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Transcript of How mobile is transforming banking

  • A report from The Economist Intelligence Unit

    How mobile is transforming retail bankingRedefining banking to survive and thrive in a digital world

  • The Economist Intelligence Unit Limited 20141

    How mobile is transforming retail banking

    Preface 2

    Introduction 4

    Mobile, a big player in an omnichannel world 6

    A new competitive landscape 9

    Moving beyond transactions 12

    Conclusion 14

    Appendix: Executive survey results 15

    Appendix: Consumer survey results 22

    Contents

    1

    2

    3

    4

  • The Economist Intelligence Unit Limited 20142

    How mobile is transforming retail banking

    Preface

    Redefining banking to survive and thrive in a digital world explores how mobile technologies are transforming retail banking. While the rise of mobile computing will not eliminate web, physical and other paths to customers, people around the world are clearly embracing mobileand banks need to do so as well. Indeed, if they fail to help shape the change, they risk being swept aside by newcomers who enable mobile-empowered consumers to reach their financial goals and dreams.

    As the basis for this research, The Economist Intelligence Unit conducted two global surveys, sponsored by SAP. The first polled 111 retail-banking executives in June 2014 and the other polled 1,827 consumers in September 2014. The findings and views expressed in this report do not necessarily reflect the views of the sponsor. The author was Dan Armstrong. Riva Richmond edited the report and Mike Kenny was responsible for the layout. We would like to thank all of the executives who participated, whether on record or anonymously, for their valuable insights.

    Interviewees

    Brad Jones, head of North Asia operations and Asia transformation at National Australia Bank

    Ivan Mortimer-Schutts, East Asia-Pacific electronic and mobile banking specialist at the International Finance Corporation

    Joshua Reich, chief executive of Simple

    Jose Manuel Villas, head of the digital channel at Banco Bilbao Vizcaya Argentaria

    Andres Wolberg-Stok, global head of emerging platforms and services at Citibank

  • The Economist Intelligence Unit Limited 20143

    How mobile is transforming retail banking

    The Economist Intelligence Unit conducted two global surveys on mobile banking, sponsored by SAP: one of 111 banking executives in June 2014 and the other of 1,827 consumers in September 2014.

    The executive survey. Nearly half (45%) of respondents served in the C-suite or board of directors, while 17% were at vice-president or director level or ran business units. Outside the general management category, the key functional areas were strategy and business development, finance and marketing and sales. The survey attracted executives at banks large and small. A quarter (24%) hailed from banks with assets greater than $100bn; two-thirds (66%) had more than 100,000 retail accounts. Half (50%) described their footprint as either global or multinational, while 18% described themselves as regional and 31% as national. About one-fifth (20%) of respondents came from North America, 23% from Asia and 18% from Latin America. EMEA accounted for 21% of respondents, with most (19%) from Middle and Eastern Europe (a designation covering the countries from Switzerland and Germany on the west to Russia on the east).

    The consumer survey. Respondents to the consumer survey were from five regions and 48 countries. All currently use mobile devices and have bank accounts. About 13% of respondents were from the US, with 6% each from Brazil, Mexico, Canada, China, the UK and France; no other country accounted for more than 4%. Emerging markets were well-represented, with 19% of respondents hailing from the BRIC countries and another 48% from a more broadly defined group of emerging economies. About one-fifth (19%) came from North America, 19% from Latin America, 23% from EMEA, 26% from Asia-Pacific and 14% from Middle and Eastern Europe.

    The median survey-taker was in the 41-to-50 age group; the average age was 45. Men outnumbered women by a ratio of 57:43. In terms of income, respondents exhibited a dumbbell pattern: the largest group made more than $125,000 per year (14%), while the second largest made less than $10,000 (9%) and the third largest between $10,000 and $15,000 (7%). The average annual income of respondents was approximately $57,000. Most have smartphones (86%) and almost half have tablets (47%). A significant portion also uses a feature phone (22%)a basic phone for calls and texts, with simple games and Internet connectivity.

