A White Paper Based On:

The ath Power Mobile Banking Study™

By Michael J. McEvoy, Managing Director

CUSTOMER EXPERIENCE AND AT TITUDES, 2013

SMALL BUSINESS MOBILE BANKING

www.athpower.com

This confidential business summary document has been prepared by ath Power Consulting Corporation and is furnished for informational purposes only. The recipient agrees not to reproduce it in whole or in part, not to use it for any other purpose, and not to disclose any of its contents to third parties without written permission of ath Power Consulting Corporation. © 2013 ath Power Consulting Corporation.

SMALL BUSINESS MOBILE BANKING: CUSTOMER EXPERIENCE AND ATTITUDES, 2013

The ath Power Mobile Banking Study™

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During Q1 2013, 3,201 Mobile Banking Customers, including 196 small business customers, responded to an online survey that set out to determine what factors make up an “ideal” mobile banking experience for consumers and small businesses, and to uncover the impediments to producing such an experience. Through this evaluation, consumers and business owners provided information about their current mobile banking behaviors, the features and functionality they value or would like to see added, and their assessment of their current mobile banking experience. Throughout this report, the sample size (n-size) is 196 for figures based on responses from small business owners.

This confidential business summary document has been prepared by ath Power Consulting Corporation and is furnished for informational purposes only. The recipient agrees not to reproduce it in whole or in part, not to use it for any other purpose, and not to disclose any of its contents to third parties without written permission of ath Power Consulting Corporation. © 2013 ath Power Consulting Corporation.

BACKGROUND

KEY TAKEAWAYSCompared to retail banking mobile users, small business mobile customers:

• Use mobile banking services more frequently

• Are far more willing to pay for mobile

• Are more likely to consider switching banks due to the quality of mobile offering

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Tablet use is so prevalent that banks should consider offering tablet-specific apps to optimize customer experience for small business customers.

• More than 1 in 2 small business mobile customers access mobile banking using tablets

• 1 in 3 small business mobile customers regard mobile banking on a tablet as ‘safer’ than on a smartphone

• Tablets offer the potential for an online-banking type of experience, but using a mobile device

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There is a significant gap between services that are currently available through mobile and those that are most desirable to business owners. Stand-outs for which access is particularly limited relative to customer interest:

• Being able to use mobile to check the credit worthiness of customers

• Accepting credit cards

• Paying business taxes

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SMALL BUSINESS MOBILE CUSTOMERS ARE MORE ENGAGED WITH ‘MOBILE’ THAN RETAIL MOBILE BANKING USERS

Mobile Channel Usage. The small business (SB) mobile customer is a more frequent user of mobile services than the average retail mobile customer (see Figure 1) with almost two-thirds of SB mobile customers logging in at least twice weekly (see Figure 2).

Figure 1 - Small Business Mobile Customers Access Mobile Banking Services More Often than Retail Customers.

On average, how often do you use business mobile banking with your bank?

Source: The 2013 ath Power Mobile Banking StudyTM

This confidential business summary document has been prepared by ath Power Consulting Corporation and is furnished for informational purposes only. The recipient agrees not to reproduce it in whole or in part, not to use it for any other purpose, and not to disclose any of its contents to third parties without written permission of ath Power Consulting Corporation. © 2013 ath Power Consulting Corporation.

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This confidential business summary document has been prepared by ath Power Consulting Corporation and is furnished for informational purposes only. The recipient agrees not to reproduce it in whole or in part, not to use it for any other purpose, and not to disclose any of its contents to third parties without written permission of ath Power Consulting Corporation. © 2013 ath Power Consulting Corporation.

Figure 2 - Almost 2 in 3 Small Business Mobile Customers Log-In at Least Twice Weekly.

They are about as likely to access mobile banking services while at home or in their office as they are ‘on the road’ (see Figure 3). This suggests that mobile banking has begun to rival online banking for the attention of business customers, in environments where both online and mobile banking are likely to be readily available (i.e. home and office). An implication is that financial institutions will need to provide a customer experience that compares favorably with the online channel as its business customers migrate to mobile or risk losing them to competitors.

