As mobile commerce and apps become more sophisticated (cooler, perhaps), it can be easy to look down on the contribution of banks to this expanding digital ecosystem. Banks, after all, are virtually ancient, and represent something older than even the rotary phone. However, banks — as unhip as they might seem — have an advantage for which all companies strive: trust.
“Statistics indicate that consumers still trust their banks more than, for example, tech companies when it comes to their financial lives,” said Richard Bailey, SVP of engineering at Entersekt, a South Africa-based FinTech firm that focuses on mobile authentication and app security software. During a recent PYMNTS interview, Bailey discussed how banks can add mobile value-added services, and do so in ways that satisfy consumers who are already deeply involved in digital commerce and payments.
“Consumers have become used to being able to do virtually anything on their phone and having access to a range of services at their fingertips,” he said. “Banks and [FinTech firms] have been looking for secure ways to bring the convenience and user experience that people love about apps into the world of financial services. This is happening against a background where changing the payment and banking infrastructure is time-consuming and expensive.”
Trust stands as a strength that banks can use as they improve their mobile offerings, often with the help of FinTech firms. Banks maintain relatively deep relationships with consumers, who check the status of their accounts, move money and conduct other tasks on a frequent — sometimes daily — basis. Banks hold a store of data about their customers, who are at least implicitly demonstrating their trust by not switching over to competing financial institutions (FIs). Beyond that, those customers serve as an audience-of-first-resort for any new products developed by their banks.
“If banks can use that trust relationship as a foundation for offering innovative services, and in so doing address their customers’ needs, they can remain relevant,” Bailey said.
Of course, trust goes only so far. The mobile services offered by banks must solve problems for consumers in ways that competitors do not, and hold consumer interest. One way to do that is by banks doing a good job with basic services, which can open the door to persuading customers to try more advanced financial and payment features.
“The trick is to connect to the payments ecosystem outside of the app, using platforms at the bank to provide convenience and flexibility to the consumer,” he said. “It’s important for the bank to find ways to become the ‘marketplace’ — the Amazon — for new offerings.”
Banks, too, have to reduce the friction found in poorly designed mobile experiences, all those frustrating points in the payments or commerce process, during which customers — faced with delay, confusion or worries about security — are tempted to stop the transaction and seek out a competitor. If banks fail to do that when designing and marketing new mobile apps, they could also lose the advantages they have via customer trust, and find themselves being pushed back into the crowd, so to speak.
“The position of being ‘front-of-wallet’ could go out the window if the friction of using bank-supplied mobile or digital payments apps becomes avoidable by using alternatives,” Bailey said.
Operating in such a crowded mobile field means that originality counts for banks as well when trying to retain that front-of-wallet position among consumers. Banks can’t afford to be lazy or cheap, and simply provide customers a copy of the web banking website, instead of building a platform for mobile-originated payments and transactions, he said.
Banks need to reach out to consumers, and not take them for granted.
“There’s the old saying that banks need to be where the people are,” Bailey said. “This is going to be increasingly important in the future, and we’re seeing that banks are prioritizing customer engagement more and more. In this day and age, digital transformation and customer engagement cannot really be separated from each other.”
The Power Of Smaller Banks
Bailey emphasized that mobile growth and development are not limited to the larger banks. In fact, the advantage of trust might apply even more to community banks, he said, because they often have more personal interaction with their customers — an attribute that is envied by many larger companies, no matter the industry. Sure, larger FIs might indeed have more money and time to, say, conduct A/B testing on new mobile products, and to craft a more comprehensive product launch and marketing plan — but that’s not all that counts.
Still, “size should not be a major barrier,” Bailey said, not with the trust advantage that community banks have.
Banks have long enjoyed a monopoly on financial services, but those days seem gone as more companies use data to craft new products and win over consumers from banks. However, according to Bailey, banks still have “the history, experience, infrastructure and technology to define the ecosystem.” Now, they must take part in influencing where mobile payments go from here.
“If they don’t step up to the plate,” he said, “there is no way of knowing where they will end up.”