The phrase “banker’s hours” has traditionally been used with disdain. For a long time, access to banking and other financial services were limited, forcing most people to take time out of the work day to visit physical branch locations or a broker’s office.
Time has changed courtesy of digital revolution in the financial services industry.
“Fintech” and “mobile banking” have become the topics du jour for anyone in the financial services industry. Consumers are no longer interested in being limited to prescribed hours to do their banking. A study by the Federal Reserve Board of Governors found that at least 53% of smart phone users had used a mobile banking app in the last year. What’s more, a Google study found that 40% of consumers would choose to switch banks rather than put up with a less-than-optimal mobile experience from their current bank.
Mobile banking is the future of the industry, and that means that mobile app development is an area of tremendous opportunity. Designing apps that allow people to connect with their finances from anywhere and manage them with ease and confidence is the newest gold rush, and the people who succeed in creating the best and most popular avenues for consumers and their cash will find themselves holding some of the most lucrative territory in the mobile space.
Seamless Interactions, Frictionless Transactions
A world where every consumer carries a computer in their pocket has meant a fundamental shift in the way people handle their finances. Personal finances can be managed any time, from anywhere. While consumers are still adapting, the smartest efforts at mobile app development now can position an app in the best place to take advantage of the coming tidal wave.
And that wave is already arriving. Mobile banking and mobile payments are rapidly moving from being seen by consumers as a perk to a necessity. According to a Bank of America study from last year, 62% of people’s primary method of interaction with their bank is digital, up from 47% just two years earlier.
This presents an enormous opportunity for those app developers who can really pave an efficient path between consumers and their banks. The right mobile app isn’t just going to be a nice to have, it’s going to be a must have. The service that is efficient, improves the user experience, takes an industry traditionally known for being opaque and difficult to access, and then turns it into a simple, intuitive service, is something banks are going to require to keep their customers.
Payment apps are also at a critical junction. According to the Federal Reserve study, there was an over 20% increase in the use of mobile payment apps among smart phone users just from 2011 to 2014, and another study from First Annapolis found that 64% of respondents had used a mobile payment app in the last year and 39% already had a digital wallet on their phone. These numbers skew way higher for younger respondents.
However, that same First Annapolis study also found that only 5% of respondents were using their mobile payment app once a week or more. That means that while there’s plenty of consumer awareness in the market, consumer adoption is still pretty wide open. With merchants and consumers alike not fully committed to one solution, there’s an opportunity to create an app that becomes the industry standard that sits in the middle of millions of transactions and establishes a presence at the point of sale that would be difficult to dislodge.
Improved Services and Targeted Marketing
So, mobile banking is rapidly becoming a necessity, but it’s also a massive opportunity to better connect with customers. According to a study from Fiserv that included 240,000 credit union members, mobile banking customers used 77% more product offerings than branch-only customers, and the average number of unique products holdings increased by 12% after customers started using mobile services.
Perhaps more important, POS transactions for mobile pay were much higher among smart phone users. Mobile users only made up 14% of the customers but 39% of total POS transactions, and mobile users added a 19% increase in POS transactions and a 46% increase in POS credit and debit card transactions. So, not only is a great mobile app becoming necessary for customer retention, mobile users are more valuable for customer acquisition. These customers use banking services more, make more purchases, are receptive to new features, and cost less to acquire.
But mobile users pose even more opportunity. The ability to capture data from mobile users can give crucial insights into their spending behavior. This dramatically improves the ability to deploy targeted marketing campaigns that directly respond to consumer needs. Users only see ads for goods and services they need and are interested in, and marketers can limit their outreach to those people who actually want what they’re selling.
This type of data is invaluable, and has helped drive the development of wildly successful personal finance apps like Mint. Their services are excellent and upgraded the users’ ability to manage their personal finances and track their spending habits. And they can offer that service for free because those same spending habits are helping Mint app offer users services tailor-made for their present situation.
Reduced Cost, Improved Margins
Of course, the news keeps getting better for those financial institutions successfully converting customers to use mobile banking apps. Not only are those customers more loyal, more active, and potentially providing a treasure trove of data, but the margins on their services are vastly improved. A Javelin Strategy & Research study found that the average cost for a mobile banking transaction was just $0.10 for banks compared to $4.25 for an in-person transaction at a physical branch.