Figure 3 - Small Business Mobile Banking Customers Access Mobile Banking Services From Wherever They Are.

Source: The 2013 ath Power Mobile Banking StudyTM

Source: The 2013 ath Power Mobile Banking StudyTM

Frequency of Mobile Banking Logins

Where do you most often access business mobile banking?

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Role of Tablets. Part of the solution for some banks wishing to provide a customer experience that compares well to that of online banking may involve tablets, given their adoption rates and similarities with computer notebooks. In our study, one-half of small business mobile banking customers access banking services using tablets, and 2 in 3 of such tablet users typically take the device with them when away from home or the office (see Figure 4).

Figure 4 - Rising Tablet Use Offers Potential for an Online-Banking Type of Experience Through Mobile.

This confidential business summary document has been prepared by ath Power Consulting Corporation and is furnished for informational purposes only. The recipient agrees not to reproduce it in whole or in part, not to use it for any other purpose, and not to disclose any of its contents to third parties without written permission of ath Power Consulting Corporation. © 2013 ath Power Consulting Corporation.

With their bigger screens and easier keyboard options relative to smartphones, tablets offer the potential for a customer experience on a mobile device that more closely resembles online banking than is possible using a smartphone. In addition, business owners are far more likely than retail customers to view tablets as ‘safer’ for conducting banking transactions than smartphones (see Figure 5).

Source: The 2013 ath Power Mobile Banking StudyTM

Which mobile devices do you use to access your business mobile banking account?

Where do you typically use your tablet?

Source: The 2013 ath Power Mobile Banking StudyTM

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This takes on added importance given that almost one-half of small business mobile users are discouraged from availing of certain mobile features due to concerns over security (see Figure 6). In short, many business mobile customers use tablets for banking, they tend to have their tablet device with them wherever they go, and a sizeable proportion view tablets as ‘safer’ than smartphones for conducting banking business. Banks may therefore want to think about providing banking apps. for their business customers that are designed specifically for tablet devices, with the goal of optimizing customer experience for the growing proportion of customer using tablets for their business banking needs.

Figure 5 - Roughly 1 in 3 Small Business Mobile Customers View Tablets as ‘Safer’ for Banking Than Smartphones.

This confidential business summary document has been prepared by ath Power Consulting Corporation and is furnished for informational purposes only. The recipient agrees not to reproduce it in whole or in part, not to use it for any other purpose, and not to disclose any of its contents to third parties without written permission of ath Power Consulting Corporation. © 2013 ath Power Consulting Corporation.

Figure 6 - Almost One Half of Small Business Mobile Customers Curtail Their Use of Mobile Banking Over Security Concerns.

Source: The 2013 ath Power Mobile Banking StudyTM

Do you perceive the tablet as “safer” than a smartphone for conducting banking transactions?

Do concerns over security discourage you from using certain mobile banking services

(e.g. funds transfers, bill payment)?

Source: The 2013 ath Power Mobile Banking StudyTM

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This confidential business summary document has been prepared by ath Power Consulting Corporation and is furnished for informational purposes only. The recipient agrees not to reproduce it in whole or in part, not to use it for any other purpose, and not to disclose any of its contents to third parties without written permission of ath Power Consulting Corporation. © 2013 ath Power Consulting Corporation.

Switching Banks Due to ‘Mobile’. The risk of customer flight due to a poor small business mobile offering, mentioned earlier, appears real. Two out of three small business mobile customers would consider leaving their current bank if they found an alternative with a superior mobile banking offering (see Figure 7). In fact, small business customers are far more inclined to consider switching due to mobile banking than are retail customers (see Figure 8), further emphasizing the importance of mobile to the small business customer.

Figure 7 - Strong Majority of Small Business Mobile Customers Would Consider Switching Banks Due to Mobile Banking.

