Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

Table of Contents

Executive summary Research methodology Considering the consumer Mobile user increase Capturing mobile ‘hearts and minds’ Why go mobile? Hunters and farmers Beyond the customer Technical issues Conclusion

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Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

Executive Summary Mobile banking poses many questions for the financial sector and telecoms providers alike. There has been a generous effort by all interested parties to leverage the potential benefits that mobile banking can deliver to customers. However, response from the market has been measured at best. The Sybase 365 Global Mobile Banking Survey 2008 seeks to provide context to many of the conundrums surrounding the delivery of mobile banking services in an increasingly competitive retail and professional banking world. This report is relevant reading for any financial service provider evaluating peer opinion on mobile services before taking the next strategic step. Using data resulting from interviews with some of the world's largest financial organizations, as well as representative samples of national and specialist financial institutions, the survey takes a regional (US, Europe and Asia-Pacific) and international view of mobile banking sentiment and trends.

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Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

A summary of the key findings is as follows: Enthusiasm for mobile banking services 66% of respondents in the survey considered that mobile banking provides an excellent opportunity to enhance existing customer service International factors European and Asia-Pacific regions are considerably ahead of the US in terms of mobile banking provision – only 10% of US banking organizations taking part in the study currently offer mobile banking against 57% in Europe Expected growth With 34% of banks (globally) currently offering mobile services to customers, an additional 32% of respondents plan to offer mobile services in the next 12-24 months. 53% of US banks expect to be offering mobile services in the next 12-24 months, giving potential parity to mobile service provision across the globe by 2010 (see Figure 1) The suggestion of considerable momentum for mobile banking over the next two years should be received warmly by mobile providers and bankers alike. The ratio of mobile banking users, i.e. customers adopting mobile services remains modest, but is predicted to grow over the next two years with 58% of banks currently offering mobile banking expecting that at least 1 in 10 customers will be using mobile banking by 2010. However this growth will not come without modification of existing processes: Our challenges are all based on standardization measures with regard to browsers, security demands and operator tariff systems. (European Banking respondent, Sybase 365 Global Mobile Banking Survey 2008)
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Figure 1: Mobile banking provision plans, all respondents (base: 92)

60% 53% 50% 43% 40% 30% 20% 10% 0% 10% 20% 22% 47% 37% 31% 33%

Offer mobile services

Plan to offer in next 12-24 months

No plans to offer

Asia

Europe

US

All

Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

Further key points from the survey include: Raised awareness A key consideration, mirrored in the Sybase 365 mobile banking consumer study undertaken in 2007, is the level of awareness that customers have of mobile banking. The 2007 consumer study showed that in Asia-Pacific, US and European regions over half of respondents were not aware if their bank offered mobile services. It appears that businesses are responding to awareness issues with 65% of the banks who currently offer mobile services to customers stating that marketing budgets and activity to raise awareness are part of the strategic plan for 2008. Delivery options Service sits at the center of the banking philosophy, acting as a measure of quality by customers and a critical aspect of differentiation by the banks themselves. As shown in Figure 2, the method of management and delivery for mobile services is biased considerably towards the organic, in-house approach. It will be interesting to observe how this trend changes over time, especially with concerns voiced from several corners of the respondent base regarding ‘security’, ‘integration’ and ‘platform compatibility’ when discussing mobile banking challenges.

Figure 2: How is the delivery of mobile banking services managed from a technical perspective within your organization?