Those savings mean a huge opportunity for mobile banking app developers. The most valuable customers are the ones most interested in mobile services, and shift them to those services means saving huge sums of money on transaction costs. For app developers, that means financial institutions have a lot of resources to invest in apps that successfully attract customers who prefer mobile or move existing customers onto mobile platforms.
Mobile app developers presenting the strongest mobile banking products will be providing an incredibly valuable service to their institutional customers, a service that those customers will likely be willing to invest heavily in and pay a premium for.
New Opportunities in the Lending Space
Of course, the benefits of a decreased cost per transaction aren’t limited to saving banks money for day-to-day transactions. The changes to the lending industry also have a chance to break ground on new territory.
Obtaining a loan to buy a car or open a small business has long been a difficult process. However, that may be changing. Banks used to have to pay for hours invested by their loan officers to determine which loans were worthwhile, meaning that only those loans with the highest returns would allow them to even break even. However, new approaches to lending that deploy mobile apps to collect consumer information and simplify algorithmic approaches to determining which loans meet the necessary criteria, are opening up a whole new swath of potential customers. With overhead drastically reduced, lenders can afford to take on more borrowers and to strategically loosen their standards.
Small-business lending apps like Kabbage can approve a $100,000 line of credit after a process that can take as little as just seven minutes. Even the big players are getting into the action. Major banks like Barclays are using a mobile app designed to facilitate small business loans in England.
There’s also the growth of peer-to-peer lending, which is leveraging technology to connect borrowers with potential lenders, cutting the banks out of the loop entirely. Companies like Prosper, Upstart, and Funding Circle are putting consumers in touch with other consumers while carefully tracking default rates to give borrower and lender a clear sense of what appropriate interest rates are.
With the loan process being so complex, building a mobile app that not only streamlines the process, but also helps borrowers understand and feel comfortable with the process, could be essential to helping unlock a whole new market for the lending industry.
Serving Underbanked Populations Means New Customers
Of course, when it comes to broad sections of the population being unable to access banking services, lending is just the tip of the iceberg. Much of the American population is underbanked, lacking access to even a simple checking account. This creates a host of extra expenses for people who are frequently already struggling to get by.
However, once again, the ability for mobile to lower many of the old barriers to providing banking services could mean tapping into a huge group of new customers. The Federal Reserve study found that smart phone ownership was just as high among the underbanked as the fully banked, that minorities that make up a large portion of the underbanked are more likely to use smart phones, and that the use of mobile banking services occurs at a higher rate amongst the underbanked.
All of this points to a huge opportunity for financial institutions to repair the relationship between themselves and communities that they have long either ignored or failed to find ways to profitably service. Mobile app developers who can cater to these communities, helping introduce people largely unfamiliar with banking services to what’s available, could help unlock an important new revenue stream for financial institutions.
Perhaps even more exciting is the way that investment portfolio management is changing. Plenty of new mobile apps offer people the chance to invest whatever small sums of money they may have left over after paying bills. Apps like Acorn, Stash, or Clink all allow users to begin stashing away small sums to begin taking advantage of the benefits of compounding interest. On top of that, automated investing apps have further helped make the process of selecting investments much easier and more transparent, helping attract a new generation of investors and savers to the markets.
Fintech Could be Key to Next Generation of Financial Companies
Of course, perhaps one of the most exciting things mobile is bringing to the financial services industry is innovation. As much change as we have already seen, there’s every indication that we’re only scratching the surface of what’s possible. More and more fintech companies are springing up every day, building a wide variety of new services and processes for mobile consumers.
This translates into new opportunities in the areas of web and mobile app development. The explosion of mobile banking has created thousands of jobs and stands to continue to grow, building an industry that should survive well into the future.
Mobile app developers can’t miss out on this opportunity. The financial services industry is catching up to digital revolution and the apps that are likely to become household names in the near future are likely to hit the market in the next few years.
Mobile is the Future for Financial Services
Mobile has been changing nearly every aspect of people’s lives, and in that context, it should come as no surprise that our financial lives are a part of that as well. However, to simply fold the current revolution happening in financial services today into the broader cultural shift surrounding smart phones would likely be a mistake. The relationship between the financial services industry and its customers, something that has remained largely stable for most of the 20th century, is currently undergoing a change that is permanently redefining the industry.
And in that, we could be entering a golden age for the financial services industry, one where a sweep of new services, new products, and new consumers are becoming available. And for those people developing the software and mobile apps that continue to fuel this revolution, the future is bright.