For banking industry, mobile-first is the future

With the surge of smart phone use — which is as high as 74 per cent in the UAE — and internet access data packages becoming more and more affordable and thus easier to avail, the future of digital banking is undeniably mobile.

Whilst device penetration in the UAE is at a staggering high, banking services being offered to customers will need to become mobile as well.

Banks are in fact realising that their mobile offerings can no longer be just an extension of their current services; instead, services must be designed to provide a successful digital experience.

On the practical side, mobile innovations can also be applied on other channels. Because of this banks are investing increasingly in a mobile-first strategy. Instead of designing new products for the branch or online portals, they are experimenting and repeatedly verifying what works best for mobile — only then will they roll out that strategy on their remaining channels.

In a way, they see the bank branch of the future as a hub for teaching customers how to use self-service channels for routine use, repetitive tasks (such as deposits and withdrawals) as well as checking balances.

In this way, customer service representatives are freed to provide personal assistance for more complex transactions and to take on a greater consultative role.

The way some banks are tackling the momentous task of a successful mobile offering is by employing digitally savvy experts — who do not necessarily have a financial background — to work alongside finance gurus.

While the banking professionals ensure that risk, security and compliance are adequately addressed, the mobile experts create a user-friendly, intuitive and consistent customer experience that works across mobile phones, tablets, websites and ATMs.

In the meantime, mobile wallets offer the next big emerging opportunity for commercial banks. The so-called ‘m-wallet market’ is projected to grow at a combined annual growth rate (CAGR) of around 30 per cent in the next five years — from 2015-2019.

The market segment of M-wallet includes the transferring of money, all types of services related to banking transactions, as well as value added services — such as shopping, ticketing, recharging and bill payments.

In this particular segment, the highest market share — at 38 per cent — is captured by money transfer businesses, followed by recharge and bill payments at 30 per cent, as well as utility areas at 12 per cent. Others enjoy a 20 per cent market share.

Financial institutions, e-commerce and lifestyle shops have realised the potential of mobile wallets in terms of consumer experience and consumer loyalty. This is why each of these are keen to invent their own version of a m-wallet. However, it would be relatively easier for banks to do so, as opposed to a non-bank product, since banks already have a trusting customer base. Similarly, their product is less likely to suffer from interoperability.

The next big emerging opportunity on the horizon is Mobile Money and P2P transfers. The single most important factor driving the boom in mobile money transfers, particularly in developing markets, is the ability to reach the unbanked. There are about 2.5 billion people out there who solely rely on cash and do not have a bank account — and while a billion of these have no bank account, they do have access to a mobile phone.

Mobile-wallet services could provide them with whole new ways to safely transfer money. Similarly, they could sign up for financial services like insurance without the need to carry cash physically or to sign up via traditional banking procedures. With a market as mature as that of mobile, it seems one can assume that most major opportunities have been tapped into. However, mobile money is a great example showing that banks still have a huge chance to add new, even more innovative services to their existing programmes and, in the process, generate significant new revenue streams.

When it comes to predicting which consumers will use and value the bank branch, a recent study found that segments of similar demographic composition (such as age and income) use and think about branches very differently.

In fact, as part of an attitudinal segmentation process done by a reputed research company, it was found that a majority of consumers (irrespective of age or income) use the branch very infrequently, but still are attached and feel loyal toward their branch.

When targeting consumers regarding branch use, we look beyond traditional demographics and notice that there is a significant opportunity to move market share based on different branch strategies.

When looking at the value of the branch in the eyes of the affluent consumer, the affluent are not — for the most part — attitudinally ready to leave the branch completely behind, while the internet-ready segment is disproportionately affluent. That said, they are still less likely to prefer the branch than other consumers. So, while a bank branch may help the bank brand itself with the affluent, it is becoming less helpful in serving them.

To adapt to this continuing shift in customer preferences, Mashreq made some alignments in its overall strategies. We introduced a multichannel experience, including both digital and branch fulfilment. More importantly, we aligned the experience with the product presentation, simplifying the account opening process while aligning incentives and attribution measurements to nurture collaboration between the digital and branch channels.

Banks will need to revamp their systems if they are to fit into the current digital environment; meanwhile, banks still maintain their branch network. The material impact of the digital transformation and the consequences that follow, are difficult to anticipate for traditional financial institutions that are not ready or agile enough to adapt.

Regional banks will definitely have different solutions to the global digital disruption, especially with the rise of financial technology start-ups (Fintech).

Furthermore, the overall aim has clearly been to reduce the internal workload for recurring requests, as well as to empower increasingly connected generations; this could only be achieved at a higher cost, whereas the potential of smaller scale initiatives to improve the internal operations efficiency has been too often neglected.

The operations and processes impacted by the implementation of digital features have not been properly adapted to support and promote the related services and new functionalities.

This requires a deep review of the operating model in most cases; there is not just one single way of preparing for digital transformation, but every bank should explore and consider the different options when setting up their digitally enabled organisations or transitioning towards the next level of maturity.

— The writer is the regional head of digital banking at Mashreq