The world of financial services is undergoing an incredible transformation. One of the biggest factors influencing this transformation is the continued proliferation and everyday use of mobile technology. In the past 5 years, mobile technology has had a profound impact on the financial services and banking sector, with consumers shifting away from traditional banking practices. We recently explored the reasons why banking customers are switching to mobile and the ongoing battle between cash and mobile. Today we’re exploring the 7 key mobile trends in financial services. If you’re a company involved in the financial services sector, from banking to insurance and pensions, these trends will have a significant impact on your business.
1.) The rise of the mobile-only bank
It’s estimated currently that mobile-only users represent approximately 15% of the global mobile banking user-base (Business Wire). These mobile-only banking consumers are classified as users who only use a mobile device (smartphone, tablet or wearable) to access their account. The rest of the 85% will use a combination of mobile devices, desktop devices and traditional retail outlets to perform everyday banking tasks. Although the market segment for mobile-only users is still relatively small, the overall proportion of mobile-only consumers is growing at an astonishing pace and represents a significant part of the overall banking landscape. Whilst the majority of mobile-only banking consumers tend to be millennials or younger, the proliferation of mobile-only banking has spread across generations and a diverse range of socio-economic segments. New market entrants such as Monzo are a great example of a mobile-only bank making waves across the financial services sector.
If you’re a traditional bank new to the world of mobile, it’s worth considering the unique challenges associated with developing and optimising mobile apps. Mobile-only users have very different needs to ‘mobile-sometimes’ consumers in that they expect to be able to perform a wider variety of tasks and aren’t interested in traditional banking techniques. As the number of mobile-only users continues to skyrocket, banks will need to provide a ‘full-stack’ banking experience with great UI/UX and solid functionality.
2.) Data driven money management hits the mainstream
In the UK, there are currently four key digital banking start-ups currently making a significant impact in the financial services sector: Tandem, Atom and Starling. Starling is a newly licensed bank that operates in a very different way to traditional banks. Starling is all about enabling banking customers to make smarter decisions through analysis and understanding of their personal spending behaviour. The mobile app uses infographics that enable their customers to visualise their banking data in a completely different way, giving them more control over their money. One of the main features in the Starling app is that it provides users with push notifications to help them avoid unwanted fees and charges. Another great example is the B app recently launched by Clydesdale and developed by the team at Waracle.
These new mobile banking apps represent a huge shift in the financial services sector. If you’re a software development manager working in banking, it’s important to keep on top of the latest trends and understand how you can leverage the power of mobile technology to provide a better service for your customers.
3.) Biometric logins are becoming a thing
Atom and Starling will both enable banking customers to login via facial and voice recognition. This means that consumers don’t have to waste type with passwords and pincodes. In February 2016, HSBC announced that it would be rolling out voice biometrics and fingerprint security technology to over 15 million customers. The system is being rolled out via the company’s First Direct internet banking division and represents a major leap forward in terms of account authentication for the entire banking industry. In 2013 Barclays began rolling out voice authentication for high-net-worth telephone banking customers and HSBC’s latest move promises to tip biometric authentication into the mainstream. The technology itself utilises over 100 unique identifiers to authenticate the user and this includes analysis of the user’s pronunciation, cadence and voice speed. The service is designed to provide a faster and more efficient service for banking customers as passwords are now viewed as being weak in terms of security as they’re easily forgotten, lost or stolen. It’s now estimated that 78% of more than 2,000 respondents were confident that their body/voice is unique enough to be used as an identifier and 74% felt this would be the default password in future.
If you’re an established bank looking to get ahead of your competitors, they key is to understand which features a mobile app can deliver that will increase security and provide a better experience for your customers. In the future, banking customers will consider traditional authentication methods (usernames and passwords) as less safe and slower than newer methods. It’s essential that you understand where you are in relation to your competitors (chances are they’re already doing a good job using mobile apps for their customers) and develop a strategic technology roadmap that enables you to develop new features that your customers actively want.
4.) New services create profound value for consumers
Many of the established banks have done a good job of providing a multi-channel experience for their customers in the last five to ten years, particularly online and mobile. It’s estimated that in the UK alone, 84% of banking customers use mobile and online to access everyday banking services and features, which is creating a dramatic decrease in the number of customers who are still using physical retail outlets to perform banking tasks. It’s estimated that since 2009, HSBC has experienced a 30% drop-off in the number of customers visiting banking retail outlets. The expectation would be that by reducing retail footfall, that banks would be in a great position to cut costs and pass some of these savings onto their customers. However the data would suggest that establish banks who are developing new multi-channel experiences are failing to pass these cost savings onto the consumer, which in turn offers a great opportunity for challenger banks to disrupt the existing status quo.
