Financial IT speaks with Brant Clark, Director, Product Marketing - Mobile Products and Solutions at Kofax, Inc about the mobile banking technologies and how they affect the customer experience.
Financial IT: What are the challenges and trends in mobile banking industry?
Lexmark: There are often two conflicting aspects of providing customers with mobile banking solutions, but they are in fact two sides of the same coin. On the one side the banking industry is a highly regulated industry that, due to the very nature of a retail bank's financial activities and the corresponding stringent compliance regimes that govern their operations, will always err on the conservative side when introducing new products and services to the market. On the other side, their customers have a totally different set of expectations when it comes to what they can do with their mobile devices.
Rapid mobile technology development cycles that introduce new hardware and software features to the end-user are, in many ways, at odds with the bank’s own technology development and deployment time frames and their overriding need for security - and to be compliant with the banking regulations. This disconnect between customers’ mobile expectations and banking's conservatism can be the cause of serious customer frustration and can even lead to loyal customers being tempted to seek alternative offerings – and this is in an industry with a historic customer churn rate of 2% or less!
For example, when Apple introduced TouchID fingerprint technology to the iPhone 5S in 2014, an app forum comment from a mobile user of a leading US bank read '“Touch ID needed, please do this. Chase and PayPal has it... please update.” So even a perfectly acceptable, full function, secure and easy to use banking app can suddenly fall out of favour with today's app savvy, vocal (through the app store review mechanism) user if it doesn't keep up with the latest capabilities of their mobile device. Alternatively, if the bank attempts to rush an update to keep pace with fast moving technology, it can again risk losing customer loyalty if the app is poorly engineered or, even worse, introduces security or regulatory issues.
But somehow banks have to square this circle because it is estimated that already 25% of customers are now mobile-only consumers of banking services. This percentage is even higher in the “millennium” generation, the majority who have never been into a bank branch. This means the banks need to make major investments in their back-office IT infrastructure and application development capabilities to allow them to catch up with, and then stay with, the rapidly changing mobile industry.
Financial IT: How is mobile banking impacting customer experience?
Lexmark: In a big way. A “traditional” mobile banking app allows customers to perform basic tasks such as view their account balance, transfer funds, pay people, etc. But by using the additional technology features of today's mobile phones, combined with a sophisticated mobile banking platform hosted by the bank, many more of the traditional branch banking activities can be performed from the mobile.
First of these capabilities is cheque deposit using the mobile device's camera. In the USA the Check 21 Act introduced in 2003 set the scene for allowing an image of a cheque to be used instead of the physical document. In the UK, despite initial pressure from the banks to do away with cheques entirely, legislation has been introduced to allow cheque images to replace paper, and on July 1st, 2015, Barclays Bank began inviting customers to participate in a pilot scheme, limited initially to depositing Barclay cheques of below £500 value via an Android device.
Since the Check 21 Act in 2003, mobile technology has more than caught up with cheque image capture requirements. In addition to the mobile's camera capability, there is now the ability of the app software, controlled from the bank's mobile platform software, to ensure that a crisp, in-focus, non-skewed image, suitable for downstream OCR, can be taken by any casual user.
In addition, by linking the mobile device into the bank's back-office workflow processes, much more sophisticated customer-facing activities can be performed remotely. For example, for a new customer opening an account normally requires a trip to the branch, along with proof of identity – a passport or driving license, a utility bill, council tax details, etc. - especially with the extensive compliance requirements that have been introduced to address money laundering. But all of this customer “on-boarding” activity can be achieved with a combination of a mobile's camera, screen and keyboard, controlled by the bank's mobile platform that is connected, in turn, to the back-office systems and processes.
The ability to directly interact with a prospective customer via their mobile device for the critical “first mile” of their interaction with the bank is no longer a nice-to-have feature but is a demographic imperative. Most consumers choose their bank at an early age, then very often stay with them for a very long time. But to reach the “millennium” generation the bank has to offer remote on-boarding. If they don't, the younger customer will simply choose a bank that does, and the bank's customer base will begin to wither on the vine.
Financial IT: How new technologies reshape the branch networks and front line roles?
Lexmark: The increased capital requirements imposed on the banks since 2008 have put tremendous pressure on costs and this has, inevitably, resulted in the closure of many branch locations over the last few years. At first glance the adoption of advanced mobile technology as outlined above could be seen as yet another threat to the beleaguered branch network, but in many ways this fits in with the bank's current strategy of turning branches into advisory, rather than transactional, outposts. By enabling the customer to perform traditional branch functions on their mobiles – cheque deposits, account openings, etc. - the branch need no longer be staffed and equipped to the same extent for transactional business – service counters, tellers, queues – and can be re-focused on higher-value advisory (and sales!) roles. So this means less service counter space and more face time around a desk discussing with an up-skilled branch adviser the customer needs, aspirations and problems. This approach, with appointments booked via the bank's mobile app, is guaranteed to result in greater customer satisfaction and retention than the current branch experience of taking a number and standing in line.
Financial IT: What are the best practices of mobile authentication?
Lexmark: Which authentication regime to adopt is always a decision based on a costs versus risk equation, and this equation is different for different financial products, services and activities. For example, a retail bank running a mass-market new account campaign would not want to incur the same per-account authentication costs as they would in signing up a new business account with higher potential risk exposure. In the latter case, the bank may perform a myriad of background checks with third-party agencies to verify creditworthiness. This would cost substantially more than a simpler authentication regime for a new, low-risk retail customer. Once again, the document capture capabilities of the mobile device can be used to provide a much higher level of end-user authentication at substantially lower cost than traditional background checks or visits to the branch.
Once on-boarded and, typically (in the UK), supplied with a physical two-factor security device (e.g. Barclay's PINsentry), setting up and authenticating a mobile device is a simple one-time event and from then on the mobile device itself provides a very cost-effective and secure transaction authentication capability for payments, funds transfers, etc. New payee accounts can also be added and authenticated via eSignature capabilities, or via one-time codes sent to the mobile.
Only one note of caution regarding on-line banking in general, whether via a mobile or a PC, is that although the banks would like everybody to move away from cheques to on-line payments they haven't solved the payee validation problem. If you get a wrong or reversed digit in the payee's account details, the money goes to somebody else! No check digits, no cross-validation with the payee's name – and it's your problem to recover the funds. No wonder a lot of people still prefer to send a cheque!
So with the proliferation of mobile devices, including the new generation of wearable technology, mobile banking is here to stay and will only grow as a percentage of a bank's retail business. This in turn will require substantial investment by the banking sector in chasing and keeping up with this emerging user community, especially the younger customers. In the USA, Wells Fargo Bank grew its on-line banking community, based on PCs, to 10 million users in twelve years. It took only six years to reach the same number of mobile users.