Mobile Banking Engagement: Data from Digital Insight

Digital Insight has been conducting a comprehensive and ongoing study of financial institution customers. From these studies, the company has been able to provide a deeper view of banking customer behavior across several categories, such as mobile and online banking. In this first post, we examine mobile banking statistics and how they both impact and benefit financial institutions. Below are key findings from the study, and you can view a more in-depth analysis here.

We will be publishing data on additional topics in the coming months, so stay tuned via Banking.com. *For information on the on the methodology used for the study you can download the PDF

The New Paper Chase

It’s always interesting to examine trends taking shape at the intersection of financial services and technology, as this blog does so often. But there’s one issue that’s frequently gets overlooked and yet is still the giant elephant in the room: paper.

Yes, paper. We’re a couple of decades into the era of e-commerce, and for many of us even bills arriving via snail-mail seem like a rarity. We have a staggering array of online tools that enables us to do virtually everything financial, from anywhere at any time. What’s paper got to do with it?

The short answer is: a lot. This is particularly true of checks, as used by millions of consumers and even small and mid-sized businesses. But in many other areas too, it’s an area in which change has been surprisingly slow. On the flip side, doing away with paper will bring enormous benefits, from speedier transactions and greater savings to environmental preservation.

It’s been almost a decade since the Check 21 Act passed in late 2003, allowing financial institutions to create digital versions of original checks. Today, banks deal with each other almost entirely through electronic transfers—once the actual check has been submitted, it disappears from the process.

But tell that to the entities writing the checks in the first place. To be sure, the numbers are dropping, however slowly—there’s close to 2 billion fewer written each successive year. But at this rate, it will take until 2026 for paper checks to be eliminated altogether.

That’s the conclusion in a study published last year by the Federal Reserve Bank of Philadelphia. According to the same report, the benefits are undeniable: getting rid of paper saves the banking industry $1.2 billion a year, while consumers and businesses keep $2 billion in benefits through faster payment processing.

Of course, few trends in technology stay at the same rate—there are frequent spikes and pullbacks, and unexpected accelerations that blow away all estimates. No one expected tablet adoption to grow at such a staggering pace, but it has. It took almost 10 years for smartphones to reach 40 million users (which admittedly meant replacing older models), while that number was crossed only two years after the emergence of the Apple iPad.

Just this week, Juniper Research estimated that tablet buying will lead to 200 million users of “transactional tablet banking services” by 2017. By that time, one in four tablet users will be paying their bills via those devices. There are other signs too—let’s not forget that Amazon used to accept checks, but discontinued the practice in 2008.

There’s now a broad variety of services designed in part to wean users off the habit of writing checks. For example, most banks now offer the ability to capture a check image via smartphone and make an instant deposit. And any number of other providers, from thriving vendors like Square to newer entrants like Zipmark—which styles itself as the digital checkbook—make it easy to avail of the new capabilities.

The changes will have tremendous ramifications: Intuit, which now has close to 30 million customers for its payments services and processes $38 billion a year in payments, estimates that it could increase its payments business by $4 billion by getting QuickBooks software customers, mostly small businesses, to use the payments service.

At this point, the use of paper seems almost a throwback to an earlier time, but the numbers clearly belie the perception. Getting rid of it from the world of finance would likely do a world of good. And given the justified concerns over rainforests and a rapidly declining ecosystem, it would actually do the world good too.

What We’re Reading: Cloud Computing, Lending and Device Strategies

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom.

 

  • Asked About Digital Wallets, Most Consumers Only Know of PayPal: Study

American Banker

The promise of digital wallets has fueled the conversations and hopes of financial technologists for years. But there are many obstacles to having those dreams realized, including the fact that few consumers know that digital wallets exist. Only 51% of U.S. consumers said they are aware of wallets other than PayPal, according to a comScore Inc. study published this week. comScore defines digital wallets as virtual copy of the contents of a consumer’s physical wallet to facilitate online or offline retail.

Read more

  • Big Banks Boost Lending to Small Businesses: Survey

American Banker

Big banks are showing a growing appetite for loans to small businesses. Banks with at least $10 billion in assets approved 15.3% of loans between $25,000 and $3 million in January, up from 14.9% in December and from 11.7% a year earlier, according to an index published Thursday by Biz2Credit, which connects small and mid-size business borrowers with lenders.

