Moven: From Mobile Banking to Mobile Money

February is definitely a pivotal month for the start-up previously known as Movenbank, having changed it's name to Moven, winning the best of show honors at Finovate Europe and gearing up for a February 25 closed beta launch of its mobile-optimized financial services application. 

Founded by Bank 3.0 author Brett King, with $2.4 million in seed funding, Moven is the latest but not the last in a plethora of unique banking alternatives including Simple™, GoBank™ and Bluebird™.

So what sets Moven apart from not only traditional banking organizations, but also the less traditional financial intermediaries that are entering the banking battlefield? 

First of all, Moven is not a bank. Similar to Simple, while not having a banking charter, Moven provides a unique customer experience interface with a traditional banking organization working in the background (with banking licenses, FDIC insurance, etc.). The focus of Moven from the beginning of development has been to 'help customers spend, save and live smarter' using mobile technology.

According to Brett King, "With Moven, we're not talking about downsizing an Internet banking portal onto a mobile screen or downloading a debit card onto a mobile wallet. Instead, we are creating an entirely new way of thinking about a bank account, giving the customer mobile insight and control every time they make a decision that could impact their financial health."

Not Mobile Banking . . . Mobile Money Management

         Moven PayPass Sticker

It is the goal of Moven to leverage the power of the smartphone as the primary payment device and to provide immediate feedback with every spending decision. As a customer pays at the cash register using their contactless MasterCard PayPass sticker on the back of their phone, they will get real-time feedback on how the purchase impacts their financial health right on their phone's screen. 

According to King, while initial customers will have the option to receive a plastic card with a magnetic stripe for times when the tap-to-pay option is not available and for ATM withdrawals, the ultimate goal of Moven is to have a cardless, branchless experience. 

One of the tools that is being used to assist customers is Moven's personal financial management (PFM) interface called MoneyPulse™ which will analyze spending behavior and provide visual cues (green, yellow and red indicators) to let customers know how they are doing compared to past behaviors. 

Moven MoneyPulse™

While MoneyPulse looks at how a customer is doing from an individual transaction perspective, MoneyPath™ charts a customer's spending over a month's time to allow the customer to understand spending patterns. According to King, "Moven will allow customers to see how much they've spent at a certain location over a specific period. For instance, one scenario would let the customer know that they've spent say $230 at Starbucks during the month, allowing them to identify an unconscious habit that's hurting their savings patterns. The power of mobile allows us to provide scalable, real-time personal financial management."

Moven MoneyPath™

A unique feature from Moven integrates the MoneyPath financial timeline with a customer's Facebook social timeline allowing a customer to see the impact their social life has on their spending habits . . . essentially linking a purchase or spending decision with a check-in or status update.

In addition, there will be real time categorization and gamification around spending behavior. According to King, "The 'cool factor' is the ability to create immediate financial awareness ("Crap, I didn't know I spent that much in local bars or on coffee!") and then gamifying behavior to encourage saving and other positive behaviors".

Moven Budget Categorization

Moven Geo-location Receipt

Real-Time Budget Monitoring

So how do all of these capabilities work together from a customer perspective? Moven just released a 3 minute video to show how MoneyPulse, MoneyPath and some of the other features work. What can be seen from the video is how much emphasis Moven places on immediate feedback to financial decisions. It is clear that this form of feedback would not be possible in either a check or card environment

Engaging Without Being Intrusive

Moven's mission is to leverage mobile technology to continually encourage customers to be more aware and responsible with their financial behavior without being too judgmental or intrusive. The Moven team has a psychologist, behavior specialist, user experience specialist, designers and experienced banking industry professionals on staff. This combination is behind the unique skill set that Moven believes is needed to develop tools and provide ongoing insight into better personal money management.

Financial education is extended beyond the mobile applications, with helpful hints provided regularly on the Moven blog. Beyond announcements around the future introduction of Moven, there are musings regarding savings, retirement, budgeting, credit use, etc. which all reinforce the Moven brand.

One of Moven's most unique engagement tools is their CREDscore®. Taking into account an individual's traditional credit score in addition to a customer's use of digital payment channels, social connectivity and money management beliefs, CRED assesses risk as well as a customer's financial potential. Unlike a credit score, CRED is designed to be a sort of financial health or wellness score, like a calorie counter on your phone – a score that goes up when a customer gets better at saving or managing their money.

"CRED goes beyond just a credit rating to include a view of social and financial management credibility," says King. "The key will be to provide customers a valid value trade-off, where they will be willing to share social data to participate in building a better financial solution".

Another engagement tool is the Financial Personality, that uses an interactive survey to determine where a customer may fall in comparison to others. As with all other elements of Moven, this tool can change over time and allows for social channel engagement, since sharing and comparing of Financial Personalities is encouraged. The real purpose of the Financial Personality tool to further customize the real-time feedback and messaging according to the personal 'money style' of each customer.

Removing Friction From Banking

Chris Skinner, who writes the Financial Services Club Blog recently did a post entitled, 'The Bank That Removes The Friction Will Win' where he discusses the benefits provided organizations that have removed friction from commerce using digital data such as Amazon, Apple, Google, Facebook, Paypal, etc. His belief is that banks that leverage the available customer data and make banking as easy and intuitive as Apple makes entertainment and Amazon makes shopping will be both disruptive and successful.

While Moven will be introduced later this month with only a portion of the eventual functionality, what do we know today about how Moven wants to disrupt the traditional banking model initially and in the future?