60% 50% 40% 30% 25% 20% 10% 3% 0%
All in-house management In-house mangagement with additional 3rd party support Fully outsourced to 3rd party single supplier Fully outsourced to 3rd party multiple supplier

48%

19%

5

Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

In summary… Growth The research concludes that the next two years will see a second wave of mobile banking provision and adoption taking the lead from early adopters in Europe and Asia. The number of banks offering mobile banking is set to double in this time frame and the number of customers using mobile banking services is also expected to increase significantly from existing levels. If respondent intentions play out, the number of banks that do not offer mobile banking will be in the minority by 2010, rather than the majority, as is the case today. This is a significant swing and a clear indication of accelerated mobile provisioning. Risk There are risks along the way for financial institutions when expanding or introducing mobile services. Mobile internet can sometimes be viewed as an afterthought, or ‘add on’ to existing internet services. The good news is that this creates a channel for mobile banking use, the bad news is it suggests an absence of specific mobile strategy – evidenced both by the desire expressed by the sample for improvement on the status quo and the level of challenges currently experienced in delivering mobile services. Evolution Mobile banking is evolving. This is not a simple case of better technology and better handsets, as technology is always evolving along this latitude. The more important developments are taking place with service providers. Findings show that different types of banking organizations are pursuing mobile banking with different goals in mind, which will undoubtedly lead to a wider array of more sophisticated services. The ‘second wave’ of mobile banking providers will also have learnt a great deal from internet service provision and current mobile banking usage. The enrichment of mobile services, combined with the cost benefits and customer intelligence gleaned from mobile data, looks set to change the way mobile provision is delivered and utilised towards the end of the decade.
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Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

Research methodology The field research for the Sybase 365 Global Mobile Banking survey was undertaken using a Computer Assisted Telephone Interviewing (CATI) system, targeting decision makers within the financial sector responsible for the delivery of mobile and/or internet banking. The sample comprised of the top 1000 banking institutions in the world from which 92 interviews were conducted in total. The sample included 32 European banks, 30 US banks and 30 banks from the Asia-Pacific region. A representative distribution of tier 1, 2, and 3 banks was also achieved. The research was completed in February 2008 and managed by Loudhouse research, an independent research consultancy based in the UK.

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Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

Considering the consumer As customer-driven organizations, it is important to ascertain what banking customers think of mobile services in order to set the context for further discussion within the report. In 2007 Sybase 365 undertook a survey of over 7,000 consumers worldwide to understand the drivers for mobile banking usage across the globe. As Figure 3 shows, a surprising number of mobile users acknowledge the appeal of dealing with financial matters ‘on the move’. Almost one in three mobile users (globally) agreed that this aspect of bank interaction was favorable. As Figure 4 shows, when looking at the type of services that consumers would be interested in when adopting mobile banking services, two thirds (67%) expressed a preference for standard transactional information, such as receiving balance enquiries via the mobile. With the evident enthusiasm for personal financial information via the mobile expressed by the consumer survey, there would appear to be a clear opportunity for retails banks to capitalize on this position. However, current mobile banking provision and usage fail to reflect the positive sentiment expressed in Figures 3 & 4. This leads one to wonder: what’s missing in the mobile banking equation?

Figure 3: I would like to be able to deal with my bank on the move

69%

31%

Agree

Disagree/Neutral

Figure 4: What type of services would you like to receive via your mobile phone?

33 % 6 7%

Would like to receive balance enquiries Would not like to receive balance enquirues

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Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

Mobile user increase One of the sticking points in the mobile banking equation is that, as shown in Figure 5, existing levels of mobile adoption remain modest. Looking ahead, the outlook is more positive. Figure 6 shows that estimated mobile banking user numbers within the next two years will increase to an average of 16%. In other words, the user base per bank is set to more than double. This increase of users per bank also needs to be considered within the context of the number of additional banks planning to offer services, as shown in Figure 1. If plans hold true, the actual number of banks offering mobile services is also set to double, meaning that the overall number of people engaging with their banks via mobile data could increase by a factor of 4 to 5 times over the next 12-24 months. Admittedly, by starting with a low base figure, the multiples can easily sound attractive, but the fact of the matter stands that there will be a measurable upswing in mobile banking usage, driven by two encouraging factors: existing mobile banking providers anticipated increase in service usage and a larger percentage of banks globally offering mobile services. These figures should be of particular interest for the Americas region where, not only US consumers express a higher than average enthusiasm for banking on the move (49% US to 33% global average), but this region also has the most significant growth potential (as shown in Figure 1).