If you’re a bank seeking to develop a multi-channel customer experience using mobile, it’s essential you consider what you’re doing to provide a better service for the end customer. Mobile-only banks will have a seismic opportunity to disrupt the established players in the banking sector by reducing costs in terms of physical retail outlets and customer service channels. By cutting costs, the challenger banks will be able to pass these savings on and attain new customers.
5.) Machine learning and AI are on the rise
Machine learning is a specific type of AI (artificial intelligence) that provides computers with the ability to learn without being programmed. The technology focuses on the creation of new computer programs that can be taught to self-optimise based on data and without external human interference. In the context of banking, a number of the new challenger banks are using machine learning to streamline their customer service experience. Atom is planning on using a bot based approach (check out our recent blog on bots here) to enable a self service system for banking customers, whilst Monzo is using the power of AI to predict spending habits that can help consumers to better manage their banking activities.
Getting ahead in the modern banking era is all about innovation, particularly when it comes to developing mobile apps. Providing a better service for banking customers will depend upon the banks ability to keep up to speed with all of the latest technological innovations. This means working out how to reduce costs and make banking services faster and more efficient and developing a new mobile app, or optimising an existing one, can be a great way to achieve this.
6.) Gamification is redefining the customer experience
There are some very clear examples of how gamification can benefit the banking and financial services sector. Atom, one of the latest challenger banks, has acquired gaming business Grasp. Financial services firm Pinsent Masons recently are suggesting that this type of acquisition could be the first of many in terms of banks seeking to bolster their offering using gamification techniques. The banking sector is paying close attention to the health and fitness sector, where wearable devices and the gamification of fitness has become a mainstream activity. Fitness technology and wearable devices enable users to track how many steps they take, calories burnt and how much sleep they are getting in order to track, analyse and optimise performance on an ongoing basis. The ideas is that the same types of measurement techniques can be applied to the banking sector (and wider financial services) in order to enable consumers to measure their spending habits.
Banks can now explore innovative new ways of delivering gamified experiences for consumers via mobile technology. Gamified mobile banking apps enable consumers to monitor their own financial health and work towards personalised spending targets and goals. Gamification techniques can also be used to teach consumers about new financial concepts and play more of an educational role in the customer acquisition process. Using gamification for educating users on financial products can also help banks to meet regulatory compliance obligations for things like risk disclosures. Banks must always be aware of legal issues in relation to data when it comes to gamification. Whilst users have been happy to share their fitness data, the same may not be true for gamified banking apps and financial services.
7.) Fewer legal barriers to market entry
Since 2010 more than 25 companies have obtained banking permissions or are applying to operate in the retail banking market. In many cases, some of these banks are starting from scratch with no existing customers and it’s estimated that 80% of these new challenger institutions will go to market with a mobile-first or mobile-only product offering. The big five banks (Lloyds, RBS, Santander, Barclays & HSBC) currently hold 80% of current accounts, but with fewer regulatory barriers to market, 2016 could represent a major tipping point within the sector. Regulatory changes in the market are designed to stimulate competition and provide better value for consumers. If providing consumer value is the overall goal, then it’s fintech (financial technology) that acts as the tool in order to realise this potential.
There are some serious challenges ahead for new banks, even in spite of decreased market regulation. The cost of staying on top of regulatory changes is massive and is increasing all the time. New banks are being forced to adopt high risk strategies in order to offset the associated regulatory costs. Whilst regulation has decreased, so far this has not translated into huge numbers of customers switching banks. It’s never been easier for customers to switch current accounts, yet data suggests that less than 80,000 customers every year bother to switch to an alternative provider. Other barriers to entry include accessing the technical capabilities to provide new services, particularly mobile apps and this is something challenger banks need to be acutely aware of.
The banking and financial services sector are undergoing a significant transformation. One of the biggest drivers influencing this change is the deployment of new mobile technologies and innovations. Some of the key drivers are fewer legal barriers to entry, the introduction of machine learning/AI and gamification into banking products, the ability for these services to create value for consumers, the availability of data driven money management tools, biometric authentications and the rise of mobile-only banks. If you’re an established bank, challenger or financial services company looking to develop innovative new mobile apps, contact Waracle today to start the conversation.