Mobile banking breeds loyalty

Woman sitting on bench holding Apple iPhone

In his guest post, Carta’s Salim Dhanani, highlighted that a key change brought about by mobile payments has been the amount of, and the ways in which data can be collected.

“For the first time multiple payment products can all live under a single application. The owner of that application is the one who can see the consumer story from beginning to end. Real value begins to take shape when you can connect the dots,” he argued.

However, that is not the only significant benefit. Now, it seems that mobile banking has another benefit – ROI. According to a year-long research from Fiserv, consumers who use mobile banking are less likely to swap providers and are more likely to use a wider range of the bank’s products.

The study, carried out over a 12-month period between 2014 and 2015, involved customers of eight credit unions and nine banks of varying asset sizes. It compared product usage, transaction frequency, attrition rates and revenue generated among three groups: mobile banking users, online users and branch-only users. For mobile banking users, data was from those who had active engagement – including bill pay, person-toperson payments, transfers or deposits – through the mobile channel. Fiserv analyzed the three months before and after consumers enrolled in mobile banking to understand the impact of engaged mobile users.

The first thing the study noticed was the profile of the average mobile banker. Over half (53 per cent) were under the age of 55, had multiple product holdings, more debit and credit card usage, and higher transaction counts.

In terms of bank product holdings, the study noted that the number of different products held by a customer increased by as much as 12 per cent in the three months after the adoption of mobile banking. Average total product holdings increased by 11 per cent post-adoption.

Furthermore,  despite only accounting for 14.4 per cent of the customer base in the banks studied, mobile banking customers drive more than 39 per cent of the total POS spend. Transaction frequency is higher among existing mobile banking users in the financial institutions studied, compared to consumers who don’t use mobile banking. In the credit unions studied, 40 percent of existing mobile banking users averaged more than 10 ATM transactions per month.

Fiserv posits that this correlation between mobile banking and transaction frequency could be because immediate mobile access to financial information, including balances, may influence additional transaction behaviors.

In the three months after adopting mobile banking, the study finds that consumers in the study significantly increased both the number and value of their transactions. There was was a 46 per cent increase in the number of POS card transactions for bank customers.

Very interestingly, and perhaps counterintuitively, ATM usage jumped up by a whole quarter in both credit union and bank customers. Moreover, the value withdrawn by bank customers increased by 27 per cent. One explanation for this jump is that high frequency ATM users use mobile banking to check their balance accounts before or after a withdrawal.

The other advantage of mobile banking is the inherent self service, which in turn could ultimately reduce costs of running branches (or even apportioning money to open new ones). Fiserv cites research from Javelin,  which found the average cost per mobile transaction to be just 10 cents, while an in-person transaction at a physical branch is $4.25.

Ultimately, the biggest thing to take away for banks from the report is that mobile banking lowers attrition. Customers who only bank in-branch are two times more likely to leave that financial institution than mobile banking users. This could be down to the fact that mobile banking offers another path of engagement between the customer and the bank. It reduces the hassle of carrying out quick or small banking activities such as transferring funds, depositing checks or making loan payments and therefore reduces the risk of customer annoyance (if the mobile application is working well).

Matt Wilcox, SVP, marketing strategy and innovation, Fiserv, said, “The financial institutions in this study are seeing tangible revenue from mobile banking. Marketing mobile banking and highlighting how it can help consumers keep pace with the speed of life is absolutely essential if financial institutions want to grow adoption and use of the service and reap the benefits of their mobile investment.”

Related reading

Leave a comment