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  • Cloud Computing Security Rules Put Responsibility on Users

American Banker

The PCI Security Standards Council has published guidelines for protecting sensitive data in the cloud. Although the advice was written to protect card information, the same principles could be applied to any data stored remotely. The report states that installing and maintaining a firewall to protect cardholder data would be a shared responsibility between client and provider under infrastructure-as-a-service and platform-as-a-service cloud configurations. But for software-as-a-service, in which the cloud provider hosts software delivered over the web, the firewall would be the sole responsibility of the provider, the PCI Council has decided.

Read more

  • Understanding the Tablet Banking Customer

BAI Banking Strategies

Tablet usage is growing exponentially, with important implications for retail banking. According to eMarketer, the number of U.S. tablet users was expected to reach nearly 70 million by the end of 2012, up from 34 million in 2011. Adoption is now strong enough to provide an accurate assessment of this user segment and develop a strategy for engaging these consumers in financial services.

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  • Five Things Every Business Leader Should Know About Social Capital and the Influence Economy

Business 2 Community

Though social capital is an intangible, it reflects on how well you’re known, liked and trusted. Social capital can be most simply understood as the good reputation and influence of your business or personal brand. Like the concept of goodwill in business valuation, social capital is an intangible whose value is determined by others. “A brand is no longer what we tell the consumer it is – it is what consumers tell each other it is.” ~ Scott Cook, Intuit

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  • Why You Need To Have A ‘Device Strategy’

Credit Union Journal

A recent study by First Data showed that 61% of Americans use a smartphone and that 56% of smartphone users use their smartphone to bank. Plus, almost one-third say they expect a mobile phone app from their FI. Most respondents go online to bank (86%) and pay bills (81%) frequently. Yet, while web-based transaction services are now the benchmark, ATMs still play an important role in consumer transactions. Although consumers view ATMs traditionally-as devices that enable them to retrieve cash, deposit checks, and monitor account balances-there are new capabilities that enhance individualized communications to promote both cross-selling and customer loyalty.

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  • Now banks have to worry about Apple and Google

St. Louis Business Journal

Financial institutions aren’t keeping up with the customers’ needs and desires in mobile banking, according to a recent survey.  Varollii, a Seattle technology company, found that increasingly tech savvy customers want more than what many banks are giving them and that they’re finding it from providers such as Apple and Google, which are offering competitive consumer-friendly services, such as personal financial management and alerts, The Street reports.
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  • Mobile Banking and Change is Coming

SYS-CON Media

In the book Bank 3.0 by Brett King he writes about the monumental changes taking place in the banking industry due first to the Internet and now mobile.  Here is an excerpt, “The average individual is spending 94 minutes or so a day using apps, checking emails and texting up to 100 times per day.  We’re logging on to mobile banking 20-30 times per month and Internet banking around 7-10 times per month, but visiting a branch (of a bank) only a few times a year.”

Read more

  • Big Banks Bet on Mobility and Super-Powered ATMs

WSJ: CIO Journal

As big banks finish the job of consolidating IT systems and knocking down organizational silos, they are counting on investments in mobile applications for both retail and commercial customers, and more sophisticated ATMs, to increase customer satisfaction, lower transaction costs, and help improve margins and revenue growth. According to PNC Financial Services Group, the average cost of a transaction using an online or mobile device is 56 cents, and 59 cents at an ATM, compared with $3.97 when a customer transacts with a bank teller.

Read more

What We’re Reading: Privacy Rules, Mobile Wallets and Banking Acquisitions

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom.

  • Four Ways the FTC’s New Privacy Rules Affect Mobile Banking Apps

American Banker

The Federal Trade Commission has been toughening its stance on consumer privacy protection, and this directly affects the mobile applications banks offer their customers. On Saturday the agency issued a report, Mobile Privacy Disclosures: Building Trust Through Transparency, that offers advice on keeping using consumers’ data private. It offers recommendations to four sets of stakeholders: operating system providers (like Apple and Google), app providers, advertising networks, and app developer trade associations. Banks that provide mobile banking, PFM, trading or wallet apps fit in the app provider category.

Read more

  • Bank Tech Vendor Shakeup Continues: FIS to Acquire mFoundry

Bank Systems & Technology

The consolidation trend in the bank technology solution provider space continues to accelerate, with news today that Jacksonville, Fla.-based FIS has signed a definitive agreement to acquire the remaining 78% interest in mobile banking and payment solutions provider mFoundry. Previous to this transaction, FIS held a 22% interest in mFoundry (Larkspur, Calif.), which was founded in 2004 and now serves more than 850 clients in financial services and retailing. According to a statement from FIS, the addition of mFoundry “enables FIS to leverage its technology assets across a broader client base.