Figure 5: Current estimate levels of customers using mobile banking from respondents offering mobile services (34%)

6%

94%

Current users

Other

Figure 6: Predicted levels of customers using mobile banking by 2010

16%

84%

Potential use by 2010 Other

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Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

Capturing mobile ‘hearts and minds’ As an interesting further dimension to the rationale for offering mobile banking services sooner rather than later, a question was posed to the consumer group in the 2007 study regarding the ‘draw’ of mobile banking as a stimulus for changing banking providers. The banks themselves in the 2008 study were also questioned on this issue. As with the previous charts comparing consumer and banking sentiment, there are some interesting differences of opinion. When the 2007 consumer panel was asked if they would consider switching banks if free mobile banking was offered, 24% stated that they would consider moving. This is quite a considerable number, especially when set in context of other marketing lures at the disposal of the banking industry and their relative success rates. Furthermore, as shown in Figure 8, 45% of the banking sample considers that mobile banking is a way to encourage potential customers to switch banking providers. However, in line with existing user figures provided in Figure 5, the respondents in Figure 8 consider that only around 5% of customers would potentially move banks. Clearly, end user enthusiasm for new ways to interface with their banks (such as mobile banking) is countered by banking provider caution in providing the services, creating something of a frustrating hiatus. More alarmingly, there is a suggestion that mobile banking could be a greater contributor to customer attrition than bankers predict.

Figure 7: I would consider switching to a bank if I was offered free mobile banking (Consumers 2007)

24% 76%

Agree

Disagree/Neutral

Figure 8: Do you think that offering mobile services is a way to encourage potential customers to switch banking providers?

55%

45%
Respondents believed that on average only 5% of customer would move banks

Yes

No/don’t know

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Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

Why go mobile? Figure 9 provides a priority list of mobile triggers that have encouraged the mobile provider section of the sample to offer services in the first place. The top three criteria tell a simple story: banks provide mobile services to improve customer experience, to extend internet banking, or to achieve competitive advantage. This seems a common sense approach. The harder commercial rationale of reducing customer service cost and/or generating revenue are less well represented in the chart, though cost reduction is clearly a more compelling driver than revenue generation. The chart has also been split into ‘hunters’ and ‘farmers’ to point out some notable differences. In the survey, respondents were asked if their predominant strategy was a) to increase revenue from existing customers (farmers) or b) to grow their customer numbers overall (hunters). Each group represents around 40% of the sample, with the final 20% preferring a balance between the two options. It is interesting to observe the difference between the hunter and farmer groups when looking at drivers such as customer demand, reaction to competitors and the need to generate new revenues. It goes with ‘type’ that the farmer group are more interested in satisfying an existing customer demand having already established a competitive advantage, whilst the hunters are in a more reactive and revenue focused mindset. However, what this also demonstrates is that, even with a minority of banks providing mobile services today, the drivers for doing so can be very different.

Figure 9: From the following, what would you say were the reasons that your organization introduced mobile banking services?

Additional service to improve customer experience Competitive advantage Logical extension to internet banking Customer demand Reduce existing customer service costs Reaction to competitor mobile services 35% 48% 30% Generate new revenue strems
Farmers Hunters

88% 85% 87% 82% 77% 81% 77% 62% 71% 65% 69% 65% 46% 55% 65%

62%

39%

54%

All

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Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

Hunters and farmers Continuing the hunter/farmer theme, Figure 10 shows that the farmer group also associates a greater level of importance with mobile banking than their hunter counterparts. 44% of the farmer respondents consider mobile banking to be important against 32% of the hunter sample. Coupled with the increased number of farmers that undertook mobile banking to achieve competitive advantage, rather than as a reaction to competitors, there is the suggestion that our farmer group has a more mature and, potentially, more informed view of mobile service provision. In shaping a view on best practice, it appears certain fundamental aspects of commercial strategy will influence the approach to mobile service provision, and therefore the types of services that are being offered. To date, it is difficult to speculate on which approach is more successful, as both hunters and farmers have their merits, but it may help other businesses considering an appropriate mobile strategy to observe the following: Hunter Customer growth driven React to competition Mobile revenue focus Creating customer need Farmer Customer value driven Competitive first mover (mobile) Cost reduction focus Reaction to customer demand Mobile drivers

Figure 10: On a scale of 1 to 5, where 1 is not very important and 5 is very important, how would you rate the importance of mobile banking to your organization?

