Aug 11
30
Mobile Applications in Financial Services: The Concepts, Methods, Issues and Future Conceptual Products that make a Significant Impact in Security
In support of the upcoming Financial Technology Innovation Forum, I recently sat down with Finance IQ to share some insights on mobile applications for the Financial Services Industry. Check out our interview below.
The impact mobile applications will have on Financial Services companies is not yet clearly defined. As mobile increasingly becomes an ever more essential part of the way customers conduct their business, players in the financial services industry need to make sure they do not lag behind in their technologies. Finance IQ interviewed Matthew Wilcox, Vice-President of Interactive Services at Zions Bancorporation on the state of these technologies today, and going forward where he foresees mobile taking Financial Services companies in the future.
Finance IQ: Can you address the concepts, methods, and issues for mobile applications in the Financial Services Industry?
Matthew Wilcox: There are numerous mobile application concepts that range from security to m-commerce within the Financial Services industry. The toughest part of managing a mobile product is navigating through all the hype to get to the small nuggets of material that are relevant to your business. If method is a new way of defining mobile strategy then the answer is it is a no-win scenario. Financial Institutions that are on the bleeding edge are investing in technology that has a limited shelf life, given the rapid advances in mobile technology and the constant demand from mobile bankers to have the latest and greatest. Close followers seem to be making similar mistakes as those on the bleeding edge, due to the time and complexity involved in bringing up new mobile technologies – and the laggards in this space won’t need to worry about mobile since they will not have any customers left. Addressing concept and method should provide you with a solid taste of the issues the Financial Services industry faces in regards to mobile, and all of this happens before you get to security and ROI.
Finance IQ: What kind of impact have mobile applications had on the financial market?
Matthew Wilcox: At this point in the evolution of the Financial Services mobile application we are not at a point where the impact of mobile applications on the financial market is clearly defined. I think everyone agrees that this space is going somewhere, but whether or not mobile lives up to all the hype as the next step in commerce within the U.S. has yet to be seen. Depending on where mobile lands in the next few years will give us a better understating of the kind of impact mobile applications will have on the financial market. However, I predict mobile will overcome online banking in terms of usage and will also be seen as a fully-fledged marketing channel.
Finance IQ: What kind of impact have mobile applications had on your business?
Matthew Wilcox: Currently mobile applications have been seen as an investment in our future. We have had to invest as part of our overall online/mobile strategy. It is important for us to meet consumer expectations for service delivery set by larger financial institutions such as Citibank, Chase, Wells Fargo and Bank of America. In the near future we expect mobile to have a much more positive and profound impact on our business especially when you look the potential that m-commerce presents, which is why it is so critical for us to continue to gain experience in this space.
Finance IQ: What are some conceptual products that make a significant impact in security?
Matthew Wilcox: Products currently exist that have an impact on security and risk, such as Mobile RDC and P2P Transfers. However additional products, such as the mobile wallet, are in the conceptual phase and will have as dramatic an impact on security. In addition, the mobile malware (along with phishing and spoofing techniques) are in their infancy and many of the tools needed to combat these threats have yet to be developed.
Finance IQ: Where do you see this technology taking the Financial Services Industry in the future?
Matthew Wilcox: In the future, mobile will most definitely replace online banking, but more importantly mobile will change the way consumers interface with their Financial Institutions. In a world where managing finances is a monthly, weekly or daily event, mobile will most definitely push more customers and small business owners towards real-time financial management. Even more intriguing is the mobile wallet, which in theory will consolidate the consumer facing process of commerce down to a single application on a mobile device.
Matthew Wilcox is a speaker at the upcoming IQPC Financial Technology Innovation Forum, October 17 to 19, 2011 in New York City. For more information or to register, visit www.financialtechforum.com or email info@iqpc.com.
Banking Finance Mobile Banking by .
Quick Response (QR) codes are the latest tech gadget to engage folks with smartphones and other mobile devices equipped with a camera.
These codes are fun, and simple to use. Just point the lens of your smart phone or other compatible mobile device at the code, and wait to see what pops up on the screen. Usually, it’s a website. But it can also be a cell phone number, an email address, a text message, or even a YouTube video. And that’s just for starters.
The final result is a lot like you get from typing in a URL, but QR codes offer some distinct advantages. One is the novelty factor, but another is convenience. Typing a URL on a smart phone can be frustrating. By contrast, a QR code only requires you to point, and your phone does the rest.
The ease, spontaneity and fun of using QR codes may make them the interactive equivalent of the Point of Purchase (POP) display. You don’t even have to tell customers where the code will take them (many will simply point their smart phone at a code purely for its mystery appeal).
Your imagination is the limit when it comes to how your bank can use QR codes. Here are just a few ideas:
• Low, introductory CD rates — aim and presto!
• Apply for a credit card — aim and presto!
• Test different marketing and ad strategies — aim and presto!
• Enter a sweepstakes — aim and presto!