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  • The Latest Trends That Will Redefine Online Banking

Business 2 Community

Online banking has had a tremendous effect on banks because people can now complete financial transactions by visiting secure websites that are maintained by brick-and-mortar or virtual banks, credit unions or brokerage houses. While this is convenient consumers are also concerned that their financial information may be accessed by hackers via the Internet, and banks are intent on providing security for their customers and keeping up with the latest technological trends at the same time.

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  • ‘Me Too’ Rules in Mobile Banking

Credit Union Times

Anthony Genovese, a vice president at payments company Compass Plus stated that central advice from Compass Plus to credit unions is to “focus on the importance of the mobile channel” and to take steps to make use of uniquely mobile features such as built-in GPS (the phone knows where it is), a camera, and in an increasing number of phones NFC, the near-field communications payments chip. Genovese added that “the stickiness of mobile user is questionable. Financial institutions aren’t offering many features that compel users to keep using the channel.”

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  • Apple Patent Reveals Peer-To-Peer Mobile Banking Idea, Using iTunes As Bank

Fast Company

Fast Company checks in with last year’s Most Innovative Companies to see how their big ideas fared in 2012–and how they’ll play out in 2013 and beyond. Apple has just revealed one of its more out-there ideas in a patent application titled Ad-Hoc Cash Dispensing Network. The proposed patent, in short, is a peer-to-peer lending concept that would use iTunes accounts as a connection to let people loan or borrow small amounts of money to each other. The patent, which was reported on by the Unwired View website, shows just how far outside the box the thinking goes over at Cupertino.

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  • Will You Be Ready When Mobile Wallets Turn Banking Upside Down?

The Financial Brand

Financial marketers had better wrap their heads around the impending mobile-dominant landscape, and fast. Mobile devices will soon be the central tool consumers use to manage banking relationships. When consumers start embracing mobile wallets and making digital transactions, banking will never be the same again. Around every 10 or 20 years, something big comes along that completely transforms the world of banking — ATMs, debit cards, the internet. Unquestionably, the next big thing to rock banking will be mobile wallets.

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  • The Forgotten Secrets Of The Enterprise Giants: Virality, Word Of Mouth, And Other Radical Experiments

TechCrunch

Today, Intuit is generally recognized as the only party to “own” the accounting channel, but they came at it via a totally radical approach that its competitors seem to have forgotten (which is probably why Intuit has had such firm footing for decades, despite legions of challengers). Don’t be afraid of failure. Be afraid of not trying. Salesforce, Concur and Intuit weren’t, and now we can’t imagine a world without them.

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  • Bank of America’s online banking crashes Angry customers vent frustrations on Twitter.

USA Today

Bank of America says its online banking website crashed Friday, leaving customers unable to access their accounts. Starting late Friday morning, customers trying to log on saw a message that the site was “temporarily unavailable.” The lender announced a few hours later that the problems had been resolved, but not before it endured a fire storm of complaints and criticism. Angry Bank of America customers took to Twitter to say that they were left frustrated, trying to do their banking on the first day of the month.

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  • Identity: The New Security Perimeter

Wired

Traditional security perimeters encircling corporate networks no longer meet the needs of today’s enterprise. As businesses move to cloud computing, employees are able to gain access to their work apps and corporate networks through almost any internet-connected device. The breadth of access, and choice of devices, breaks down traditional security boundaries and forces IT to seek a new security model that can deal with this anywhere reality. Security, therefore, must evolve from an on-site protection model and adapt to securely provide access to off-premises devices.

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Love at First Use: Three Tips for Building Awesome Products

It’s said that you never get a second chance to make a first impression. Nowhere is this more true than in product development. You may have built a truly amazing product, full of wonderful features that deliver lasting value to customers, but if you don’t have an amazing first-use experience, it’s game over!

In today’s world, first impressions matter more than ever before. Prospects have little patience for friction or confusion. In a mobile-first world, potential customers will download and test-drive our app, and if it doesn’t deliver some benefit or WOW in its first impression … they press the app until it wiggles, hit the X, and go searching for a better solution.

This new reality has motivated us to take a fresh look at our first use experiences, and our observations have led to three guiding principles to successfully introduce customers to our products:

  • Time-To-Benefit: Make sure that the customer immediately sees how and why they would use the product. Resist the temptation to reveal all the great long-term benefits, but instead, focus on getting to real core customer value in a simple, fast and approachable manner.
  • Ease (Do It For Me): Only ask for the absolute minimum information to get started. Once you ask for it, don’t ask again. Every request for information introduces friction and can reduce conversion significantly.
  • Emotional Delight: Go beyond functionality and surprise your customers. Make the most important tasks easier than expected. Seek to create moments of “Wow!” that will generate positive word of mouth.