Account Opening

The unique user experience begins at account opening. There are no extensive new account forms to sign and no involved opening process. Simply deposit funds, receive a MasterCard PayPass sticker and start using the account. When I opened my relationship, the process also asks for information on accounts I hold elsewhere and allows me to build my Financial Personality and my CRED score. Similar to Mint, Moven wants to be at the center of a customer's money management process.

Platform Support

Moven already has an online and mobile introductory site and plans on launching their beta platform on both iPhone and Android platforms out of the gate (unlike most other new players). In fact, they already have an Android app for CRED available on the store. Moven also has Facebook apps available for customers and prospects today, such as the Financial Personality profiling tool.

Card vs. No Card

As mentioned above, customers during the first 90 days will be provided the option of receiving a card for cash withdrawals at ATMs and for transactions not supported by PayPass. That said, it is the intention of Moven to quickly move to a cardless engagement due to Moven's belief that there are significant limitations to a card-based strategy.

This positioning was reinforced at Finovate Europe, where King drew the line in the sand by stating, "Any bank that still issues a plastic card to their customers in the future doesn't understand where mobile fits in the emerging banking experience."

Product Line Expansion

When viewing an application or business like Moven, it is normal to try to view the offering within the normal product-focused perspective of traditional banking. Is it a mobile banking app? Is it a mobile wallet? Is it PFM?

This would be a mistake, since the strategy at Moven does not focus on the underlying products, but on the utility of banking and the utility of a consumer's money. That's why Moven will not offer checks and is forthright in their criticism of cards.

Moven will focus entirely on retail banking services is not looking to expand into the small business space at this time (Many of the current complaints around the Simple offering deal with their lack of business accounts as discussed in The Financial Brand blog post reviewing Simple). 

According to King, later this year, there will be unique savings functionality added that will provide impulse saving incentives and a credit/overdraft capability will be added that will not work in the same way traditional banks handle credit.

Moven Capabilities

Not Everyone is Sold on Moven . . . Yet

While Moven is bringing a new perspective to the way people can bank in the future, there are industry followers who wonder about the potential of Moven to move market share. 

For instance, in a blog recap of the Finovate Europe conference, Forrester's Benjamin Ensor stated he was impressed with the innovation done by the Moven team, but believes the solution could be overhyped because of the difficulty in launching a brand new bank. According to Ensor, "Moven's biggest impact may be in encouraging traditional banks to raise their game, rather than the customers it takes from them". He did add that he would welcome being wrong.

Similarly, Daoud Fakhri from Datamonitor Financial wrote a blog entitled, 'Market Not Yet Ready for Moven', where he expresses concern that consumers may not be ready to embrace the concept of a virtual bank that only exists in the digital realm. Fakhri references Datamonitor's 2012 Financial Services Consumer Insight Survey that found that 90% of US consumers regard a conveniently located branch as an essential feature, and that only 26% would even consider switch to a bank with no branches. 

Fakhri summarized, "Moven looks impressive on paper, but consumers are just not ready to embrace virtual banks right now. The move is a brave gamble, but one that is likely to prove too far ahead of its time."

JJ Hornblass from Bank Innovation, while not necessarily being skeptical of Moven or any other recent new player, believes that many may be missing the potential risk of new channels and new business models. As stated in his recent post entitled, 'Amid the Innovation Hubbub, Are We Forgetting Risk Management?, Hornblass says, "How can an enterprise fully understand the entire gamut of risks of something that is entirely new"? While he doesn't suggest these risks are insurmountable, he just believes managing risk should be part of the equation.

Counter to these cynics, Ron Shevlin believes we are entering a new phase of competition where the importance of location is replaced with the expectation of being able to monitor personal financial performance in real time as discussed in his recent Snarketing 2.0 blog entitled, 'The Next Wave of Banking Competition'.

In Shevlin's blog entitled, 'NeoChecking Accounts', he also discusses many of the benefits of the new mobile offerings, stating that the likely early adopters may be those consumers who are less entrenched in their current financial relationships - Gen Yers. When asked whether this would be a drawback, Shevlin believes that affluence is not what will drive the profitability of Moven. "Profitability will most likely be driven by potential fees (people will pay for value), interchange, and the potential to generate revenue from third parties who would benefit from Moven's customer insight".

Brett King's response to the skeptics is even more straightforward. "We're carefully timing our launch to match emerging smartphone behaviors and launching a bunch of unique innovations, but at our core we're just trying to make a consumer's money and banking experience work better, minus the friction and inefficiencies of a typical bank. In that way, I think we are already becoming the benchmark of what a banking experience will become. However, in reality, many are probably hoping we will fail because I think they realize when we succeed we will render current distribution methods largely obsolete."

Additional Resources

Moven Gives Sneak Peek of New Mobile Banking App - Pandodaily (February 2013)

Amid The Innovation Hubbub, Are We Forgetting Risk Management? - Bank Innovation (February 2013)

The Bank That Removes The Friction Will Win - The Financial Services Club Blog/Chris Skinner (February 2013)

Market Not Yet Ready For Moven - Datamonitor Financial (February 2013)

The Future of Movenbank - Snarketing 2.0 (October 2011)

Will The Power Of Mobile Make Branches Disappear - Bank Marketing Strategy Blog (February 2013)

The Next Wave of Banking Competition - Snarketing 2.0 (February 2013)

NewChecking Accounts - Snarketing 2.0 (January 2013)

Moven to All Digital Banking - Bank Marketing Strategies (April 2012)

Will The Power of Mobile Make Bank Branches Disappear?

