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A Strategic Perspective on Mobile Banking Delivery

August 17, 2017
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The ubiquity of Internet-capable mobile devices and the evolution of this technology in the banking realm present new challenges and opportunities for financial institutions. As financial institutions continue to make significant investment in mobile banking technology, the industry’s primary imperatives are twofold: Growth and retention.

Raddon Research Insights shows 86 percent of consumer households own at least one mobile device with Internet capabilities. Seventy-eight percent of all consumers have a smartphone and 52 percent have a tablet. Forty-four percent have both a smartphone and a tablet, while four percent currently own a smartwatch.

Demographically, Raddon research finds a clear relationship between age and smartphone ownership – younger consumers are significantly more likely to own a smartphone and to use mobile banking than older consumers. For tablets, there is slightly less of an ownership disparity along age lines. Less affluent consumer households – those earning less than $50,000 annually – have a lower propensity to own a smartphone than higher income households. This disparity between income levels has diminished somewhat over the years as the technology has become more accessible, indispensable, and affordable. However, tablet ownership among lower income households continues to lag behind their higher income cohorts.     

Source: Raddon Research Insights

Raddon Research Insights further shows mobile banking channel usage has grown from seven percent of all consumers in 2010 to 41% of all consumers – includes a small portion of the population (0.7 percent) using a Short Message Service (SMS) over a regular cell phone.

Source: Raddon Research Insights

The evolution of mobile banking service delivery in recent years has generally made smart device ownership a prerequisite. According to Raddon Reports Insights’ forthcoming study “Grappling with Mobile Banking Engagement Issues”, the consumer population can be parsed into three distinct consumer groups:

Consumers that own a smart device and use a mobile banking service represent 40 percent of the population. These consumers are more likely to match the demographic profile of Millennials.Financial institutions may benefit from a mobile banking retention strategy to effectively meet this segment’s existing mobile banking needs.

Consumers that own a smart device but do not use a mobile banking service represent 46 percent of the population. This group is more likely to be consumers 45 years of age and older – particularly Baby Boomer individuals. Financial institutions may benefit from a mobile banking growth strategy to encourage mobile banking service adoption and usage.

Consumers that do not own smart device and do not use a mobile banking service represent 14 percent of the population. Given their present status, these consumers are effectively ineligible to use mobile banking unless they purchase a smart device sometime in the future. This segment is more likely to be over 60 years of age – particularly Traditionalists – and may prefer to conduct their banking business face-to-face with a bank employee rather than electronically using a smart device.

Once a financial institution identifies its known mobile banking customers, it may serve the financial institution well to evaluate continually how well their mobile banking offering serves their users’ needs and fits within its broader delivery strategy. Additionally, institutions that serve younger, higher-income customers and markets should evaluate their mobile banking tools  for sufficiency and  market competitiveness. A lack of digital engagement from younger, higher-income customers may suggest non-primary customer status.  If an institution’s mobile banking service is lacking - whether in reality or perception, it may be a detriment to retaining users and attract new users.

Conversely, financial institutions may not be able to specifically identify customers who are not utilizing mobile banking but are eligible to do so by virtue of owning a smart device. In order to target non-mobile bankers who likely own a smart device, institutions may turn to demographic data to identify potential users, such as non- users who are younger (Millennials and Gen X) and/or to higher income ($50,000 or more) consumers,  who may be  more likely to be mobile-banking eligible. 

Institutions that serve an older, lower-income demographic may choose to less focus on mobile banking.  Nonetheless, if a marketing opportunity presents itself, institutions with aging customer bases may be able to use a mobile banking offering to attract younger customers: Millennial and Gen Z populations.

Financial institutions should acknowledge mobile banking is transforming retail banking and the interactions between customers and their service providers. Financial services providers are then prompted to relate and interact with customers and consumers digitally or they may lose their relevance in a “new” retail banking environment.

Interested in learning more? Raddon recently released our latest report highlighting mobile banking challenges. The Grappling With Mobile Banking Engagement Issues study recognizes the impact that technology has had on the banking industry and discusses the new challenges and opportunities for financial institutions, as customer expectations are transformed and the traditional banking business model is further disrupted. The report is included with an annual subscription to Raddon Research Insights, or click here to find out how you can order the individual report. Raddon Research Insights subscribers as well as those that purchase the individual report will also have access to a one-hour Webinar where we discuss some of the key findings.