Figure 8 - Small Business Customers Are More Inclined to Switch Banks Due to Mobile Banking Than Retail Consumers.

Source: The 2013 ath Power Mobile Banking StudyTM

Source: The 2013 ath Power Mobile Banking StudyTM

How likely would you be to switch banks if you found another bank with a superior business mobile banking offering?

How likely would you be to switch banks if you found another bank with a superior business mobile banking offering?

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This confidential business summary document has been prepared by ath Power Consulting Corporation and is furnished for informational purposes only. The recipient agrees not to reproduce it in whole or in part, not to use it for any other purpose, and not to disclose any of its contents to third parties without written permission of ath Power Consulting Corporation. © 2013 ath Power Consulting Corporation.

CONTINUOUS IMPROVEMENT OF THE MOBILE SERVICES PROVIDED FOR THE SMALL BUSINESS MOBILE CUSTOMER IS AN IMPERATIVE FOR RETENTION

The capabilities offered through mobile, and the ease and reliability of access to them, are at the core of ‘customer experience’ for the business mobile customer. Clearly, they help determine how business customers assess and view the mobile banking service provided by their financial institution, relative to their expectations.

Services Offered. A large proportion of small business mobile customers are using the features and capabilities currently available (see Figure 9). But they are ready for more. In fact, there is a gap between the mobile services that small business customers are currently able to access and those they would like to avail of (see Figure 10), including several stand-outs for which access is particularly limited relative to customer interest:

1. Checking the credit worthiness of customers;

2. Accepting credit cards; and

3. Paying business taxes.

Banks will need to continuously improve their small business mobile offering by identifying and adding these kinds of capabilities, or risk customer attrition to competitors with superior offerings.

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This confidential business summary document has been prepared by ath Power Consulting Corporation and is furnished for informational purposes only. The recipient agrees not to reproduce it in whole or in part, not to use it for any other purpose, and not to disclose any of its contents to third parties without written permission of ath Power Consulting Corporation. © 2013 ath Power Consulting Corporation.

Source: The 2013 ath Power Mobile Banking StudyTM

Source: The 2013 ath Power Mobile Banking StudyTM

Figure 9 - Services Currently Provided Through Mobile Are Well Utilized by Small Business Customers Eagerly Awaiting More.

Figure 10 - There is a Significant Gap Between Services that are Currently Available Through Mobile and Those Most Desirable to Business Owners.

Types of Mobile Banking Transactions Conducted Recently by Small Businesses

Small Business Mobile Capabilities Currently Available and Most Desirable

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This confidential business summary document has been prepared by ath Power Consulting Corporation and is furnished for informational purposes only. The recipient agrees not to reproduce it in whole or in part, not to use it for any other purpose, and not to disclose any of its contents to third parties without written permission of ath Power Consulting Corporation. © 2013 ath Power Consulting Corporation.

Source: The 2013 ath Power Mobile Banking StudyTM

Technical Issues. Not to be forgotten is the need to ensure reliability and ease of use of mobile banking services. Even among the largest banks, technical issues, including possible denial of service attacks, can bring down or considerably disrupt mobile banking service for the entire customer base. At the individual customer level, issues may arise with particular capabilities, such as funds transfers or bill payment. Overall, almost one-half of small business customers reported they encountered technical issues with their mobile banking service over the past year (see Figure 11). Although the problem was ultimately resolved for most of these users, the fact that so many customers experienced problems during the year is a cause for concern.

Figure 11 - Almost One-Half of Small Business Customers Experienced Some Problem(s) with Mobile Banking Within the Past Year.

Have you experienced technical problems in using mobile banking in the last 12 months? Was the problem resolved to your satisfaction?

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This confidential business summary document has been prepared by ath Power Consulting Corporation and is furnished for informational purposes only. The recipient agrees not to reproduce it in whole or in part, not to use it for any other purpose, and not to disclose any of its contents to third parties without written permission of ath Power Consulting Corporation. © 2013 ath Power Consulting Corporation.

