What Banks Should Know about the Wave of Mobile Banking Consolidation
Mobile Banking is becoming a commodity in the U.S and will likely drive mobile banking vendor consolidation. Consolidation and feature parity among the remaining vendors will make it difficult for banks and credit unions to differentiate themselves. Institutions should develop a long-term mobile strategy to account for these changes and plan ways to differentiate from the competition, generate more revenue, and retain customers.
Mobile Banking vendors are pairing up with traditional banking software vendors. Fiserv offers MCOM mobile banking. Fidelity National Financial Services offers mFoundry. S1 offers Fundamo.
Increasingly vendors are offering similar features on a variety of platforms including Mobile Internet (WAP), SMS, iPhone, Blackberry, Android and others.
Furthermore, while neither vendors nor banks will talk about what they’re spending on mobile banking solutions, off-the-record indications are that the price points are coming down significantly.
Lower prices are great for bankers, especially in this tough economy. More mature software and more intense competition also bodes well for banks and credit unions. However, consolidation almost certainly follows plummeting price points and deep pocketed partners who can afford even deeper discounts.
Soon the market may be down to two or three mobile offerings from the same two or three vendors that offer online banking and core deposit systems. As with online banking, vendors will likely make it difficult for their mobile banking system to connect with others systems, to prevent erosion of their customer base. Therefore, many institutions will have little choice but to choose their mobile banking solution from their Internet Banking vendor.
Many banks are developing long term strategic plans to account for this consolidation. Bank of America, USAA, Wells Fargo, and Capital One have all experimented with a number of vendor provided technologies and ultimately provided more than just vendor provided solutions. While these are large institutions with many resources, there are far smaller banks and credit unions following the same path. For example, San Antonio community bank Broadway Bank has a solution provided by Mobile Earth that is tailored to their specific needs.
We recommend our clients to evaluate their long term mobile strategy and determine the directions that are right for them regardless of vendor developments. Each institution has it’s own brand, culture and competition. While transformative, the mobile channel will ultimately extend the existing institutional traditions but in new ways. When organizations clearly understand their needs, they can push vendors toward fulfilling their needs or make decisions to innovate themselves.
(This was featured in Banking Connects 8/18/2009, available here.)