New research reveals untapped market for mobile banking among offline consumers

In the face of turbulent economic conditions and significant cost pressures, U.S. financial institutions, like their counterparts around the world, are focusing on improving the profitability of their customer relationships, lowering channel costs and enabling more self-service electronic banking.

In recent years, the rise of mobile banking has opened a new path for financial institutions to lower the cost to serve their customers, improve their competitive position and increase customer acquisition and loyalty. At the same time, mobile banking establishes a foundation for delivering future products and services that can be monetized, such as mobile payments and remittances. Despite this new ROI opportunity, most institutions have primarily utilized this new channel to drive mobile banking adoption among current online banking customers. Therein lies the opportunity.

Many institutions have implemented mobile banking merely as an extension of their online channel. In fact, customers must be enrolled in online banking before they can even gain access to the mobile channel. This approach overlooks an important segment of the banking public: The estimated 55 million non-online-banking households in the U.S. who choose not to bank online regularly or at all. Similar metrics are in place in other geographies outside of the U.S.

New survey findings suggest that financial institutions should pay more attention to this non-online-banking consumer segment as a potential target audience for their mobile banking services. The survey was commissioned by Syniverse Technologies and conducted by Palmer Research in collaboration with Syniverse, Fiserv and M-Com.

The research shows these non-online-banking consumers have clear interest in using mobile banking services. Sixty-percent of consumers reported interest in using at least one mobile banking service if offered during a typical month.

Offline consumers are heavy users of multiple bank channels: Nearly two-thirds of those surveyed reported contacting their financial institution once a week or more through one or more traditional bank channels. If customers transferred even a relatively small percentage of these transactions from more costly channels such as interactive voice response (IVR) and contact centers to the low-cost mobile channel, institutions could achieve significant savings (see figure 10 and page 4, "Mobile Banking ROI: Lowering the Cost to Serve" of the Mobile Banking Among Offline Consumers Research Paper you can download here).

Among owners of smart phones and other high-end devices, consumer interest and usage of mobile banking services was significantly higher than among users of basic cell phones. By mid-2011, 43 percent of all survey respondents said they expected to be using a smart finances (figure 3). These are among the most costly channels to serve customers: The call center costs an average of $3.75 per transaction and automated voice response system transactions cost an average of $1.25 per transaction (see figure1). The top three reasons for phone or other high-end device indicating a desire to do more than just talk. The rapid adoption of high-end mobile devices over the next couple of years suggests mobile banking may have a bright future.

While mobile banking appears to have a solid future among the non-online-banking consumer segment, the survey indicates that financial institutions still need to do more to educate consumers about the security of conducting financial activities on their cell phones and other mobile devices. A majority of respondents cited fear of transaction security as a key reason that would prevent them from using mobile banking.

This research paper analyzes the results of the recent Syniverse mobile banking survey of 501 U.S. consumers who are not active regular users of online banking (please see appendix for more information about survey methodology). It also will provide recommendations for how financial institutions can lower the cost to serve this major customer segment through increased mobile banking adoption.

Economic Downturn Drives Frequent Bank Interactions
The economic downturn has prompted consumers to pay closer attention to their finances. As TowerGroup noted recently, consumers are managing their finances more closely and instant access to financial information is emerging as one of the key drivers in the business case for mobile banking.2 Among non-online-banking consumers, that means frequent interactions with their bank or credit union. Nearly two-thirds of the consumers surveyed reported contacting their financial institution once a week or more (figure 2). In a typical month, respondents interacted with their bank or credit union a total of nine times.

Non-online-banking consumers had many different types of relationships with their financial institutions, led by checking/savings accounts (93 percent), credit cards (68 percent), mortgages (41 percent) and investment accounts (38 percent). Respondents are using a variety of bank channels to check account balances and review recent transactions (figure 1). Monthly mailed statements were the most frequently cited way to monitor account balances, followed by the online channel, bank tellers and interactive voice response systems (IVR).

Nearly half of survey respondents have contacted their bank's call center or IVR to help manage their finances (figure 3). These are among the most costly channels to serve customers: The call center costs an average of $3.75 per transaction and automated voice response system transactions cost an average of $1.25 per transaction (see figure1). The top three reasons for communicating with the contact center or IVR were checking account balances, contacting customer service and transferring money.

To read the entire article, please download this Mobile Banking Among Offline Consumers Research Paper.