A great first use experience is the front door to powering growth for a new or existing product. Don’t let all the hard work that goes into creating a great product be sabotaged by not putting in the time and effort of designing a delightful gateway. None of us want to see the next thumb being placed on our wiggling app to delete it!

*This blog originally appeared on LinkedIn. You can follow Brad Smith on LinkedIn here.

Perspectives from Intuit CEO Brad Smith: Opening up your Platform Requires a Mindset Shift from Ownership to Outcome

The world has shifted from a paper-based, human-produced, brick-and-mortar bound market to one where users understand, appreciate and embrace the benefits of truly connected services. As a result customer expectations are changing. Customers expect products to work seamlessly across devices. They expect to have their other efforts aggregated or harnessed into something you provide so they don’t have to do re-work. Customers want to have a 360 degree view of their lives or business, not just what you provide. And they want it all to be personalized for them.

On top of that new devices are launched every day and the pace of platform change has moved from six years to six months.

We are operating in a world where no one company can solve all of their customers’ problems. We have to shift our mindset from ownership to outcome.

Meeting that demand can be a technological challenge for any provider, especially in financial services. This morning I had the opportunity to join a panel of CEOs at the BAI Retail Delivery Conference in Washington D.C. We discussed the future of financial services and tackled this very topic.

Some bankers may be reluctant to open up their platform. But to remain relevant, they will have to. Opening up empowers a financial institution to incorporate the contributions of others, solve a wider array of specific customer challenges and, ultimately, delight those they serve. And, with higher engagement comes better revenue opportunities for all involved.

Intuit data shows that customers now interact with their financial institution via the digital branch more than any other way. A recent Intuit internal study showed that our financial institutions’ online customers interact with their financial institution’s website approximately 10 times per month.  When mobile is added, users interact roughly 19 times per month. And, those who access using online banking, mobile banking and tablet banking access their accounts approximately 30 times per month.

At Intuit, we’re finding new ways to open our products and platforms so that our customers and third-party software developers can help us add value to our products, even while we sleep. Recently we opened up the APIs to our financial data services and our digital banking platform.

In this new digital world, we’re committed to unleashing the power of many to continue creating innovative solutions that improve people’s financial lives. I encourage you to join us.

*The panel discussion can be viewed online at: http://www.bai.org/RETAILDELIVERY/summits-and-sessions/ceo-panel-live-webcast.aspx

Killer App, circa 2013

Anyone have fond memories of the term ‘killer app?’ More to the point, what would a new killer app for the banking and finance world look like? What exactly would it do?

It’s not that the phrase has gone away, but over the years, it seems to have been overtaken by marketing hype—so many new releases are routinely tagged this way that a collective yawn seems to be the only appropriate response. That’s unfortunate, because a true killer app really does make a huge difference. It can by itself generate an industry shift, propel a new technology paradigm and markedly alter end-user habits, particularly by introducing business professionals and home consumers alike to new ways of doing things.

With regard to finance, Visicalc played exactly this role more than 30 years ago. As the first spreadsheet to appear on PCs, specifically the Apple II, it helped change the perception of the entire field of computing. What were previously seen as toys for geeks became serious business tools, and a whole generation climbed aboard the technology train. The Lotus 1-2-3 similarly propelled sales of the IBM PC, which in turn spawned a vast hardware and software industry. And while it’s easy to be dismissive of video games as creative time-wasters, releases like Quake helped drive the development and adoption of 3D accelerators in home computing, which in turn raised the stakes for other technologies.

These days, perhaps more than new hardware, one tool that propels other forms of innovation is the API, or application programming interface. Simply put, by serving as a common language that enables different kinds of software to communicate with each other, it eases and speeds the development of new apps—perhaps even killer apps.

Intuit seems to think so. In search of the “next killer finance app,” the company, for the first time in its history, is opening the APIs to its financial data service in the U.S. and Canada. The move gives third-party developers unprecedented access to the financial data service that powers Quicken, QuickBooks, Mint.com, and FinanceWorks. In fact, developers can now to tap into transaction information from 19,000 financial institutions, auto-categorize the data, and embed it into whatever applications they develop.

Innovation in this field has frequently been driven by the ease with which vast amounts data can be accessed, collated and packaged. The new releases have the potential to take developers and users alike many steps forward in harnessing new capabilities. The new APIs are available on a limited basis now through the Intuit Partner Platform, with wider availability to come in December.

One early program that has already built on the new service is SaveUp, a free rewards game for saving money and reducing debt. Customers can securely access data from just about any financial source, while the company tracks their financial actions and offers rewards accordingly.