SEVERAL EMERGING FEATURES AND CAPABILITIES WILL HELP DRIVE SMALL BUSINESS ADOPTION AND USAGE

Small business mobile is relatively new and remains under-developed, with most banks focusing until recently on retail mobile. Looking ahead, mobile adoption and usage by the small business customer will accelerate as capabilities are added and emerging technologies are deployed, including:

Remote Deposit Capture. Arguably the mobile banking feature that has attracted the most attention from customers to date is Remote Deposit Capture (RDC). As its rollout continues across the banking industry, roughly half of the small business mobile customer-base have used RDC within the past year. Among those who have yet to try it, the most common reason for not doing so is that their financial institution does not yet offer it (see Figure 12).

Figure 12 - Half of the Small Business Customer Base Has Used RDC Within the Past Year.

Source: The 2013 ath Power Mobile Banking StudyTM

Voice Authentication. Voice authentication is a system that verifies a caller’s identity during the course of a conversation by recognizing the caller’s voice and speech patterns. Given that almost half of the small business mobile customer base are discouraged from using certain mobile banking capabilities due to concerns over security (see Figure 6, earlier), voice authentication may have a role to play in allaying those fears for at least some users. In fact, almost one-half of small business customers say that voice authentication would encourage them to use more mobile banking services, such as funds transfers and bill payment (see Figure 13).

Have you used Remote Deposit Capture at your bank? Why have you not used it? (Select all that apply)

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This confidential business summary document has been prepared by ath Power Consulting Corporation and is furnished for informational purposes only. The recipient agrees not to reproduce it in whole or in part, not to use it for any other purpose, and not to disclose any of its contents to third parties without written permission of ath Power Consulting Corporation. © 2013 ath Power Consulting Corporation.

Source: The 2013 ath Power Mobile Banking StudyTM

Figure 13 - Voice Authentication May Have a Significant Role to Play in Encouraging Mobile Adoption and Usage.

Voice Recognition. Voice recognition (i.e. using voice to interact with mobile services, rather than typing or swiping on a mobile device) has been introduced at a small number of financial institutions, for use by retail customers. Our study indicates that if introduced, it, too, would attract more customers to mobile banking and encourage greater utilization of mobile services by the small business customer (see Figure 14).

Figure 14 - Voice Recognition Will Make Using Mobile Services Easier and More Efficient for Some, and Therefore Encourage Usage.

Would voice authentication encourage you to use more mobile banking services?

Would voice recognition encourage you to use more mobile banking services?

Source: The 2013 ath Power Mobile Banking StudyTM

Mobile Photo Bill Pay. Mobile Photo Bill Pay has recently been deployed for use by retail mobile customers at several banks and credit unions. It may have particular added appeal to small business owners, who are typically hard-pressed for time and would value the potential time-savings associated with photo bill pay: previous studies conducted by ath Power indicate that small business owners are especially receptive to services that save them time.

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This confidential business summary document has been prepared by ath Power Consulting Corporation and is furnished for informational purposes only. The recipient agrees not to reproduce it in whole or in part, not to use it for any other purpose, and not to disclose any of its contents to third parties without written permission of ath Power Consulting Corporation. © 2013 ath Power Consulting Corporation.

Source: The 2013 ath Power Mobile Banking StudyTM

MONETIZING ‘SMALL BUSINESS MOBILE’ WILL BE AN EASIER TASK THAN DERIVING REVENUE FROM ‘RETAIL MOBILE’

Small business customers are accustomed to paying for banking services and our study indicates that more than 2 out of 3 would be willing to pay a monthly fee to access mobile banking (see Figure 15). In fact, small business customers are prepared to pay for mobile banking at almost double the rate of retail customers (see Figure 16).

Figure 15 - Almost Two-Thirds of Small Business Mobile Customers Are Willing to Pay for Mobile Services.

