Why should financial institutions step up their mobile game?
In the first segment of our three-part mobile banking series, we gave you an infographic with the results of our Google survey about US residents’ use of mobile banking services. In this segment, we’ll be showing you why it’s in financial institutions’ best interests to step up their mobile game.
The most current and compelling data on this comes from a January 2016 white paper by Fiserv, Inc., a global provider of financial services technology solutions. To assess the ROI of mobile banking for financial institutions, Fiserv conducted a year-long study that tracked the activity of 240,000 credit union members and 283,721 bank customers at eight credit unions and nine banks. Fiserv determined the value of mobile banking by comparing key attributes in the three months prior to and after consumer enrollment in mobile banking.
Key insights from this study:
- Mobile banking users hold more products than non-mobile users. The average number of different products held by a customer (including loans, CDs, credit cards, and mortgages) increased by 12% within three months of adopting mobile banking services. While mobile banking users hold about 2.3 products each with their primary financial institution, branch-only users hold about 1.3 product less. Mobile users are more deeply engaged with their financial institutions, and more oriented toward using them when they need additional products.
- Mobile banking users perform more, and higher-value, transactions. In the three months after adopting mobile banking services, users increased the number of debit, credit card, ATM, and ACH transactions, and the average transaction value increased 46%. Mobile banking users accounted for 14% of the customer base in the banks studied by Fiserv, but drove more than 39% of the total point-of-sale spend.
- Mobile banking users are more loyal. Mobile banking users had lower attrition rates than branch-only customers. This was true across banks and large and small credit unions—with branch-only bank customers more than two times more likely to leave, compared with mobile users.
- Mobile banking users generate more revenue. As we’ve seen, mobile banking users hold more products, perform more and higher-value transactions. All of this translates into higher average revenue in terms of interest income from certain loans and various fees. Revenue for mobile users at credit unions was 36% higher than branch-only members, while mobile users at banks generated a whopping 72% higher revenue than their branch-only counterparts.
So what’s the ROI for financial institutions driving users to mobile banking? According to Fiserv:
- Credit unions in the study added up to $1.6 million in incremental annual revenue, up to $8 million in incremental POS purchases, experienced up to 20% reduction in member attrition, and the potential for cost savings from decreased branch traffic.
- Banks in the study added up to $2 million in incremental annual revenue, up to $38 million in incremental POS purchases, and experienced up to 12% reduction in overall member attrition.
It’s interesting to note that banks saw the bigger increases in revenue and POS purchases, while credit unions saw bigger increases in member retention. This tracks with our experience conducting research with credit union members. Members are often drawn to credit unions for their low fees and more personal feel, but convenience is a pain point for some that can result in attrition. Offering quality mobile banking services is an excellent way for credit unions to address that pain point without having to invest in physical branch infrastructure, and increase member retention.
Stay tuned for part three of our series to learn what people really want in a mobile banking experience.
— posted by Ingrid