40% 36% 35% 30% 25% 20% 15% 10% 5% 0% Not at all Not important important
Hunters Farmers All

34% 33% 28% 27% 24% 20% 14%

21% 16% 15% 10%10% 7% 5%

Neutral

Important

Very important

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Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

Beyond the customer Mobile data and banking is not solely the domain of custom information services. Mobile communication is also present within financial sector organizations, used as a support tool for call center services as well as for internal communication, as shown in Figure 11. There is room for growth within both these areas in terms of general take up of services, but also the sophistication of services involved. Many bank customer call centers are burdened with rudimentary account enquiries that can easily be alleviated with SMS-based services. It is also easier for a business with existing knowledge of text and WAP-based internal communications services to channel that learning and experience into customer facing tools. Figure 11, in line with the rest of the survey, describes a sector that is still very much ‘coming to grips’ with mobile technology at a coordinated corporate level. This is also acknowledged in Figure 12 when looking at the level of need identified in getting more from the data generated by mobile users. With those financial institutions currently offering mobile banking services seen as somewhat ahead of the curve in terms of provision, it is unfortunate that 58% of them agree that the CRM potential created by mobile data is not best utilized at present.

Figure 11: Does your organization use mobile/SMS technology in any of the following ways beyond customer facing, or internet-orientated services? (Base 92)
60% 50% 40% 30% 20% 10% 0% SMS statement sent from telephone/call center enquiries None Corporate SMS application/system for internal communication 15% 25% 60%

Figure 12: Our organization could do more to capitalize on the data generated from mobile users to improve/refine mobile services.
50% 40% 30% 20% 10% 0% Strongly agree Agree Neutral Disagree Strongly disagree 10% 3% 23% 16% 48%

13

Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

Technical issues Mobile service delivery does not come without technical challenges, though as shown in Figure 2, most banks are happy to overcome these challenges with in-house resources alone. Figure 13 describes the most common methods that mobile banking providers consider will improve current offerings. The overriding issue is one of delivering a wider range of services. Consistent with increased marketing efforts to end users (65% of the sample stated that they were to increase marketing focus on mobile services), education is also a key theme. However, there is also a notable desire to overcome perennial technology challenges surrounding integration, security and CRM. Some of these sentiments are echoed in the responses below regarding challenges in the delivery of mobile services: What do you see as the main reasons for customers not undertaking mobile banking? Only available on certain devices by certain networks; we are an early adopter of mobile banking so we are ahead of customer demands. Compatibility issues with the different handsets out there. Our system requires WAP browser 2.0; if the hand held device does not meet that, the customer can’t use mobile banking.

Figure 13: In what ways do you think that mobile banking services could be improved within your organization?

Wide range of services Better education Improved security Better integration of mobile and online services Improved CRM using mobile data More marketing support Cheaper subscription
10% 29% 39%

48%

On a positive note, most of the technological obstacles referred to are becoming much less of an issue as the mobile industry overcomes interoperability and standardization challenges. More importantly, a strategy that correctly accounts for these issues at the outset is less likely to encounter them once mobile services are live.

