Banks Cautious on Mobile Payments?

Thirteen of the 15 financial institutions surveyed by Forrester Research on behalf of Fiserv have a mobile banking offering of some sort.  In addition to account access, the most commonly offered services are transfers between accounts, ATM and branch locators and bill payment.

All of the 13 financial institutions with a mobile banking solution offer the service to retail banking customers. Just more than half offer some type of mobile service to small business customers.

But the majority of bank and credit union executives interviewed are struggling to build a business case to support mobile payments, and many are waiting for market changes to serve as a catalyst for additional investment.

So what would make mobile payments more interesting? The first, and most obvious motivator is competition from other providers, especially other financial institutions as well as technology and payments companies. Some more certain evidence of consumer demand also would prompt the executives to move faster.

Many of the survey participants would like to see another company provide more concrete evidence of the financial model for mobile payments, as well.

Device and process standards also continue ot develop, and most of the executives wanted more stability on the technology front before they would move faster.

Banks and credit unions view merchant enablement as key to the adoption and success of next generation mobile payments. Once merchants are actually set up to receive mobile payments, financial institutions will be more inclined to invest additional time and money in mobile payments.

When building a business case, respondents considered the impact mobile payments would have on multiple business processes and outcomes. Customer retention and profitability are lead concerns.  A study by Fiserv found the retention rates of Millennial consumers using a mobile channel improved from 85 percent to 93 percent.

In a separate study, Fiserv found that increased payment interactions deliver increased customer engagement and profitability. For example, consumers who routinely pay their bills electronically through their bank or credit union have almost twice the number of products (5.34 versus 3.21), deliver more than twice the annual profitability of the average retail customer and
are 3.5 times less likely to churn.

While costs associated with processing checks and cash payments vary, it is well understood that electronic payments – including those carried out through mobile phones – have a direct positive impact on the cost structures of payers, payees and financial
institutions, Fiserv says. By shifting customers away from more expensive payment forms such as cash and checks, banks and credit unions can reduce their cost to serve.

One of the big unknowns, though, is the degree to which new competitors will displace the current suppliers of credit, debit or bank accounts, or work with the established entities.

Still unknown is the extent that ultimately will be played by cross-selling and customer service aspects of mobile payments.
Banks and credit unions also envision unique opportunities (money and fraud management, authentication and customer service, for example) as possible benefits.

Eight of the 15 financial institutions surveyed now enable access by mobile browser (WAP) and six enable SMS (text) banking.

The majority of banks and credit unions surveyed support smartphones today. Notably, support for Google Android is the top priority moving forward.

In contrast to mobile banking, though, very few of the surveyed financial institutions have clear mobile payment strategies in place, Fiserv says.  And while all of the respondents currently offer or plan to offer mobile payments, they are split between being a driver (seven of those surveyed) or a facilitator (six of those surveyed) of mobile payments.

Mobile payments are seen to include bill payment, person-to-person (P2P), remote retail (including social media) and point-of-sale (POS) or contactless payments. When asked how they have prioritized each of these mobile payment methods, banks and credit unions indicated they are most focused on bill payment and P2P with the other methods receiving less focus, Fiserv says.

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