The high rate of mobile banking penetration at Chase Bank, Bank of America and recently introduced direct banks such as Simple, GoBank, Bluebird and Moven could provide a significant business advantage as digital channels tend to build loyalty and provide the opportunity to reduce costs through transaction migration. 

A recent report from Bain & Company entitled, 'Customer Loyalty in Retail Banking' found that mobile banking is more likely to increase a customer's likelihood of recommending the bank than any other channel interaction and that features such as remote deposit and even the ability to check a balance impact loyalty. The research also found that once customers moved to mobile, roughly half stated they made fewer visits to the branch which can lower costs.

Digital Delight

As mobile banking use increases, banks have the opportunity to 'delight' customers with new applications and functionality. For instance, while remote deposit capture still represents just a small percentage of branch and ATM transactions (as shown by the size of the circles below), it is by far the most likely to 'wow' the customer (64%) and provide the opportunity to recommend the bank. 

Interestingly, even routine mobile transactions such as checking a balance or transferring between accounts has a likelihood to delight (44%) and is a strong influence on loyalty according to the Bain study.

The delight with the mobile channel increases with use as well, with higher frequency mobile transactors being more likely to recommend their bank regardless of age category or type of institution. It was found that younger customers (age 25-35) were more likely to illustrate stronger loyalty (as measured by Net Promoter Score) based on mobile and that the larger and direct banks had the largest lift in NPS score between mobile and non-mobile users as shown below.

This disparity in loyalty between the larger and smaller organizations and for direct banks is believed to be the result of more advanced functionality by the largest players such as Chase, Bank of America, U.S. Bank, PNC, Wells Fargo and the direct players.

As shown above, for retail bankers battling for new customers and the loyalty of existing customers, digital channels can be a powerful tool for building loyalty and referral business. However, digital advantages are short-lived as mobile development is getting greater emphasis and differentiation is short-lived. For instance, while remote deposits may still be a differentiator in some markets, they are quickly becoming table stakes in the competition for the mobile customer. But the potential loyalty of a satisfied mobile customer can't be disputed.

Power of Premium Apps

While doing the mobile basics is important, the key is to continually develop innovative applications that appeal to the mass market while building premium tools for the affluent customer who is more demanding. This could include personal financial management (PFM) applications as well as tools that integrate both online and offline advisory capabilities.

The importance of developing premium applications is highlighted by the finding that moving an affluent or mass affluent customer from being either unsatisfied or 'passive' to being a 'promoter' is worth five times more than converting a mass market customer. This is because an affluent customer who is loyal has more products with the bank as well as having the tendency to recommend their bank to other affluent friends. In fact, Bain estimates that converting just 5,000 affluent customer from being passive or a distractor to being a promoter could generate $25 million in lifetime net present value.

Moving From Physical to Digital

While not being a 1:1 conversion, mobile banking can divert large volumes of high-frequency routine transactions, reducing branch visits and providing the springboard for branch redesign and reduced costs (see previous BMS post 'Banks Transforming Branch Networks to Improve Efficiencies'). And, as shown above, these same routine branch-based transactions either don't have a big impact on loyalty or are more prone to annoy customers than mobile transactions.

The benefit of moving from the physical to digital channels is more acute in the U.S. than any other developed country due to our dependence on the brick-and-mortar facility. According to the study, the average customer in the U.S. visits the branch more often than in other countries and 90% of the transactions done in a branch are considered routine (cashing checks, making deposits, checking balances, etc.).

According to the Bain study, once customers turn to mobile channels, roughly half made fewer visits to a branch: 29% of the U.S. mobile converts reported making between one-tenth and one-half fewer visits, while 18% said they reduced their number of visits by half or more. 

This movement from the physical to digital can have an immediate bottom line impact. According to research conducted by Diebold, a transaction that costs $4.25 in a branch would cost $2.40 through a call center and only $.20 online. Moving the customer transaction to the mobile channel would reduce the cost to $.08. This transition obviously would also allow banks to reconfigure branches and remove expensive human interaction or allow for the closing of branches altogether.

This change in branch design can go beyond just the reduction of costs to also improve the overall customer experience according to Bain due to shorter wait times, more consistent service, etc. For instance, Coastal Federal Credit Union does not employ a single teller behind the counter at its 15 branches and Boeing Employees' Credit Union has employed a 'teller-less' branch layout for years, leveraging online and mobile banking combined with multiple teller machines. This reduces the required footprint of branches, extends hours of operation and has led to market leading customer satisfaction scores.

The Disappearance of Branches

Even with the rapid acceptance of mobile and online banking and the business rationale for moving more customers to digital channels, branches will not disappear overnight, especially in the U.S. But, as banks continuously improve their mobile banking applications, encourage customer to try these new capabilities, and provide experiential incentives to move their routine (and non-routine) transactions to less costly and potentially easier interactions, branches will move from center stage to being part of a more integrated omnichannel experience as illustrated below.

Instead of processing thousands of basic transactions, branches in the future will be more similar to Apple stores, being product showrooms, serving as sales centers and locations to provide expert 1:1 advice. Even these functions may move to digital video terminals in the future as consumers become more comfortable with technology.

To make the transition, digital channels need to be more intuitive and convenient while providing financial and non-financial benefits. Execution and ease of use will be critical and the use of 'big data' for the benefit of the customer will be expected. 