“ “

29%

29%

26%

14

Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

Conclusion Mobility in banking is not a new term. In fact, some businesses in the sample have been supplying a form of mobile information services to customers for four years or more. However, there are several factors, in addition to the findings discussed in this report, that suggest the next two years will witness a step change in mobile adoption and delivery within the financial sector, including: Standardization of mobile internet platforms Increased handset functionality Second wave of mobile adoption by banks Consumer confidence in technology Consumer familiarity with ‘digital’ service delivery The first wave of mobile banking services has undergone a steep learning curve in mobile banking delivery. However, the second wave is comprised of a more informed provider community and a more enthusiastic customer base, both of which suggest a promising two years ahead. Evidently, mobile banking is not for every customer today, but the range of potential services on offer means that it can become a very flexible customer tool. Some customers will thrive on location independent minute-to-minute financial information; others may simply want to check a bank balance with a simple text message on occasion. As Figure 14 shows, most mobile banking activity currently focuses on information alerts, though there is a wide array of more sophisticated services offered in general.
Figure 14: What services, if any, do you currently offer your customers in terms of mobile banking?
Balance on demand Transaction alerts Money transfers Balance alerts Request a call back from customer services Request a statement or mini statement OTP (one time pin) or 2FA or mTAN Check interest rates and/or share prices Bill payment Make a deposit or withdrawal Call to action in marketing campaign Reports of potentially fraudulent transactions Being able to freeze card Set up regular withdrawals or deposits
45% 42% 36% 36% 29% 26% 23% 19% 16% 16% 77% 74% 71%

87%

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Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

There is still a considerable amount of work to do in getting the financial sector up to speed with the potential of mobile banking. It is fair to say that a lot of mobile services today suffer the challenges common to many early adopter infrastructures: siloed data resources, lack of standardization and mixed service delivery methods. Therefore, current mobile solutions are rarely optimal for either customer or service provider. However, that trend is changing. Internet banking has created the delivery channel for many mobile internet possibilities and delivery obstacles are being ironed out. The future challenge is to think about mobile strategically. SMS balance alerts may prove to be a good starting point for mobile banking strategy, but the industry now requires a greater understanding of how to establish a mobile relationship with customers, one that new customers increasingly demand and new technology provides. The findings in the survey also suggest that mobile strategy is driven more by implication than planning, as demonstrated by the ‘hunter/ farmer’ approaches. It is encouraging that the market is beginning to differentiate service provision, but questionable as to how aware banking organizations are of this behavior. As stated in the executive summary, the ‘second wave’ of mobile banking activity will be defined by three factors (see page 17). Arguably, the success of mobile banking adoption will be decided by how effectively banking organizations can acknowledge, adapt and respond to these points. Mobile banking provides unique opportunities for customer engagement that the majority of the banking industry appear keen to explore.

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Mobile Banking: The Second Wave Global Mobile Banking Survey 2008

Growth The number of banks offering mobile banking is set to double in this time frame and the number of customers using mobile banking services is also expected to increase significantly from existing levels. If respondent intentions play out, the number of banks that do not offer mobile banking will be in the minority by 2010, rather than the majority, as is the case today. This is a significant swing and a clear indication of accelerated mobile provisioning. Risk There are risks along the way for banking organizations when expanding or introducing mobile services. Mobile services can sometimes be viewed as an afterthought, or ‘add on’ to existing internet services. The good news is that this creates a channel for mobile banking use, the bad news is it suggests an absence of specific mobile strategy – evidenced both by the desire expressed by the sample for improvement on the status quo and the level of challenges currently experienced in delivering mobile services en masse. Evolution Mobile banking is evolving. This is not a simple case of better technology and better handsets, as technology is always evolving along this latitude. The more important developments are taking place with service providers. Findings show that different types of banking organizations are pursuing mobile banking with different goals in mind, which will undoubtedly lead to a wider array of more sophisticated services. The ‘second wave’ of mobile banking providers will also have learnt a great deal from internet service provision and current mobile banking usage.

For more information, please contact: info365@sybase.com To download a free copy of the Sybase 365 2007 consumer study ‘Nano-economics: Mobile Opportunities for the Financial Sector’, go to www.sybase.com/365

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