    About the surveys

  • The Economist Intelligence Unit Limited 20144

    How mobile is transforming retail banking

    Our grandfathers retail bank was a columned building with tellers and velvet stanchions. Ours is fast becoming an icon among many on a tiny screen. The traditional bank represented solidity and permanence. The new bank is a portal into a dynamic new digital world.

    As anyone who has witnessed rows of mesmerised commuters knows, mobile devices are becoming central to individuals interactions with each other and with businesses. Banking, like so many industries, has been swept up by the wave.

    Both bankers and consumers expect the use of

    mobile-banking technologies to grow rapidly, according to companion surveys of 111 bank executives and 1,827 consumers across five regions and 48 countries conducted by The Economist Intelligence Unit and sponsored by SAP.

    Yet the surveys also show that, even as mobile interactions grow, other channels where consumers and banks connect will remain as important as ever. Many consumers still appreciate the feeling of stability that brick-and-mortar branches provideand they will always need branches or ATMs to deposit and withdraw cash.

    Branches, ATMs PC Call centre Mobile devices

    Regional breakdowns on mobile channel use (% of executive respondents)

    Now

    In fiveyears

    EMEA

    Now

    In fiveyears

    North America

    Now

    In fiveyears

    Middle and Eastern Europe

    Now

    In fiveyears

    Latin America

    Now

    In fiveyears

    Asia-Pacific

    52

    27

    13

    8

    32

    28

    11

    30

    40

    32

    11

    18

    26

    289

    37

    6024

    88

    38

    26

    10

    26

    67

    18

    69

    46

    21

    6

    27

    53

    20

    12

    14

    35

    26

    8

    31

    Source: Economist Intelligence Unit survey, September 2014.

    Introduction1

  • The Economist Intelligence Unit Limited 20145

    How mobile is transforming retail banking

    Many like the larger screens that their home computers provide. Still, most also want the convenience of paying for items and handling transactions on their phones.

    This omnichannel world is diverse. Consumers are not uniform in their banking preferences: retirees in Mallorca, millennials in Seattle and villagers in Peru will each be inclined to use a different mix of branches, ATMs and online and mobile services.

    But consumers around the world are clearly embracing mobile as a vital channeland banks need to be there. In the EIUs executive survey, 82% of retail bankers agree or agree strongly that in the next five years mobile will become the number one channel for millennials and younger consumersbanks future customers.

    Seventy percent of the Spanish population owns a smartphone. It is clear that customers are increasingly moving to mobile, says Jose Manuel Villa, head of digital channels at Banco Bilbao Vizcaya Argentaria (BBVA). We need to enable distinctive digital platforms, and that requires a

    substantial investment in both talent and technology.

    Moreover, mobile services could help make developing countries and the underbanked and unbanked more accessible and attractive markets to banks. In emerging markets, approximately 1.2bn mobile users will use mobile money accounts by 2015, up from a negligible number in 2010, according to Ovum, an IT and telecom research firm. A 2014 Federal Reserve study, Consumers and Mobile Financial Services 2014, found that the unbanked make heavy use of mobile phones and smartphones and that almost 40% of the underbanked use mobile transaction services at a relatively high rate.

    Bankers must develop their omnichannel strategies and watch the mobile horizon closely. We do not yet know how profoundly mobile commerce will change consumer behaviouror whether banks will help shape that change or be swept aside by newcomers with financial products that help mobile consumers reach their financial goals and dreams.

    Will banks help shape change or be swept aside by newcomers with mobile products that help consumers reach their financial goals and dreams?

  • The Economist Intelligence Unit Limited 20146

    How mobile is transforming retail banking

    Bankers and their customers agree on two things: Interaction via mobile devices will continue to grow quickly and traditional banking channels will not go away.

    Tradition, inertia and screen size may largely explain why. Well over half (56%) of consumers who dislike mobile say that they simply prefer the PC and another 35% like ATMs better. About one-quarter of bank customers (26%) do not expect to visit branches less frequently, even if mobile banking improves. For now, almost all consumers need a branch sometimesif only to get cashand a few want a branch all the time.

    Of course, these attitudes may well change as consumers gain familiarity with mobile services, electronic payments become more ubiquitous and apps become more intuitive. New technologies are emerging and digital