For the longest time, the magnitude of a bank’s influence had been manifested in monumental skyscrapers lining up Wall Street and the Central Business Districts in Hong Kong and Singapore. Banking hours were rigid, and one often had to prepare various documents for verification purposes, so as to avoid multiple fruitless trips to the bank.
Telephone banking started changing this process, but online and mobile banking dramatically simplified processes to the point that few consumers, it seems, would ever turn back. According to a report published by McKinsey & Company, in 2014, branch usage was down by 27 per cent across Asia. Nearly 20 per cent of key product purchases were being made online, and 40 per cent of customer servicing was being conducted using mobile or internet devices. As mobile penetration continues gathering pace worldwide, this is set to be the way forward for some time to come.
Indeed, the benefits of this transformation go both ways: consumers now enjoy far greater convenience, and banks have been able to do more with much less. Customer acquisition and service, sales productivity, and operational efficiency have improved significantly as a result.
Banking services at consumers’ fingertips
On the whole, digital banking has been a game changer, and mobile banking is its new frontier. According to KPMG, mobile has emerged as the largest channel for a majority of banks in terms of transaction volumes, and Juniper Research estimates that the global pool of mobile banking users will grow from 0.8 billion in 2014 to 1.8 billion by 2019.
This growth is largely being driven by mobile-first developing markets, where lack of infrastructure has traditionally been a barrier for growth and ‘banking the unbanked’ is consequently seen as a public policy priority. Just recently, DBS Bank, one of Singapore’s most prominent banking institutions, launched a mobile-only banking service proposition in India. Under this service, new accounts can be opened directly through a mobile phone at partner cafes, eliminating the need for physical banking outlets.
In 2015, India had more than 233 million people not covered by traditional banking institutions. While this was a significant improvement from the figure of 557 million in 2011, at nearly 50 times the population of Singapore, 233 million still represents both a formidable challenge and a tremendous opportunity. A mobile only banking service like DBS’ serves as a disruptive marketing innovation that could change lives and boost the bank’s fortunes.
DBS has described this as its foray into the fast growing Indian middle class which uses a smart phone – potentially 600 million people in the next three years.
Meanwhile, in more developed markets, convenience is the key driver. All it takes is a few swipes to get information, make requests, transfer money or pay bills, among a variety of other things. In fact, cheque deposits can also be done instantly by just taking a picture of the cheque with a mobile appand uploading it.In late June, Singapore became the third country to launch Google’s Android Pay, offering contactless MasterCard and Visa payments via a wide majority of the country’s largest banking institutions, including DBS Bank, Standard Chartered Bank, UOB, POSB Bank and OCBC Bank. Experiences like these offer consumers greater ease and convenience, and are testament to the central role smartphones now play in the fast-paced digital lifestyle of today’s consumers.
Singapore ranks second in the world after United Kingdom in terms of readiness for digital banking, and leads the way in South East Asia. According to another McKinsey report published in 2015, at 94 per cent, Singapore has one of the highest digital banking adoption rates in the region, and the stakes for its leading banks are therefore considerably high.
Mobile as a catalyst for banking innovations
Whether in developed or developing markets, mobile banking is here to stay, and is leading innovation across the industry. Many banks are already integrating Google maps to make ATMs easily discoverable. Some have ventured further to facilitate transactions between Facebook friends through near field communication that requires users to bump their phones together to complete a transaction.They are also providing consumers with 3D and Flash based account statements on their mobile devices.
These novel features only mark the beginning, as consumers are demanding more. They want customer service to be tailored and to be provided to them through social channels of their choice. They want to tap on services that add value based on the bank’s deep contextual knowledge and understanding of their transaction history and needs. Gradually, consumers are also getting used to personalised promotions such as information on sales and discounts based on their spending habits and travel preferences.
The external environment has never been more conducive for innovation and disruption in banking. The easing of regulation across developing markets, technological advancements, the high uptake of mobile devices including phones and tablets, and changing consumer habits present an incontrovertible case for banking institutions to invest in change and to rethink ways for acquiring and retaining customers.
It is an exciting time for the industry, but a challenging one too. The most important challenge concerns data security and protection, and financial fraud management. According to a recent Juniper Research Report, global online fraud will amount to USD 25 billion by 2020, double of what it is today, and 27% of this is expected to come from financial transactions.
It is unsurprising then that innovation in biometrics and multi-level authentication has been receiving substantial attention. Most mobile banking applications today integrate finger print recognition through the smartphone, and transaction processing based on voice recognition is also under development.
Biometrics in fact form a part of multi-level authentication processes that are emerging as the norm for digital banking transactions. When logging in, a consumer first authenticates via biometrics, fills in his or her transaction password, and then enters an instantly generated one-time password that is sent to the mobile device via SMS. This is just one example, but banks are coming up with different variations to stay ahead. In fact, a recent report by the Biometrics Research Group confirms that the banking sector has emerged as a primary end-user market for biometrics technology worldwide.
McKinsey’s study in 2015 found that more than 80 per cent of consumers across developed markets in Asia expressed willingness to shift to a bank that offers a compelling digital proposition.Mobile banking is an integral part of this opportunity, with nearly 25 per cent of Singaporeans carrying out transactions on their mobile devices at least once a week.
As we move towards a converged hardware landscape that embraces the emergence of wearable devices like smart watches,a bank’s digital presence will only grow in importance. Every bank must rise to the occasion and get their mobile banking strategy in place, or risk getting left behind.