A new Fiserv study of eight credit unions and nine banks shows there’s money in mobile.
Titled “Mobile Banking Adoption: Where Is The Revenue For Financial Institutions,” the study was conducted over the course of 12 months at 17 financial institutions of varying asset sizes. Per the release, it compared product usage, transaction frequency, attrition rates, and revenue generated among three groups: mobile banking users, online users, and branch-only users.
The point was to view the engagement from mobile banking users three months before and after they enrolled in mobile banking. Engagement was defined as using bill pay, person-to-person payments, transfers, or deposits. The survey was done among 240,000 credit union members and 283,721 bank customers.
A 2015 Pew Research Center report puts the number of Americans who own a smartphone at 64%, up from 35% in 2011, underscoring the importance for financial institutions to develop and implement mobile banking capabilities — as 64% of the total population represents some 200 million plus Americans.
The impediment to implementing mobile, until now, had been the ambiguity with the return on investment. It’s one thing to say that credit unions should have mobile banking capabilities because the younger and most sought-after generations spend a great deal of time on their phones. It’s another thing entirely to back that sentiment with cold, hard facts.
In broad strokes, the study shows mobile banking adoption is associated with lower attrition, greater product usage, and an increase in transactions; in sum, resulting in increased revenue for financial institutions that offer the service.
Average number of product holdings (including loans, certificates of deposits, credit cards, and mortgages) increased after consumers’ adoption of mobile banking by 11% in the three months post-adoption.
Mobile banking members and customers at the credit unions and banks in the study have higher product holdings as well, averaging 2.3 products vs. 1.3 products for branch-only customers. Those who use mobile are likely more engaged with their financial institution than those who don’t, the survey finds.
“If customers have savings accounts, auto loans, and mobile banking with a bank, for instance, they’re more likely to think of that financial institution when they need mortgages or other financial services products,” the survey report reads. “As consumers use more products, they turn to mobile banking to help them manage increasingly complex financial lives. This may lead them to specifically seek out mobile banking capabilities as part of an overall financial relationship.”
In the three months after adopting mobile banking, consumers increased the number of debit and credit card transactions, ATM transactions, and ACH transactions made. These upticks are beneficial for an institution because many of these transactions create revenue, such as interchange fees.
In the three months after adoption of mobile banking for credit union members, the study found a 19% increase in the number of average monthly POS transactions, a 25% increase in the number of ATM transactions, and a 13% increase in the number of bill pay transactions.
Mobile banking adoption may also portend a decrease in branch transactions but higher potential cost savings, the study finds.
In the three months after adoption of mobile banking, credit union members exhibited a 32% decrease in branch transactions, from 4.4 to three per month. The cost savings may also be significant. Quoting a Javelin Strategy & Research report which found that the average cost per mobile transaction to be just $0.10, while an in-person transaction at a physical branch costs $4.25. Migrating more simple transactions to mobile versus in-branch could reduce overhead and result in cost savings.
But the branch would still be valuable.
“[Consumers] will likely return to perform high-touch, high-engagement transactions [in-branch], such as asset management, loan origination, and resolution of potential fraud activity,” the report reads. “This shift in interaction types may even be a catalyst for optimization of the retail space.”
The study also found that attrition rates greatly declined for consumers with mobile banking users when compared to online and branch-only consumers.
At credit unions, the attrition rate was just 4.9% compared with 13.4% for members who weren’t enrolled in mobile or online channels.
All told, these findings contributed to higher average revenue at the credit unions studied. In this case, revenue was defined as interest income from various types of loans and various fees, such as interchange fees, late fees, and finance charges. At credit unions, revenue from mobile users was 36% higher than branch-only users.
How’s that for a return on investment?
“The financial institutions in this study are seeing tangible revenue from mobile banking,” says Matt Wilcox, senior vice president, marketing strategy and innovation at Fiserv. “Marketing mobile banking and highlighting how it can help consumers keep pace with the speed of life is absolutely essential if financial institutions want to grow adoption and use of the service and reap the benefits of their mobile investment.”