Borders Closing and Banking: What's the connection?

As many people have heard by now, Borders, a 40 year old retailer of books and music, is closing it's remaining 399 after a last minute attempt to sell itself. It's demise is blamed, in part, on management's strategy to continue building Superstores as people started shopping for books and music online.

So what's this have to do with banking? Borders made the fatal mistake of sticking with it's strategy to expand through physical locations while ignoring the behavior of it's current (and future) customers. They ended up too late to the marketplace and were saddled with large retail locations and no customers.

Over the last couple of years, I've participated in a number of industry events, as either a speaker or panelist, on numerous topics including social media and mobile banking. I find it increasingly apparent that many of the community bankers I talk to are still in the "Borders" mode. While they see traffic declining at the branches, they are unsure if they should get involved in social media or provide a mobile banking solution. They are ignoring the societal trends and taking a "wait and see" attitude. Given the speed at which consumers adopt new technology (how many people even heard of Twitter in 2009?), bankers today won't survive with that attitude.

So here's a message to all my fellow community bankers: I encourage you to take some risks, try new things and stay relevant so you don't become the "Borders" of the banking industry. Your community and, most importantly, your customers, need you.

Mobile Channel Focus Day at Net.Finance Conference

As I'm watching the tweets from the Mobile Banking and Emerging Applications Summit in New Orleans this week, it prompted me to highlight some of my impressions from the Mobile Channel Focus Day at Net.Finance back in May. Here are a few of the highlights:

Jeff Dennes, SVP Chief Digital Officer of Huntington National Bank (and formerly with USAA), gave the Keynote address. His presentation was full of interesting observations including:

• The economics of Mobile are compelling. Mobile transactions cost $.08 per transaction versus a branch cost of $4.00 per transaction.




• The expansion of the 4G network over the next 2 years will increase bandwidth equal to a cable modem at home.




• Mobility is driving convergence. The gap between the traditional web and related services is closing, with the increase in smart phones and the movement of the Gen Y's into the workforce.

Secil Tabli Watson, SVP of Internet and Mobile Banking from Wells Fargo discussed using ethnographic data to determine how and when customers are using their mobile services.The results will identified "convenience" as the driver of adoption and use. This will ultimately help them focus future enhancements around this approach.

Jennifer Wilson, SVP Internet Channel Director, BBVA Compass shared her experience with the introduction of ZashPay, a Person to Person payments service from Fiserv. From an adoption perspective, they found that building a web page with a simple enrollment process was key. When they looked at the user base, they found a surprising number of small business customers who were using as an alternative to more expensive ACH services. Given these pilot results, they may develop a mobile invoicing service for their business customers.

Mobile continues to be a hot topic among financial services providers and may prove to be the most signficant game changer in the next couple of years.

Mobile Banking and Customer Behavior

There have been a number of recent articles and studies focusing on customer behavior and mobile banking. The most recent was in the American Banker entitled"Tech-Savvy Crowd Demands More Personal Service from Banks, Not Less". (By the way, you've gotta love any article that uses the term Luddite)It suggests that increased mobile use by customers may not translate into decreased branch traffic and less phone calls. My question is: Who said it would?

As my friend Ron Shevlin noted on his blog, Marketing Tea Party, the mobile channel is so new, "it doesn't exist for the vast majority of customers." Given the limited adoption (much less banks offering the service), how can anyone make any inferences about how it will impact FI's and their customers?

Our organization rolled out a mobile about eight months ago. It wasn't in the hope that it would offset any costs by reducing interactions in other channels. It's about customer convenience and acknowledging the ubiquitous nature of mobile devices across all generations. Perhaps some services will, in fact, reduce bank visits. The depositing of checks through your mobile device would certainly qualify as one example. Until there is mass adoption of the technology, mobile is just another channel for our customers to use. No more, no less.

Customers demand more real time banking, Banks face more risks

As our organization looks at a new core banking solution, it's more and more apparent that the days of stand alone solutions are over. From the beginning, when we started with self service channels like ATM's and Telephone Banking, to the current mobile banking offerings, the landscape has changed forever. We've gone from providing customers with monthly data (paper statements), to day old information (online banking) to instantaneous capture of a debit transaction so it's available through any channel, including mobile. We can even proactively alert you when something happens on your account.

The difficulty this presents, as any bank technology guy will tell you, is that we are living in a real time world when our core systems are still built for a one time, batch processing environment. Customers, for example, no longer accept that deposits can only be credited to their account before two every afternoon. So the systems that support the banks, whether in-house or outsourced, have to adapt to this new paradigm. It's one of the reasons we are looking at other solutions (besides the fact that our current provider is sunsetting our core).

As we move to a more real time environment, we also open ourselves up to more transactional risk and fraud. Evaluating these risks in real time will be challenging and lead to even more automated systems to identify these individual items. It will prove to be a major challenge for banks over the next few years.

Is it time for Mobile Banking?

Mobile Banking seems ready to explode. Javelin Strategy & Research forecasts that over 191 million U.S. Consumers will have cell phones by 2012. According to the Online Banking Report, mobile banking has "reached the point where online banking was a decade ago". And, as Net Banker reported this week, Bank of America is rolling out their Text Banking service after supporting mobile (WAP and downloadable apps) for over three years.
One of the key questions is how will this new service mesh with the current online offerings. Many are suggesting that this will appeal to a different market than the current online banking customers. The Gen Y's, for example, have grown up tethered to their cell phones. Then there are the Underbanked who use mobile devices. They have found other ways to manage their personal finances without using the typical services of banks but might be open to a mobile option.
We will be introducing a mobile solution later this year. We are pretty excited about the offering and think it will help us attract and retain the younger consumers. If you are an FI with mobile banking, I'd love to hear what your experience has been.