In the past five years the percentage of weekly mobile banking users has more than tripled — from 9% in 2010 to 30% in 2015 — while weekly branch visitors fell from 40% to 24% in the same time frame. 2015 marked the first time that weekly mobile bankers (30%) exceeded branch bankers (24%) in Javelin’s survey. “What is driving this incredible growth? Smartphones and tablets are gaining rapidly in consumer adoption but it’s also a function of the fact that mobile banking services have not only proliferated but increased in the quality and features they offer consumers,” said Javelin analyst Daniel Van Dyke during a January 27 webinar reviewing the firm’s Mobile Banking, Smartphone and Tablet Forecast.
Javelin’s recent report Digital Account Opening Reaches The Tipping Point also found that more Americans are applying for credit cards, loans and investment products through digital channels than physical ones. Javelin has argued that “FIs that fail to divert resources from branch to digital suffer a large opportunity cost, missing out in lowered servicing costs for basic transactions and in sales of new products.” The service costs argument rings particularly true for mobile deposit, with Chase citing a cost of 65 cents for each teller deposit vs only 3 cents using mobile. While 38 percent of big bank customers utilize mobile deposit, only 18 percent of community bank and 16 percent of credit union customers do, placing these institutions at a significant disadvantage in terms of service costs.
While mobile can significantly reduce transactional costs, its rapid growth also carries a certain peril for financial institutions. “With mobile devices we’re giving consumers the ability to access their accounts and finances with incredible convenience, and increasingly in real-time,” said Mark Schwanhausser, Javelin’s Director of Omnichannel Financial Services. “The challenge with this is it creates fewer face-to-face opportunities. It’s reducing the power of the conversation we have, forcing us to rethink what is the future of banking and what will it look like?”
Mobile will create an opportunity for people to buy products without setting foot in the branch but Schwanhausser notes that it may also drive customers to the branch when the experience is less than optimal. “Thinking of things like account opening, it’s a pretty clunky experience where you can’t do it all in a mobile device,” said Schwanhausser. “But people often want to mix and match. Research a product, shoot documentation over and maybe they still want to come in and talk.”
The branch network, which peaked at 99,550 U.S. locations in 2009, has dropped each year since. The latest FDIC figure of 93,283 represents a 6.3 percent decline in the last six years, although Bryan Yurcan of American Banker was quick to point out that "most of that reduction has come with the nation's largest banks shedding inventory ... many smaller banks have held steady, and even increased, branch numbers."
While noting that a contraction in branches could have been tied to the recession, Van Dyke said "it's undeniable that digital services are playing such an integral role in this shift as well ... There are a lot of successful direct banking models around today. I think the number of direct banking (providers) will only increase over time." 78 percent of Javelin webinar respondents expected the number of branches to continue decreasing, while 15 percent said the number of branches will stay the same and another 7 percent envisioned branches eventually disappearing:
Predicting that account maintenance will increasingly be performed on mobile devices but there will be times that customers seek face-to-face advice, Schwanhausser said FIs need to "get into the business where they're influencing the behavior of their customers, guiding them to a smarter way to manage their finances. Those are very personal kinds of conversations. It's not about eliminating (the branch) but how do we put the pieces together in a more coherent way?"
Mobile Banking Ubiquity
While early adopters of smartwatches tend to be affluent or part of Gen Y2 (ages 25-34), mobile bankers no longer carry such unique characteristics. As Van Dyke put it, "The mobile banker of today is the banking customer of today. They're becoming indistinguishable." Mobile banking has become so commonplace that Javelin projects 80 percent of consumers will be engaging in it — on a 90 day basis — by 2020.
In 2015 74 percent of mobile banking users employed an app and 69 percent utilized a mobile browser, dwarfing the 31 percent using SMS text messaging. Schwanhausser said FIs will continue to wrestle with the question of what to make available in the app: "Do you make it fine tuned and focused and streamlined or replicate what can be viewed in online banking?" Van Dyke predicts that banks will continue to take advantage of device-specific capabilities, whether using the camera for mobile deposit or geolocation to identify nearby ATMs. "Things like that will underscore the need to offer superior experiences on the app," said Van Dyke.
2015 marked a continuation of Android's dominance, as the operating system grew its share of the U.S. tablet market from 45 to 48 percent and its share of the U.S. smartphone market from 47 to 49 percent. Apple's tablet share fell from 46 to 43 percent, with its smartphone share dropping from 46 to 45 percent. While Apple's numbers have been moving in the wrong direction Van Dyke reiterated that iOS users are the most valuable that an FI can serve. "iPhone users show extremely unique characteristics. They bank more often, they make payments more often," said Van Dyke. "When it comes to banks and payment providers iPhone owners are the gold standard." In addition to serving Android users, Javelin recommended that FIs prioritize an app on Amazon — but only after all iOS and Android device types have been addressed. Javelin suggested that there was no value in supporting Windows or Blackberry users, who only represent 4 and 2 percent of the smartphone market respectively.