We are already seeing this type of customer focus with new offerings from Simple, GoBank and Moven, where financial management tools are not added to a mobile application but integrated in the offerings. This type of integration is also evident overseas with innovative banks such as Commonwealth Bank of Australia, Fidor Bank in the Netherlands and U.K.'s First Direct.

Marketing Disconnect?

Given all of the benefits discussed around moving more customers from the physical branch to the mobile and online device, you would expect marketing to view this channel shift objective as one of their primary goals in 2013. 

Unfortunately, based on the most recent 2013 State of Bank and Credit Union Marketing report just released by The Financial Brand, the focus on online and mobile banking adoption falls to sixth on the list of priorities after loan growth, cross-selling, new customer acquisition, brand development and attracting a younger customer.

Part of the challenge may be that marketers could believe that the responsibility for mobile banking adoption falls into the lap of the applications developer or another person at the institution, but research shows that adoption of mobile is really everyone's responsibility and that all channels should be used for promoting the benefits of the mobile channel (see recent BMS post entitled, Nine Ways Marketing Can Help Acquire Mobile Banking Customers).

Even though financial marketers say 'loan growth' is their most important strategic goal for 2013, they rank 'mobile banking solutions' as the most critical product/service to push this year . . . followed by loans.

So, will the emphasis on promoting mobile and the power of mobile make branches disappear? Time will tell, but with the loyalty and cost advantages of digital channels, traditional banks will need to move quickly to keep pace with the innovations being developed by the new branch-less players who are quickly entering the financial services battlefield.

Additional Resources

2013 State of Bank and Credit Union Marketing - The Financial Brand (February 2013)

Customer Loyalty In Retail Banking: Global Edition - Bain & Company (December 2012)

Banking Loyalty Profile: United States - Bain & Company (December 2012)

How Many Mobile Users Does Citibank Have? - Bank Innovation (February 2013)

The Digital Challenge to Retail Banks - Bain & Company (October 2012)

From Passbook to Mobile: The Evolution Of The Bank Account

"Some might argue that nothing replaces a face-to-face relationship. That assumes that a digital, mobile experience is inferior to face-to-face. And while that may have been true in the past, that's not going to be the case in the future. 

Welcome to the total disruption of retail banking".

By Brett King, Bestselling author of Bank 3.0 and founder and CEO of Movenbank.

In 2009, I was visiting the head of retail for a major retail banking brand headquartered in Asia, and with a growing presence in the Middle East. This was 2 years after Apple's phenomenal launch of the iPhone, and by this time the iTunes store already had close to 100,000 apps and had surpassed a billion downloads. 

People were clamoring to get the iPhone, with unlocked 'grey market' phones available everywhere you looked in Hong Kong, Dubai, Shanghai and Singapore, because to that point, Apple had not launched the iPhone anywhere outside of countries like the U.S. But sitting in this executive's office, you'd never realize it.

I spoke about the impact that mobile and social media was having on consumer behavior, and how dominant apps would become in respect to the way consumers would do their banking over the next 3-5 years. I discussed the breakout success of Bank of America, the first bank in the US to launch mobile banking, with millions already using the bank's app daily to access their bank (and with 10,000 mobile users currently being added each day). 

This executive didn't buy my message. They insisted that nothing they were seeing was showing a shift in behavior. If anything, they believed the branch was getting stronger and the Gen-Y segment was just like any other demographic.

Within 3 years, this bank would be in serious trouble with their mobile positioning. Well behind the competition on the mobile and social front, shrinking acquisition statistics and lagging cross-sell results on the retail side would all be early warning signals that this bank was not only out of touch, but that their entire historical business model was under threat.

This was not an isolated experience. In 2009, just 3% of all banks in the US had mobile banking propositions. And, while the number of banks with mobile has increased to 80% of the 100 banks today, as an industry in flux we just can’t afford to wait 5-6 years before technologies like mobile are widely adopted. 

Today, we see tablet computing growing at 3 times the rate the iPhone grew in its first 3 years. Through the success of phones like the Samsung Galaxy III and others, Android smartphones are now growing at 6 times the rate the iPhone did during it’s early dominance of the industry. 

The problem facing the banking industry is that this technology shift is really only just getting started. What comes next is going to change the way we do banking forever. How can I make that claim?

Prior to the launch of the iPhone we’d never even heard of apps, and yet today, just four and a half years later, here are a few of the phenomenal stats in relation to mobile computing platforms like the iPhone, iPad and Android phones:

• 1,000,000 Apps for Apple and close to 700,000 for Android[1]
• Approaching 50 billion downloads for Apple, and already 25 billion for Google Play (previously known as the Android Marketplace)
• Daily downloads 48.6 million per day - Apple

In the past, it might take years for new technologies like the first PCs, Mobile Phones (Feature Phones) or even Internet adoption to become mass market and to have an impact on the way we do business. Today, new technologies such as the iPad and new interaction platforms like Facebook and Instagram are being adopted by consumers en masse in a period measuring just months.

To illustrate that this change is speeding up, here’s a great stat from Apple. In 2011 alone, Apple sold more iOS devices than all the Macs it had ever sold in the 28 years prior.

