As we move into 2015, the data is piling up that organizations’ strategic focus should be shifted from simply using mobile for servicing customers. Every organization’s strategy should focus on the O-word: Omnichannel – and not just for servicing customers, or engagement, or branding — but for sales.
I can see your eyes rolling at my use of the O-word. I can’t count the number of conversations I’ve had with executives about how “omnichannel” is overused and meaningless. The reality is there’s not a better word to describe how online, mobile, tablet, and brick-and-mortar engagement have merged. Our usage of “multichannel” implied that people would consider using both online and physical, in-person shopping in separate transactions. Omnichannel implies that on the same transaction, shoppers may be using more than one channel at once, and in particular, they may be using mobile while standing in your (or your competitor’s) physical location.
Mobile account opening has grown from 27% to 39% since June
Most retailers have already gotten the message. Financial institutions like banks, credit unions, and brokerages are just waking up to the fact that they should look at their “alternative channel” sales strategy. Insurance companies, generally, are still lost in the woods.
In fact, since June, we’ve seen typical mobile percentages for accounts opened move from 27% to 39%.
For those that haven’t acted to improve the experience, mobile abandonment rates average 85%. If you were CEO of their institution, how would you explain to shareholders or members that by your inaction, you’re only allowing 15% of interested purchasers to do business with you in their channel of choice?
Retailers, by contrast, have embraced mobile. Mobile shopping overtook online this holiday season. Here are some key mobile holiday shopping stats from IBM:
- Mobile accounted for 57.1% of shopping traffic on Christmas Day 2014
- Mobile sales were 34.8% of all online Christmas Day sales
- Smartphones drove 40.8% of online traffic, 2.5x tablet traffic
- Tablet sales were 18.4% of total online sales vs 16.3% for smartphones
- Apple iOS traffic was double Android, iOS sales were 4x Android
It is clear that consumers are using smartphones and tablets in conjunction with stores and computers to shop and buy. Furthermore, most bank and credit union mobile capabilities are woefully inadequate, given their dismal abandonment rate.
Mobile was 57.1% of Christmas Day shopping traffic
As technology makes it easier to switch primary financial institutions, institutions will feel pain much faster.
In 2015, institutions should turn their focus to attracting new customers, adding new products to existing customers, and poaching customers from their competition.
Mobile is key to both growth and survival.
The events have evolved to be about the same size, although BAI doesn’t show the growing pains Money 2020 does. Both venues are great for bumping into old friends and having great conversations about the future of banking and payments with the people that are making it happen.
Not surprisingly, Apple Pay was hot topic at both shows. We spoke to a number of bankers and listened to a lot of vendor sales pitches. Despite the startup vendor noise, the most important Apple Pay issue for all but the largest institutions isn’t NFC terminals and EMV upgrades.
Card Providers continue to not have a plan
Card Providers continue to not have a plan to support Apple Pay and don’t appear to have any sense of urgency to resolve the issue. Institutions should be looking for backup debit and credit card providers that actually have a mobile strategy and are interested in helping institutions serve their customers. Apple and Google are executing bold strategies, arguably. The major card networks and processing providers have a plan and are on board with the industry momentum. The merchant POS equipment providers and their VARs also are executing a strategy relatively in sync with the rest of the industry. And most certainly, Chase, BofA, American Express, Wells, and Citi are on board.
It seems only the companies whose business models are based on vendor lock-in haven’t gotten the memo. Changing a core banking system is one thing, but changing credit or debit card providers is less sticky. Institutions waiting on a plan from their providers (or even pricing!) should know they’re not alone and there are providers that will get them in the market.
If vendors can’t get tokenization to work for Apple Pay, why should we expect them to have a plan for EMV?
Hoping for Congress to take action isn’t a safe strategy
One vendor at BAI was making the case that the industry would lobby Congress to slow down EMV thus stalling Apple Pay. That’s possible I guess, but hoping for Congress to take action isn’t a safe strategy. Plus, since the EMV migration process timeline came from the card networks, not Congress, I think it’s unlikely a Republican-led Congress would impose strict regulations on voluntary industry guidelines. Furthermore, merchants and institutions are losing millions to credit card fraud and enraging consumers as breach after breach happens. I don’t see much momentum for slowing tokenization efforts.
Lastly, it’s clear from these shows that mobile banking has continued to become a commodity offering like ATM, online banking, and mobile check deposit. After many conversations with bankers and vendors alike, we continue to be convinced that the next frontier for banking innovation is improving the sales process (account opening, loan origination, and all the selling process around that). As the US economy picks up steam, institutions can no longer wait to grow lending. Furthermore when interest rates rise, the deposits institutions are sitting on get expensive.
We’re placing bets in this space as many of you know, and we’re helping clients invest here too.