Here’s the thing about killer apps: We never see them coming, yet when they do, we wonder how we ever got along without them. It’s easy to say that we already have more apps than we need, while financial institutions and independent software developers alike come up with new ones every day. Sure, new mobile devices keep emerging, and we need new software just to keep up. But completely new applications offering completely new capabilities that will change how we do everything? That’s not going to happen.

Sure—just like we were never going to use our phones to do anything but talk.

So, getting back to the key question, what will a new killer app for finance look like? Rampant speculation welcome.

*Photo credit:

Image: FreeDigitalPhotos.net

Big Data: The Link From Dinosaurs to Batman to Small Business

It’s hard to escape the hype around big data these days. From magazines to newspapers to TV, discussions of big data are everywhere. But for the average business or software developer, what does big data mean? What is its promise or potential? The answer depends on the business.

For Google, Facebook and others, big data is intelligence and revenue rolled into one. In cases like the British Museum, it’s about preserving and making freely available a corpus of better than 150 million assets, from maps to musical scores. But even the smallest businesses can begin to use data in new and creative ways.

Consider the case of seasonal retail businesses, such as hardware stores. In years past, store owners manually managed inventory, attempting to anticipate demand for their wares. Today, forward-looking businesses incorporate big data into that decision-making process.

Some turn to predictive algorithms, which are primed with years of inventory data to render better, more accurate projections of demand. Others factor freely available weather data into their inventory predictions. When long-term drought conditions are forecast, as they were prior to this spring, intelligent hardware store owners could lower their inventory of garden hoses and sprinklers and stock the parts necessary for deeper wells that may be dug.

And it goes far beyond internal or general sources, such as weather data. Two years ago the New York Times examined Netflix data to determine which movies were being rented, by neighborhood, in a dozen cities. If you were an entrepreneur looking to open a comic book store, knowing where the fans lived for movies like “Batman Begins,” “Captain America” or “Thor” would be invaluable. Or if you were opening a cooking supply store, planning your location and marketing around which boroughs were consumed by Julie and Julia could be a real competitive advantage.

The nonprofit sector can also benefit from big data. U.S. government census data, made available via the open API at www.census.gov, offers insights on poverty and homelessness. The Cornell Program on Applied Demographics, for example, uses the API to layer poverty statistics onto a map. From there, a savvy nonprofit could turn to the ProgrammableWeb’s collection of nonprofit APIs to tap into databases of potential volunteers.

Whatever the business and whatever the industry, there are datasets – some of them very large indeed – that can help make better decisions faster. The key to effectively using big data is to think creatively about how it can be leveraged. Consultants or contractors won’t necessarily see the same possibilities that you will. But keep an open mind, and big data will more than justify its hype.

*This post originally appeared on the Intuit Network.

About Stephen O’Grady: Stephen is an industry analyst and cofounder of RedMonk. He is based in Maine, a frequent traveler, ardent RedSox fan and focused on helping companies understand developers better and, in general, helping developers do what they do best. He is a paid contributor to the Intuit Network.

Lean Startup Lesson: Test Before you Build

Consider the cost of building a product only to find out that nobody wants it. Testing the hypothesis for a new product can save time and money. How to go about testing before a product is ever created is the topic of discussion for Eric Ries, author of The Lean Startup, and Intuit founder Scott Cook in this Lean Startup Lesson.

This is the eighth installment of a new series where Intuit leaders, including CEO Brad Smith, Founder Scott Cook and Vice President of Design Innovation Kaaren Hanson will sit down with author Eric Ries to expand on some of the themes in his best-selling book The Lean Startup.

For more information on Ries, go to http://theleanstartup.com/.

*Originally posted on the Intuit Network. You can watch more of the series here.

Lean Startup Lessons: Breaking Down Your Grand Vision into Entrepreneurial Success

Leap of faith? Or stumbling in the dark? Eric Ries, author of The Lean Startup, speaks with Intuit founder Scott Cook about breaking down an entrepreneurial vision in a way that leads to finding real success. Exploring the role that leap of faith assumptions play in this process, Ries and Cook make the concept come to life. Ries explains how to identify which assumptions are the leap of faith assumptions and why that matters.

This is the fourth installment of a new series where Intuit leaders, including CEO Brad Smith, Founder Scott Cook and Vice President of Design Innovation Kaaren Hanson will sit down with author Eric Ries to expand on some of the themes in his best-selling book The Lean Startup.

For more information on Ries, go to http://theleanstartup.com/.

*Originally posted on the Intuit Network. You can watch more of the series here.