“This 55m [iPads sold to-date] is something no one would have guessed. Including us. To put it in context, it took us 22 years to sell 55 million Macs. It took us about 5 years to sell 22 million iPods, and it took us about 3 years to sell that many iPhones. And so, this thing is, as you said, it’s on a trajectory that’s off the charts…”                                                                                                                                            -Tim Cook, Apple CEO during February 2012 reporting call

In Q1 of 2012, Apple then went on to sell more iPhone 4S devices than in the entire preceding 12 months. Samsung has recently done even better with the Galaxy SIII smartphone.

The reality is that over the next 3-5 years, mobile will not only continue to dominate changes in retail positioning and consumer behavior, but will become increasingly accessible to all parts of the economy. 

By the end of 2014, smartphone adoption is expected to reach 80% of the population in markets like the US, UK, Australia, Singapore, Hong Kong, UAE, and other developed economies. But this is not limited to developed economies and the mass affluent or middle and upper-class.

By 2016, low-end smartphones will cost less than $20, and Gilder’s Law dictates that basic Internet access will come bundled in your monthly plan at no additional cost. Today, Internet access via mobile devices has already surpassed wired internet access[2]. Put these trends together, and by the end of the decade, 80-90% of the world’s population will have access to the Internet via a smartphone.

This adoption of mobile will fundamentally change how retail banking and payments work in our economy going forward.

For 60% of the world’s population that today does not have a bank account, their mobile phone will likely be their very first banking experience. In markets like Kenya and the Philippines, the majority of the population has had their first electronic payments experience via their phone, and their first deposit account was simply a balance carried on their phone. 

The fastest growing use cases for mobile in emerging markets like these have been payments and remittances. In markets like Kenya, this has changed the day-to-day flow of cash in the economy. The same will soon be true for India, China, Indonesia and other such emerging markets.

By 2020, the world’s bank account will be indistinguishable from the functionality you find on your mobile phone. Your mobile device will allow you access to your money (in the form of an available balance), send and receive money, pay at a store, pay online and to exist fluidly in the world of commerce. 

In the past, we have tended to characterize our bank account by its physical form factor. Initially, a passbook was our ‘bank account’. Then in the 80s, the checking account was the primary form of banking relationship. Today, our debit card (attached to an online account number) is how most of us do our day-to-day banking. Very soon, however, banking will be dominated by the mobile phone.

2013 will be a big year for mobile payments. Many of the mobile wallet projects currently in development will hit the market. The first mobile-only banks, such as Movenbank, will go live with products and interactions designed for an enhanced customer experience around the mobile device. ISYS will launch, and other players like Google Wallet, PayPal and Square will duke it out for merchant dominance in mobile payments space. 

NFC deployment will start to be highly visible, and more banks will announce PayPass and v.Me (Visa) deployments to capitalize on this emerging mobile trend. When we look back on 2013, we’ll recognize it as the year the biggest players realized that mobile was the game changer it was projected to be.

By 2015-16, mobile banking use will dominate day-to-day banking interactions in most developed economies, being the preferred channel for the majority of customers. This is unlikely to have a significant impact on Internet banking utilization, however, since tablet computing will still be widely used for managing day-to-day portfolios, bill payments and transfers. In fact, comfort levels with digital interactions will rise such that consumers will manage most of their banking relationships entirely through digital devices, with more than 60% of retail banking revenue coming through non-human channels. 

This mobilization of banking will put extraordinary pressure on branch systems. Initially, many banks will move to reduce their branch network by up to 20-30%, retooling and retasking remaining branches to focus purely on sales and service as transactional activity moves digitally. Branches that remain will either be brand flagship and showcase stores, or smaller footprint stores designed to support sales and service metrics without the large network expense. 

Financial analysts watching bank stocks will start to discount retail banking brands who aren’t aggressively dealing with excess capacity in the branch network. For the first time, we’ll see stock markets penalize banks for having branches.

Mobile has been consistently underestimated in terms of its impact on retail banking since the emergence of the “app” phone. The lack of enthusiasm and adaptation by major banking players, and the over reliance on traditional physical distribution, is opening up many doors for new non-bank players to own emerging banking and payments experiences on the mobile device. 

With the certainty that mobile will dominate the future of banking, it’s clear that banking won’t look much like it looks today in a decade’s time. It’s also clear that bankers like the one I mentioned at the start of the post, may very well be casualties of this disruptive change.

About the Author

Brett King is the bestselling author of 'Bank 3.0: Why Banking Is No Longer Somewhere You Go, But Something You Do' and the founder and CEO of New York-based Movenbank, the world's first direct mobile-only retail bank. King was voted American Banker's BTN Innovator of the Year for 2012 and is a strategic advisor on the future of financial services to clients like HSBC, Citigroup, Commercial Bank, UBS and Emirates NBD.

Additional Resources

Smartphone-Based Bank Helps Customers Make Better Use Of Their Money: Springwise (January, 2013)

Two Big Predictions: Banking 4 Tomorrow (January 2013)

The Future Of Banking Is All About Context: American Banker (January 14, 2013)

Bank of America Is Adding 10,000 Mew Mobile Users Each Day: Bank Innovation (January 2013)


References

[1]Sources: http://148apps.biz/app-store-metrics/, http://www.androidtapp.com/android-apps-statistics-summary-for-2010/, http://techcrunch.com/2012/05/07/google-play-about-to-pass-15-billion-downloads-pssht-it-did-that-weeks-ago/, http://venturebeat.com/2011/01/26/mobile-app-revenue-2011/and http://bits.blogs.nytimes.com/2012/06/11/apples-stash-of-credit-card-numbers-is-its-secret-weapon/

[2] Source: Mary Meeker 2012 Report

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Banking Leaders Predict Major 2013 Trends

Trying to predict what is going to happen in the banking industry is like trying to predict tomorrow's weather. While you may get the forecast right, it could be more a case of luck than skill. And what you see today could quickly change tomorrow.

