The long-term dividends Canadian banks should seek from their mobile apps

So you’re a financial institution offering customers tools to use on their smartphone. Terrific! According to Gartner, though, it’s not quite enough.

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North American banking trends 2015 Gartner

Banks aren’t just affected by the economic climate and the state of the loonie. The proliferation of new technologies, changing consumer behaviour and the rise of “non-banks” are game-changers.

But they’re faced with a conundrum: They’ve introduced mobile apps, but they’re not driving revenue from those apps — at least not yet.

While most banks in North America have rolled out various online and mobile banking solutions, tensions exist between banks and their customers, said Rajesh Kandaswamy, research director with Gartner, in a recent webinar on market and technology trends in the North American banking sector.

While banks haven’t increased revenues or reduced costs through mobile banking solutions, customers generally aren’t happy with the solutions on offer (according to app ratings). They expect more.

And in 2015, banks plan to roll out more mobile solutions, according to Kandaswamy, but they also want to bring mobile in line with other technology investments.

“They want to integrate more with their internal systems,” he said. “But if you do that, is there a risk of not being able to do as (many) customer-facing enhancements? That’s a tension.” Banks also want to focus more on security and privacy, which may affect their ability to provide features that will enhance the customer experience.

They’ll need to find a way to ease those tensions, because mobile apps aren’t a competitive differentiator anymore. They’re the future of banking.

And this becomes even more important as we see non-traditional players entering the market. Mobile, social and cloud are enabling a new set of providers — from tech companies to retailers — that are all trying to get a slice of the pie.

Apple Pay has launched in the U.S., and while it’s still in its early days it has sparked interest. It’s Apple, after all. Walmart, the world’s largest retailer, is branching into low-cost chequing accounts and money transfers. And several non-banks are offering banking services: Intuit, for example, bought Check, a mobile app that automates and consolidates the bill payment process.

But Kandaswamy points out that supporting mobile payments isn’t just about winning business away from your competitors — that’s short-term thinking. It’s about using mobile payments to expand into new areas and help drive revenue.

That could mean expanding into non-card payment areas (where cash and cheques are typically used, such as transit and fast food) and penetrating faster-growing businesses (such as those in the “sharing” economy, which includes social lending and car sharing). Those could become new sources of revenue.

“You’re not just transforming payments from plastic onto mobile,” said Kandaswamy. “You’re really using mobile payments to get into areas where it used to be cash.”

If you’re looking to build out your mobile offerings over the next year, cost and scale are still important. But Kandaswamy says that’s not enough to overthrow other incumbent players in the market.

If you want to exceed customer expectations — and actually make some money — it’s going to require innovation and flexibility. And it’s going to mean keeping up with those innovative, flexible “non-banks” that are using mobility as a game-changer.

Image courtesy of Stuart Miles at

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