You can add QR codes to any marketing program to increase interactivity and, thus, effectiveness. The QR code is more than cool–it is the ultimate involvement device. If your marketing isn’t featuring them, it’s high time to get started.
For banks to maintain market share — and profit margins — in an uncertain economic climate, marketers will have to “think outside the box.” Please pardon the use of a cliché; in this case, it happens to fit. Increasingly, banks must walk the fine line between profitability and not letting new or increased fees drive off good clients.
A good option to consider: partnering with merchants.
This can be done with joint promotions, in which clients receive a discount when making a purchase using your bank’s credit card, debit card, or check payment. Vendors and banks can focus the promotion on specific merchandise or a minimum purchase. In turn, bank and vendor can each communicate the promotion to their own respective clients. Doing so will drive traffic to the merchant, while increasing use of bank services.
In other words, just when you feared that card-based loyalty programs were becoming prohibitive or passé, merchants have begun stepping in to fill the void by partnering with their banks and third party providers. For example:
- Online and regional financial institutions such as Ally Bank, Beneficial Bank and the South Carolina Federal Credit Union already offer discounts and promotions via customers’ online accounts.
- American Express and Levis partnered to offer online coupons via smart phones, eliminating the need for coupons and other methods of delivering discounts.
- During the Austin South by Southwest Interactive (SXSW) Conference, American Express and Foursquare piloted a program in which users who registered an American Express card with Foursquare were eligible for merchant discounts.
For clients with smart phones, you can make the process even easier by including a QR (Quick Response) code. Users need only aim their phones to download anything — from an app, to a coupon, photograph, website, video, you name it.
Soon you’ll also be able to use NFC (Near Field Communication) apps like Google Wallet for smart phones, meaning all it will take is a quick swipe to access a promotion.
A good starting place for merchant partners is, of course, your bank’s existing business clients. It’s a great way to increase your and their revenues, not to mention a great way to retain valuable merchants as clients of your own.
Jul 11
27
Why “To Raise or Not to Raise Rates” is a Trick Question
In a prior post, I suggested that raising rates elsewhere in order to compensate for a lowered debit interchange rate cap might not be prudent in every case.
“To raise or not to raise” isn’t really the question. In fact, stated that way, it’s a trick question. It assumes an all-or-nothing approach. Not all clients are created equal, and treating them as if they are — something too many banks are unwisely all too eager to do — is a costly tactical mistake.
The 80-20 Rule is alive and well in banking. In fact, in banking, the 90-10 Rule often applies. That is, 10 or 20 percent of a bank’s clientele tend to account for 90 or 80 percent of its profits. That much is not news to bankers. But you might think it was, given the way so many banks take a one-size-fits all approach to targeting and pricing.
A strong brand appeals to a core. This necessarily entails being willing to appeal less to people outside the core. When a bank markets and prices indiscriminately, its ends up spending way too much acquiring and keeping unprofitable clients, way too little acquiring and retaining profitable ones, and, in the end, not appealing to anyone in particular. Trying to appeal to everyone is more than the antithesis of branding. It is a misallocation of resources.
It is wiser to separate clients into tiers according to their potential profitability. Clients who more than carry their own weight — in average deposit account balances, average loan balances, product use and share of wallet, to name a few — may be the group you’ll want to cultivate most aggressively. And that may make them the last group you’ll want to risk annoying with increased feeds in the wake of the Durbin Amendment.
Yet you would have every reason, both marketing-wise and bottom line-wise, to consider raising fees paid by marginal clients.
So instead of jumping straight to “to raise or not to raise,” here are some questions to consider first: What is the expected Lifetime Value of each tier of clients? How much will it cost to replace a profitable client who defects because of increased fees? And, for that matter: Are there some clients who, by moving on due to a fee increase, will leave your bottom line better off?
With the recent announcement that the Fed is setting the debit interchange rate cap at 21 cents, the financial services community breathed a collective sigh of relief.
To be sure, 21 cents is less than what was charged in the past. But it’s better than the 15 to 20 cents that the market expected, and a lot better than the originally proposed 12 cents.
This is not to say that the new rate doesn’t represent a sizeable decrease. It does. The interchange revenue stream hasn’t completely dried, but its flow has certainly diminished.
How will banks make up the difference?
At first blush, it might appear tempting to impose new fee structures on checking accounts and other services.
Proceed with caution. Events of the past few years have left the public, shall we say, not too enamored of the banking industry in general. Granted, your financial institution may have a reputation for pristine ethics and rock-solid stability. Even so, right now we operate in an environment in which the public and the media are only too eager to paint all financial institutions with one wide, cynical brush.
In other words, this may not be the best time to answer a rate decrease in one place with a rate increase in another. In my next post, I’ll explain why the question of whether or not to raise rates on other services is, in fact, a trick question. And I’ll propose a more “customer-centric” way of approaching the problem that may serve you better.