With that as the backdrop, I asked almost fifty industry leaders who author blogs I read, post on Twitter, speak at industry trade shows or make banking a career for their thoughts on what may be the most important trends in retail banking in 2013.

The predictions ran the gamut from what may occur in payments to how bank distribution could begin to transform. While some focused on larger megatrends, others had a narrower scope. In all cases, however, the predictions provide food for thought for bankers and industry providers. It is clear the one forecast that is guaranteed to be accurate is that the industry will be different this time next year.

Battle For Payment Supremacy Will Continue

The past few years has seen a massive amount of change in the payments world, with a reduction of interchange fees, the infiltration of retailers and non-banks like Starbucks, PayPal, Square, MCX, etc. and the beginning of a shift from plastic to smartphones as the payment device of choice. While past predictions around NFC, an Apple mobile wallet and a cash-less society have not yet come to fruition, there are still no lack of industry luminaries placing bets on how we will transact in the future.

Tom Noyes, author of the mobile, payments and advertising blog, FinVentures, states, "Retailer friendly value propositions (MCX, Square, Levelup, Fishbowl, Google, Facebook, etc.) will get traction . . . but MCX will not deliver for another 2 years."

Ron Shevlin, senior analyst from Aite Group and publisher of the Snarketing 2.0 blog believes the most significant trend in 2013 will be the evolution of the digital wallet concept. According to Shevlin, "The digital wallet will be the new battleground – for technology companies, financial services firms, and retailers/merchants. They say that politics makes strange bedfellows – but so will digital wallets. The evolution of the concept will involve a lot of interesting partnerships and joint ventures." 

Matt Wilcox, senior vice president of Zions Bank and financial industry blogger believes we will begin to see the separation of contenders from pretenders in the payments space. "While there will still be multiple players vying for position, I believe a few companies will begin to emerge as leaders in this space." Alex Bray, retail channel solutions director at Misys in London agrees, saying "I think we will see the market coalesce around a standard form of mobile payments - and contrary to what PayPal may say, I think this will involve NFC."

Delivering On The Promise of 'Big Data'

There is no doubt that 'big data' was overused and misunderstood as a term and underutilized as a tool in 2012. There is also little disagreement among industry leaders that banks will be aiming to use both structured and unstructured data more extensively in 2013 as the collecting, storage and processing capability becomes easier and less costly.

As David Gerbino, digital product, marketing and strategy manager at Provident Bank in New York told me, "The big trend for me every year is data. Not big data, not small data, just the right data". He went on to say, "Once the data elements needed are identified, the challenge becomes using these components correctly to drive success."

Rod Witmond, SVP of rewards platform provider Cardlytics, emphasized the trend of utilizing data from the consumer perspective in 2013 but warned, "Big data can be incredibly insightful but, if it isn't leveraged in a simple way that allows the consumer to maintain their current habits – or adds enough value that the consumer is willing to change their habits – the value of the big data will be lost because consumers don’t ‘try something new or different’ if what they have already is working."

Some of the Twitter responses I received regarding banks improving the utilization of both structured and unstructured data at their disposal included:

Finally, Nate Gardner, vice president of strategic partnerships at Provo Utah based MoneyDesktop, believes that intuitive data visualization will begin to deliver on the promise of big data for banks in 2013. According to Gardner, "Intuitive analytics will make it easier for bank executives and marketing teams to customize the user experience and deliver tailored messaging, product offers and solutions that best meet specific consumer needs and interests."

Transformation of Delivery Channels

Consumers want a convenient, secure and familiar experience when they interact with their bank using mobile, online, phone, ATM or their branch. They also want their bank to realize that they may use multiple channels at the same time. This channel agnostic interaction has been recently referred to as an 'omnichannel' experience in the retail industry.

According to Mary Monahan, EVP and research director at Javelin Strategy, “To correct current shortcomings, FIs will focus on changing their perception of omnichannel banking as necessary rather than novel. Moreover, for FIs to increase or even maintain their competitive positions in the coming years, they will need to invest in developing an integrated architecture wherein data and platforms can seamlessly converge while enhancing the quality of the brand experience.”

Branch Delivery

Under the heading of 'traditional branch banking', there was no hesitancy for industry leaders to provide warnings. Serief Meleis, a partner at Novantas warned, "Continued overcapacity of branch distribution resembles the airline industry of the early 80's. Fundamental restructuring must begin sooner rather than later." Not surprisingly, Brett King, author of the new book Bank 3.0 and founder of branchless start-up Movenbank added, "Market analysts will start to discount retail banking stocks with large branch networks as poor branch performance becomes visible."

Andy Will, senior vice president of deposit products and card services at BMO Harris agrees that the traditional mid-sized branch has too much real estate and staff costs to be viable going forward. Discussing a trend he believes will extend beyond 2013 Will states, "I believe branches will get simultaneously bigger andsmaller. There will be the addition of regional 'Apple store' sized branches in prime locations combined with micro branches to 'fill in' the rest of the markets." Will adds, "Both the large and small branches will be highly automated with two-way video, touch terminals, etc."  

