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Doing the Math: Offline Mobile Banking ROI

2010 March 15

An overlooked issue in mobile banking for the developed world is that almost every implementation in the marketplace only supports online banking customers.

Wells Fargo is the only major institution in North America supporting offline customers with the SMS capabilities announced in February.

US Online Banking Adoption 44%

US Online Banking Adoption

Canadian Online Banking Adoption 67%

Canadian Online Banking Adoption

Offline customers, as non-online banking customers are often called, are ignored because they’re more difficult to support technically. In fact, the exclusion is so complete that mobile banking adoption rates are usually quoted in relation to the number of online banking customers, not the number of overall customers or even households.  Most banks and credit unions are thrilled to have 40% online banking adoption. Therefore 10% mobile banking adoption usually means 10% adoption of 40% of customers.  I think it takes some of the excitement out of the adoption rates when you think about it that way.

The irony is that the real ROI in mobile banking is in reaching offline customers.

Fiserv/MCOM/Verisign research last fall found that 60% of offline customers were interested in using mobile services. Fiserv’s numbers also show that live agent calls typically cost an institution US$3.75 while online banking and mobile respectively cost only $0.17 and $0.08.

Customer Support Costs

Customer Support Costs

So targeting mobile banking at online bankers doesn’t address the real customer support expense. Getting online bankers to use mobile saves $0.09 in support costs whereas getting an offline customer to use mobile would save $3.67 per call. Furthermore the same study found that offline users were 20% more likely to leave the institution than the broader population. This is backed up by data I’ve seen at other banks. Mobile banking customers are far less likely to attrite (leave the bank) than any other type of customer. Often the difference is quite dramatic (unfortunately I can’t share the numbers, suffice it to say I believe Fiserv’s numbers).

Sample ROI Calculation

Let’s do some back-of-the-envelope math. Let’s say an institution has 100,000 monthly live agent calls from offline customers. For many banks this would represent a household call-in rate in the single digits. Mobile banking has been shown to reduce calls by 30-40%.  At $3.75 per call, this institution would save $375,000 per month or $4.5 million annually.

100,000  monthly calls before mobile
     30% reduction in calls by mobile
  $3.67  savings per calls transferred to mobile
$375,000 in monthly savings (after figuring cost of mobile support)
$4,500,000 in annual savings

Factoring in savings from attrition prevented can add millions more in returns depending upon how profitable each customer is to the bank.

4,000,000  customers
      10% "regular" attrition
       5%  reduction in attrition from mobile
20,000 customers retained

$2 million in savings for each $100 in customer profitability

Banks rarely share customer profitability numbers. I would assert that $250 per customer is a conservative figure, at least historically.

At $250 profitability per customer, banks would save $5 million dollars annually from reduced attrition.  So this sample bank would save $9.5 million dollars by providing mobile banking to all customers, not just online bankers.

The next step is working through the technical and procedural complexities in supporting all your customers. Often it’s not a straightforward as it might seem. We’ve put a lot of thought into the process. Contact us if you’d like to discuss it in the context of your organization.

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