In 1994, Bill Gates famously said, “Banking is essential, banks are not.” As so often was true in his career as visionary and CEO of Microsoft, he was absolutely right!
With the advent of PCs and now the ever-present smartphone, banking has gone from a paper-based, people-intensive industry with branches on just about every street corner to an industry that has moved a large part of its business online. Today, banking services are increasingly delivered with technology and the entire financial industry is being driven by innovation.
Here are some high-level trends:
- Overall mobile growth is 10% a year and is rapidly overtaking the web for online banking.
- According to the Federal Reserve, 38% of all consumers with bank accounts currently use mobile banking, and 53% of smartphone owners have used mobile banking in the past 12 months.
- Older consumers remain less likely to use mobile banking than younger consumers (67% of millennials compared to 18% of consumers age 60 or over).
- This usage gap is projected to widen even more, as 85 million millennials in the U.S. come of age.
- Securing mobile applications has gone from a luxury to a necessity, as financial institutions endeavor to keep hackers away from valuable corporate data.
Technology is transforming the way people manage their finances, deal with their banks, and engage with financial advisors:
- Access to palm-of-your-hand banking has caused a shift in technology expectations across the industry.
- 70% of IT leaders say tablets and smartphones will eventually replace PCs in financial services.
- Developed markets already have the device penetration and infrastructure in place to support sophisticated mobile transactions between individuals and between consumers and financial institutions; the United States is still catching up.
- Recent research by Citigroup projects that revenues of financial technology startups will leap 10 times to more than $100 billion in the next four years.
- Mobile banking will soon become the preferred choice for consumers across the globe.
With transformation comes disruption:
- The increase in mobile banking has reduced the need for bank branches; more than 1,600 branches shut down in 2015.
- The branches that remain in business have fewer staff, from 13 full-time employees per branch in 2004 to fewer than 6 today, and they are going digital.
- Fintech attackers are flying largely under the radar today, but they will attract attention from regulators as soon as they begin to attain meaningful scale.
- Legacy platforms struggle to handle the heavier, highly dynamic workloads of mobile apps, causing the need for IT upgrades.
- Mobile identity authentication has become more important for financial institutions as consumers migrate away from online banking to smartphones and tablets.
- Mobile apps need to be secure at three levels -- the code, the data, and the device -- and continuous and dynamic risk assessment is a huge part of this process.
- While security particulars vary widely depending on the type of app being deployed, it's up to IT leaders to ensure that user convenience never trumps protection of valuable enterprise or consumer information.
A recent study of 640 businesses by the Ponemon Institute found that the average company tests less than half of the mobile apps it builds, and 33% of companies never test their apps for security before they go to market.
Digital transformation can also bring efficiencies, opportunities, and significant business benefits:
- Fintech is faster, cheaper, and more mobile that the traditional banking model.
- From retail and commercial banking to wealth management, insurance, and investment banking, mobile technology is transforming the way people handle their finances.
- In response to this trend, 75 percent of American banks have developed free mobile banking apps for their customers.
- Users can authenticate their identity and open new accounts, sign up for direct deposit, pay bills, take out loans, and deposit checks, all from their mobile devices.
The bottom line:
- A well-designed, easy-to-use mobile banking system is a must-have for today’s banks if they want to retain existing customers and attract new ones, particularly millennials.
- Mobile banking apps can’t just be convenient, they need to be secure, with security and continuous assessment infused throughout the software-development lifecycle.
- When users fire up their mobile banking apps, they should be able to expect their personal and financial data to be safe and protected.
- Banks need a fresh, interactive approach to attracting millennials (think YouTube videos, infographics, peer testimonials…).
- Segmentation and analytics can be used to personalize the user experience, providing what customers actually want and need.