None of the experts put the trend in perspective better than Bart Narter, SVP of Celent who stated, "The branch is banking's new alternative channel."

Mobile Banking

In a report just released by Juniper Research entitled, 'Mobile Banking: Handset and Tablet Strategies 2013-2017', it was estimated that more than 1 billion mobile phone users will have used their device for banking purposes by 2017. In addition, it was projected that more banks will have multiple mobile offerings, maximizing customer penetration potential. These trends were reflected in many of the predictions for 2013.

Fred Hagerman, CMO of FirstMark Credit Union out of San Antonio, TX emphasized, "Mobile is a freight train coming down the tracks - and it's here to stay. Banks that need proof only need to look at their web analytics from the holidays to see a significant bump in mobile device usage in the days after holiday gift-giving."

Some believe that banks, in an effort to speed delivery to market, have created fragmented mobile apps that served limited purposes. Bradley Leimer, Vice President of Mechanics Bank and publisher of The Discerning Technologist feels that 2013 will be the year we move the mobile banking conversation beyond transactions (transfers, bill pay, a brief snapshot of transactions, maybe some financial management) to include enhanced engagement through personalization . . . and more. 

According to Leimer, "We need to engage our customers with their own data, and drive new levels of personalized service to help them create their own value from their transactions. Our mobile applications will see renewed focus on engaging and simplified customer experiences, and improved contextual offer placement. We’ll see more applications leveraging voice, as well as the social graph, because individualized preferences are critical."

Matt Wilcox, from Zions Bank agrees, "I believe we will see the proliferation of “fat apps” that allow for a convergence of multiple applications as well as enhanced personalization for an enhanced customer experience."

Online banking will improve as well in 2013 if the industry leaders are correct. The online banking experience will be holistically reviewed this year according to Bryan Clagett, the chief marketing officer at Geezeo. "The user experience will finally take precedent, and the definition of a 'banking website' will be re-written. Products like PFM will help consumers make better decisions, save money and leverage the vast merchant data that lies within."

Serge Milman, CEO and founder of Optirate sees the focus on new and enhanced delivery channels as being a requirement to stay relevant, but not an inexpensive proposition, especially for smaller institutions. "Mobile and other delivery decisions will become 'infrastructural' initiatives", states Milman. "Banks will spend significantly to implement technology, but smaller organizations may find these expenditures prohibitive and will be slow to see returns."

Marketing and Technology Converge

Significant changes in marketing have been occurring for the last couple years, allowing bank marketers to leverage new technologies to improve targeting, offers, timing and the marketing channels used to communicate. The ability to combine structured and unstructured data described above, with the digital channels available, are a powerful combination for those bank marketers able to keep pace with change.

According to Nicole Sturgill, research director at CEB TowerGroup, "The embrace of digital channels as primary to the customer experience is significant for two reasons. First, it acknowledges the fact that the branch is no longer primary in many customer’s eyes; and second, it places digital sales at the top of the technology priority list for 2013."

Bank website design will also improve in 2013, enabling sites to become better selling tools. Tim McAlpine, president and creative director of Currency Marketing, believes that the use of HTML 5 will flourish saying, "Firms will put more weight into building websites that work on every screen size, versus the current trend of building dumbed-down mobile versions of corporate websites."

David Gerbino, digital product, marketing and strategy manager at Provident Bank in New York agrees. As he stated in my recent post on bank marketer resolutions, "Bank need to rapidly say goodbye to the web. The web of decades past is dead. Today's web needs to be responsive and device agnostic with one website supporting all devices."

These changes will improve the customer experience as is mentioned by Jelmer de Jong, global head of marketing for Netherlands based Backbase and editor of the BANKNXT blog. "Banks have to focus on creating ONE unified superior customer experience, across devices, across channels. Multi-channel strategy and creating a cross channel journey will be key."

While some banks are just beginning to utilize digital channels for their marketing efforts, some have found the power of new strategies such as search engine optimization for digital ads and retargeting for reaching people who are ready to buy.

According to Lloyd Lee, SVP, Integrated Services for direct and digital agency New Control, "The benefit of retargeting is clear - among all offline and online channels, retargeting is often the most efficient acquisition strategy on a cost-per-approved account basis." Lee added, "In 2013, retargeting will become much more widely used by banks as it ensures that banks are capitalizing on all of the traffic being driven to a bank's site from both offline and online acquisition efforts. It will be at the core of the most progressive bank's digital strategies."

The technology will also allow lifecycle and multichannel marketing efforts to merge, providing bank marketers to know who should get what offer, in which channel, in addition to WHEN they should receive the offer according to Bill Secrest, director of Datamyx. "New data solutions are emerging that can add context around when to target a consumer for marketing treatments."

Many of the industry leaders emphasized that these new tools and strategies will be more important in 2013, as the industry moves further away from the industry meltdown of a few years ago and into a period where shifting market share will be needed to grow top line revenue.

J.P. Nicols, CEO of wealth management consultancy Clientific, was rather blunt when he said, "All of the popular buzzword talk of improving client experience, optimizing channel preference and engaging clients on social media is now being viewed through the filter of 'how quickly can we see the impact in our results?' In 2013, this emphasis will put additional pressure on marketers, vendors and partners to prioritize the right projects and the right products and features that will yield results quickly."

