other countries are also seeing a decline in face-to-face banking, leading to bank closures across the globe.
Mobile banking has been a revolutionary trend in the Banking and Payments industry. It has facilitated a convenient platform which has greatly influenced people’s financial behavior, especially the financially underserved sections. Many financial institutions have already shifted focus from customer-teller transaction to customer-mobile transaction.
Below are just a few examples of current mobile banking platforms:
- ABSA Mobile Banking
- SunTrust Mobile Banking
- HDFC Netbanking
- Harris Online Banking
- Key Bank Mobile
- Union Mobile Banking
- Arvest Mobile Banking
- Regions Mobile Banking
- TCF Mobile Banking
- PayPal Mobile
Worldwide, the Global Mobile Banking Market stands at 480 million subscribers as of 2012. Owing to the high penetration of mobile phones, the number of subscribers is expected to exceed 1 billion by 2016, fuelling market growth at a CAGR of 22.47 percent for the 2012-2016 period.
The rapid adoption of mobile banking by consumers can be attributed to the following factors:
Paucity of time and convenience
In this fast-paced world, people follow hectic work schedules and often do not get time to visit their banks during the stipulated banking hours. However, they still feel the need to closely monitor their finances to manage it better. This has led banks and financial institutions to develop new platforms such as online banking and mobile banking, eliminating any location or time constraints.
High mobile penetration
With the increasing usage of smartphones, people are now more comfortable and prefer using mobile phones for processing their transactions. Almost 70 percent of those who own a mobile phone now prefer conducting their banking transactions with it.
User-friendly interface
This is also one of the crucial factors fuelling the rapid growth of smartphones and its usage for mobile banking. It is essential for customers to have a user-friendly and easy-to-understand process in order to conduct financial transactions by themselves.
But the question still remains, what’s in it for banks?
Banks and financial institutions are gradually recognizing mobile banking as a potential channel, or as a tool for differentiating themselves from their competitors. Apart from the other inherent advantages, mobile banking provides numerous advantages to banks and financial institutions, a few of which are listed below:
Lower infrastructure costs
Traditionally, banks used to roll out new branches and employ new staff in these branches. This would increase their costs to a great extent. However, with the advent of technology, and the subsequent introduction of advanced mobile platforms capable of performing banking transactions, the pressure on infrastructure expansion has reduced to a great extent and has reduced the requirement for manpower, making the entire system very cost-effective.
Better customer insights
Mobile banking has proved to be a rich source for customer insights, as it records the transaction history of the customers. This enables banks to have a deep understanding of their customers’ needs and financial behavior, which helps them design and develop personalized products and feature applications.
Larger outreach
Mobile banking eliminates location and time constraints. This helps banks to focus and enhance their reach to the unbanked or under-banked, who refrain from visiting banks due to paucity of time.
Customer loyalty
Enhancing customer convenience is one of the major tools for attracting customer loyalty. The customer feels more empowered by having a check on their financial status.
Competency
Banks and financial institutions like JP Morgan Chase, La Caxia, M-Pesa and Monetise have always focused on designing products which are well suited for their customer segment, but adopting mobile banking as a new technological platform is being viewed as a competitive leverage. This factor helps service providers to better position themselves in the market.
So what’s the verdict?
Closing branch locations means that the banking industry is scaling back jobs and creating less access for customers that still prefer physical banking over mobile and internet banking.
That being said, in the next few years alone, the number of mobile banking users is expected to reach over one billion, which means that banks need to focus on how they can interact and improve banking via mobile and online banking platforms in order to keep up with demand.
If one thing is clear, it is that smartphones are here to stay. As more and more people become smartphone users, it won’t be long before they discover the wonderful world of mobile banking, in turn driving market growth for the years to come.