What is the most you would be willing to pay per month for the convenience of business mobile banking capabilities?

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This confidential business summary document has been prepared by ath Power Consulting Corporation and is furnished for informational purposes only. The recipient agrees not to reproduce it in whole or in part, not to use it for any other purpose, and not to disclose any of its contents to third parties without written permission of ath Power Consulting Corporation. © 2013 ath Power Consulting Corporation.

Source: The 2013 ath Power Mobile Banking StudyTM

Source: The 2013 ath Power Mobile Banking StudyTM

Figure 16- SBOs Are Considerably More Inclined to Pay for Mobile than Retail Customers.

Alternatively, some small business customers also express a willingness to pay for mobile services on a per transaction basis, with one in three (34%) indicating that they would be prepared to pay fees for “premium” services such as remote deposit.

If, instead, banks were to begin charging customers for using channels other than mobile, one in four say they would leave their bank but a greater proportion, one in three, say they would make greater use of mobile services (see Figure 17).

Figure 17 - One in Three Small Business Mobile Customers Would Make Greater Use of Mobile Banking Services if their Bank Charged Them to Use Channels Other Than ‘Mobile’.

Monthly Amount Customer is Willing to Pay for Mobile Banking Services

Would you make greater use of mobile banking services if your bank charged you for using channels other than mobile?

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This confidential business summary document has been prepared by ath Power Consulting Corporation and is furnished for informational purposes only. The recipient agrees not to reproduce it in whole or in part, not to use it for any other purpose, and not to disclose any of its contents to third parties without written permission of ath Power Consulting Corporation. © 2013 ath Power Consulting Corporation.

CONCLUSIONClearly, there is an opportunity for financial institutions to obtain a return on their investment in mobile banking by charging their small business customers for using it. It is a double-edged sword, however, as our research indicates that business customers are more prone to consider leaving their bank if their mobile banking experience would be ‘better’ at a competitor. Paying customers may be more inclined to consider alternative providers.

Banks with superior mobile offerings are therefore better positioned to charge for mobile and that, may indeed, be the key to charging for mobile: continuously improving capabilities offered, and adding highly desired features such as RDC and photo bill pay that help ensure a customer experience that at least matches that of major competitors and offers value-added beyond online banking.

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ABOUT ATH POWER CONSULTINGath Power Consulting is the premier provider of customer experience solutions for the financial services industry, offering survey research, audit and mystery shop study, competitive intelligence, market analyses, training and development, and strategic brand planning. ath Power owns the largest panel of financial services field representatives in North America and executes more proprietary banking audits than anyone in the industry. Since 1997, our fully customizable solutions have helped improve customer retention, build brand loyalty and increase profitability, performance and market share for banking, credit card, mortgage, insurance and investment organizations across North America. To learn more, please visit www.athpower.com.

For more information on this study or any of our other solutions, please contact:Jessica Hamel +1.978.474.6464, Extension 107 jhamel@athpower.com

This confidential business summary document has been prepared by ath Power Consulting Corporation and is furnished for informational purposes only. The recipient agrees not to reproduce it in whole or in part, not to use it for any other purpose, and not to disclose any of its contents to third parties without written permission of ath Power Consulting Corporation. © 2013 ath Power Consulting Corporation.

ABOUT THE AUTHOR

Michael J. McEvoy - Managing Director

Michael J. McEvoy has over 15 years of experience consulting to many of the largest financial institutions and their technology suppliers worldwide. Prior to joining ath Power, Mike served as Principal and Head of Banking Research for Novarica, a division of Novantas. Additionally, he spent six years consulting to MasterCard and its member banks, and was also a founding analyst at both TowerGroup and MasterCard’s Purchase Street Research. He holds a Bachelors degree in mathematics and economics and a Master of Economic Science degree from University College, Cork, Ireland and an MBA from the Wharton Business School at the University of Pennsylvania. Mr. McEvoy may be reached via email at mmcevoy@athpower.com.

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