30/09/2011

By Scott Thompson

A new report conducted by McKinsey & Company and Efma shows that interest in mobile banking is getting stronger.

Findings include: banks expect mobile banking to transform the retail banking landscape, but admit that they are not acting or investing accordingly; the unique characteristics of the mobile device present three distinct areas for ‘proposition’ and marketing innovation: ultra convenient banking, digital commerce and the opening up of new markets and segments; the opportunities will create significant scope for individual players to win (and lose) market share – but the overall impact on banking value creation will be at best neutral; banks must shape, lead, or follow the market – they will only succeed if they make a conscious choice on which strategy to pursue and take concrete action accordingly.

Most respondents believe that mobile banking will fundamentally change the retail banking industry in the next three to five years. They reject the idea that it is a fad and anticipate that mobile technology penetration will not only grow but bring significant benefits to customers.

Almost all banks (87 per cent) aim to have a mobile site and 84 per cent aim to launch an ‘app’ within the next 12 months, up from 59 per cent and 47 per cent respectively today. Seventy per cent said they are also planning to add more advanced functionality within the next 12 months, the same number said they are planning significant mobile platform upgrades and 10 per cent are even contemplating a complete channel overhaul. These ambitions are consistent with banks’ expectations that the mobile channel will capture as much as a quarter of all transactions within five years as customers shift away from branches.

Yet the majority of banks have so far not acted to invest accordingly, feeling that telcos, internet giants and consumer-champions are better placed to develop key components of the mobile proposition. Many banks have only committed investment to the current year and have, at best, made only minor adaptations to commercial functions, meaning that they have yet to create a new underlying mobile business model or clear mobile strategy.

“This research suggests that, taking the industry as a whole, the upside from mobile banking will be limited and value creation may be neutral at best. However, at the level of individual banks, the profit and revenue opportunities are considerable,” says Radboud Vlaar, partner at McKinsey. “Although the experience of many banks has been that the mobile channel is an extra cost rather than a cost reduction opportunity, innovation plays a vital role in the retention of existing customers. Those players who under-invest in mobile technology may see a large proportion of their market share captured by a rival.”