On a more fundamental level, Mark Arnold, President of Market Strategies in Dallas, sent me the following trends which will be required as marketers implement new customer-facing technologies:

Product and Segment Opportunities

With regard to which products and services will be most important in 2013, some leaders believe there are untapped opportunities that will emerge in 2013. "Business account acquisition will be – or should be – a top priority for most FIs in 2013 since hardly any bank has been aggressive in this space or made many positive product changes in response to the repeal of Reg Q" offered Mark Zmarzly, vice president of financial services for ACTON Marketing.

Salil Ravindran, lead solutions architect for Oracle in the Netherlands agrees, "Banks will start focusing more and more on servicing the business banking segment through digital channels. The extent of services required by this segment is largely an extension of retail banking and not as complex as those required by the higher end wholesale segment, and hence banks should be able to largely leverage existing digital channel infrastructure to extend these services."

Credit union leaders provided the following tweets regarding where financial organizations may focus in 2013:

Roger Conant, curator of the original credit union tweet tracker site out of Houston believes that focusing on the women's segment will move beyond a niche play in 2013, while Salil Ravindran and J.P. Nicols both believe banks will focus more than ever on the mass affluent market in 2013. In referencing trends in both the EU and US, Ravindran says, "I believe more banks will start offering financial planning services over digital channels, thereby scaling the scope of digital channels from simple products and services to much more complex ones."

New Entrants and Non-Bank Competition Increase

Competition in and beyond the payments marketplace will continue to grab headlines and customers in 2013, making it imperative for traditional banks to keep a watchful eye on both new entrants and new forms of competition. As Simple continues to grow by providing streamlined banking to a growing list of consumers standing in a virtual queuing line to open accounts, Movenbank will open their virtual doors in early 2013>

At the same time, Walmart continues to innovate, leveraging partnerships like those with American Express for Bluebird, focused initially on the middle class consumer. And there is no reason why Walmart should stop with a prepaid offer according to Emily McCormick from Bank Director Magazine. "If successful with Bluebird, I'd look at what Walmart's next move would be, especially if they can dodge the regulatory hurdles than encumber banks."

Of greater concern in the longer run could be those offerings that bypass traditional banking channels completely. The rise of alt-lending (p2p lending, crowdfunding) in both the consumer and small biz space could present interesting challenges according to Jim Breune, CEO and founder of the Online Banking Report and founder of The Finovate Group. "Lending Club's $600-million-year (in loan originations) shows that US investors are buying into the concept and the British Governments recent announcement that they will lend 10 mil (GBP) through Zopa and 22 mil (GBP) through Funding Circle demonstrates that at least one government understands the economic potential of alternative forms of banking."

Continued Focus on Compliance and Security

Viewpoints differ on whether banks have fully adjusted to the impact of increased compliance and the CFPB. On one hand, a mid-sized bank executive stated, "The CFPB will still be a factor in 2013 for retail bankers. The question is, will it help add transparency and customer choice to the market for financial services or will their actions end up stifling choice and innovation because banks will be afraid to try creative new approaches to products or processes for fear of criticism or fines?"

Steve Cocheo, executive editor of the ABA Banking Journal has a more positive perspective when offering, "I believe that bankers will get over their compliance shell-shock in 2013, understandable as it is. While the regulations they face are often overwhelming, many will figure out new ways to meet their regulatory obligations with creativity and some fresh ideas. Not every institution will follow this path, but I believe more will than some think."

Management consultant Steven Ramirez from Beyond The Arc Consultancy sees potential for banks that embrace the context of the CFPB when he said, "Banks that expand the scope of their Voice of the Customer efforts will see an added benefit: mitigation of regulatory risk."

The impact of regulations is not just being felt in the U.S. Of particular concern for banks in the U.K., and potentially the rest of the EU, are proposed 'ringfencing' proposals that are focused on separating a banks' day-to-day retail banking arms from riskier investment bank activities. With the intention of protecting taxpayers from the potential of bailing out banks, these pending rules impact larger banks more significantly and will cause additional distractions similar to what has occurred in the U.S.

While the impact of the CFPB may be stabilizing and many banks are prepared for the impact of ringfencing, the same can't be said for the preparation for cyber attacks. This disturbing trend, which is impacting banks worldwide, may define issues ranging from consumer trust in banks to channel usage in 2013.

Mary Beth Sullivan, managing partner of Capital Performance Group, LLC stated, "I believe the cyber security threat will continue to increase, and retail banking organizations across the country will need to adopt more sophisticated security protocols and educate customers about it much more in 2013."

Bryan Yurcan, associate editor of Bank Systems and Technology agrees with his rather pessimistic post:

Change is Inevitable . . . Or Is It?

As mentioned by Bryan Clagett from Geezeo in development of this post, "Those in traditional retail banking need to realize that banking, as we know it, is evolving largely due to new disrupters in the space. I say, embrace the inevitable and look from within and outward at ways to build better, more efficient experiences."

Jeff Marsico, banking consultant and publisher of his own industry blog, referenced a sentiment similar to Jelmer de Jong's 'Just Do It' resolution for 2013 regarding the hopeful trend regarding the way bankers should look at the future:

Alternatively, maybe we could all step back and hope that Chris Skinner's slightly cynical prediction could become a reality.

Are there any trends you believe will be significant in 2013?

Additional Resources:

Financial Services Analyst Firm Announces Top Ten Trends in Banking, Payments, Mobile and Security for 2013: Javelin Strategy and Research, January 3, 2013

Top Trends in Retail Banking 2012: Celent Research, December 2012