Banks Ignore Customers, Waver on Mobile Engagement

While only 13 percent of banking customers currently use mobile engagement, a recent survey of revealed that a quality mobile banking experience creates greater customer retention than quality online banking or direct deposit services. With no true standout bank in the mobile banking arena, the bank that drives innovation in the mobile field stands to gain a large advantage.

Mercatus LLC, a financial services strategy consulting and research firm, conducted a recent study showing that only five percent of those using mobile banking and payment services switched bands in the previous year; a the strong link between mobile banking experience and customer retention.

The survey of 3,000 customers in May 2011 also showed that 35 percent of customers said mobile was an "extremely important or important" when selecting a new primary bank. Last year, only 20 percent of customers indicated the same level of importance.

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"Our survey results indicate that mobile is a major game changer for banks," said Teresa Epperson, a partner at Mercatus. "Banks must resist the temptation to view mobile as an optional investment or even an alternate delivery channel. For the majority of consumers, mobile will far surpass traditional channels in terms of usage and engagement."

But despite serviceable apps from large banks like Bank of America, Chase, Wells Fargo and Citibank, there is no leader no inidication that banks are effectively developing mobile apps. Brett King, author of Bank 2.0 and a bank consultant, and Alex Sion of Sapient Financial Services argued in May that banks are taking a myopic approach to mobile banking.

"Here again we see the descent into mediocrity, because banks are mostly trying to shift their online banking experience onto a smaller screen," they wrote. "That’s just the wrong approach."

Instead, they posit, banks need to look at new services only possible with the smartphone. They mention "scan and pay" capabilities, QR code recognition and OCR (optical character recognition) which allows you to photograph an entire restaurant check and determine who owes what. Banks could integrate shopping loyalty programs into their apps or make better use of integrating GPS and the application to provide enhanced service.

"We’re making all the same mistakes we made when the Internet came out – we’re limiting development to what the bank wants from the channel (cost migration and competitive competency) rather than real engagement of customers," they wrote.

Chase Bank made a strong marketing push for its QuickDeposit mobile feature, which allows users to photograph a check and deposit it from anywhere. The company also recently unveiled its unique iPad banking app. Still, across the board, banking engagement strategies don’t always emphasize the mobile component.

While Bank of America is closing 10 percent of its national branches, JPMorgan is opening 2,000 new branches around the country to try and grab disgruntled BofA customers. The strategy spreads JPMorgan’s branch reach by nearly 40 percent and show a focus on an older demographic that prefers in-person banking over mobile engagement.

"Two thousand is a mind-bending number, even for a bank the size of JPMorgan Chase," Bob Meara, a senior analyst for Boston-based consulting firm Celent told Bloomberg Businessweek. "Branch building on a large scale seems tough to justify."

Wells Fargo is also shuttering unprofitable branches, but BankUnited and OneWest have taken after JPMorgan on a smaller scale. While this doesn't represent an industry-wide abandonment of mobile engagement, it does show conflicting opinions on mobile investments. Studies continue to show, though, that a full focus on mobile engagement is necessary for banks to match customer engagement needs.

For more on CMIQ's events, including Customer Experience Management for Banking and Financial Systems, click here.