A Fictitious ROI Chart

We’re commonly hired to help companies make decisions on their mobile roadmap and build the business case around the mobile initiatives.

Many execs put items on their roadmap that their gut tells them are important, but it’s difficult to calculate the ROI.

While I agree that it’s impossible to calculate the exact ROI of soft ROI initiatives, I think you can calculate the ROI enough to objectively assess your priorities.

In fact, I think it’s critical that you do so. The mobile landscape is littered with too much wasted money because of executive gut decisions that didn’t end up the way they expected.

So, let’s walk through an example:

I’m going to use mobile banking because I think it’s actually harder to calculate than retail mobile commerce in some ways. Retail mobile commerce ultimately results in a sale, whereas banking is a loyalty play. Retail is tricky to calculate because increasingly, the sale crosses channels, hiding the fact that mobile, online, or bricks-and-mortar retail affected the sale.

So, imagine a mobile banking roadmap with ten items on it but you only have budget to do five or six.

The number one item on your roadmap is some cool new feature, like Remote Deposit Capture (aka RDC, depositing checks with your phone) that you think will get you tons of press, excite your employees and deliver way more soft benefits than the actual feature itself. In your gut, this is your top priority but you can’t calculate it.

Number two on your roadmap is something bland like cross-selling functionality. It’s a feature you could never promote to customers, because customers don’t want to be marketed to. However, by implementing this technology, you can sell more products.

How do you choose?

The first step is to find a way to measure the impact of the priority. In the case of RDC there’s an intrinsic feature value we can calculate (the profitability of adding new deposits to the bank and the reduced cost of doing the deposits in an electronic channel vs a more expensive channel like the bricks-and-mortar branch, less any increased fraud). Secondly, the exec thinks the brand-promotion aspect will far outweigh the benefit of the actual product benefits. Calculate them both. For brevity, let’s just outline how to calculate the brand benefit.

Answer the following questions for yourself:

• What’s the addressable market of new customers?
• What percentage of non-customers will be drawn to do business with me because of this innovative new feature?
• How will this cool feature reduce existing customer attrition?
• How will this cool feature increase adoption of mobile and other products that I value?
• Will this new feature cause any adverse impact?

So, in the mobile RDC example, I could hypothetically argue the following:

• My market is 50 million consumers and 1/3 are my customers. I could reach 33 million new consumers. If I convert half of one percent (0.5%) to customers, I get 165,000 new customers. If I profit only $50 annually from each customer, that’s $8.25 million in additional new revenue and the opportunity to market additional products.
• Adding RDC could help increase my mobile adoption from 20% to 22% (a 10% increase). Mobile customers are stickier customers and more profitable, similar to online bill pay users. If I add 330,000 mobile users to my 3.3 million existing mobile users at an average increased value of $50 annually, that’s an additional $16.5 million each year.
• RDC could increase my fraud costs and could increase calls to the call center. While many banks report reduced fraud in the mobile RDC channel as compared to the ATM channel, institutions should estimate some impact. Let’s remove 10% of the total benefits as a conservative calculation.

Similarly, adding cross-selling capabilities can also have an impact, and as adoption increases, the impact increases.

• Mobile ads continue to have far more effect than online ads. Personalization can further improve ad effectiveness. If 5% of my 3.3 million mobile customers respond to my ad impressions to adopt a new product (like bill pay), that’s 165,ooo new products. If the average value of those products is $100, that’s $16.5 million in new revenue.
• If these new products reduce attrition by 2%, that’s 66,000 customers staying with the bank. If that’s worth $100 annually, that’s $6.6 million each year with the opportunity to continue marketing to them.

So with these two basic calculations, the more bland initiative comes out slightly more profitable than the flashy new product ($23.1M in net impact vs. $22.3M).

Your mileage may vary, of course. You can argue any of these numbers are too high or too low for your situation. Replace them with your numbers.

My point is to encourage objective thinking about emotional mobile product roadmap decisions, so more teams make the best decision possible.

These conferences are always a reunion for me, providing an opportunity to meet with former colleagues and customers that I don’t have a chance to interact with on a regular basis. My interest, beyond the social aspects, was focused on mobile for corporate banking. I have noticed a slowly growing interest, with a smattering of offerings in the market, but most FI’s, as well as technology providers, have been taking a “wait and see” approach. Quite a few of these offerings are simply consumer products rebranded as mobile business banking. For most, this is not a bad approach, as many small businesses are not that far removed from the consumer market so it’s a natural extension.

Offering a small business owner the ability to deposit checks and/or pay bills via their phone while moving from job site to job site is certainly compelling, sparing a trip to the bank and untethering them from their office, if they even have an office. This affords them more time to run their business. Most cash management solutions are geared towards firms with people sitting in offices, managing cash as part of their job. From the financial institution’s perspective, the opportunity to expand the market for some of the fee based services traditionally available only to those office dwellers should be appealing, thus worth exploring. Some are already doing it.

Being a payments conference, the bulk of the mobile sessions at PAYMENTS 2012 concentrated on transactions. No surprise there, an understandably fitting. But it did get me thinking… what about mobile beyond transactions? How about mobile enabling bank employees that go out into the field to sell those services or advise clients? The insurance industry recognized the value of mobile enabling their advisors and producers, and has been outfitting their field personnel with tablet based applications, or at least making their internal applications tablet friendly for their employees. Automation and self-service have made banking less personal, but there’s an opportunity to re-introduce the personal touch through use of interactive tablet applications that a bank employee can share, side-by-side with a customer, helping provide that personal touch without losing the value of automation. If you have had the misfortune of being in a hospital recently, you may have noticed the heavy use of mobile technology to manage and record activity. For example, nurses scanning barcodes on patient wristbands and medicines, recording dosage and time using a mobile device. Even auto dealerships are using mobile for internal operations to become more efficient. I can’t say I’ve seen much of that in banking yet, but I believe the opportunity is there, particularly with corporate banking, whether it’s for the bank’s field staff or that of the bank’s corporate customers, probably both.

TGI Fridays app now does mobile payments

With the annual NACHA payments conference happening this week in Baltimore, mobile payments is top of mind for a lot of folks.

I’m sure there’ll be plenty of panel discussions about when mobile payments will be mainstream. There will also be lots of debate over who will control mobile payments. Carriers, bankers, payment technology companies and others have been bickering over mobile payments for nearly a decade now – and there are few mainstream results.

I think we have forgotten the customer.

If  we make shopping easier with mobile payments, it’ll eventually happen and lots of players in the ecosystem will make money.

Tapping a phone isn’t much easier than swiping a card. In the beginning customers will still have to carry their wallet everywhere. I think they will be underwhelmed.

Scanning a barcode is easier to implement, but it’s harder for both the customer and the cashier. However, it  does work well in certain circumstances. The Starbucks application is a great example. It’s something people do habitually, and they don’t have to carry their Starbucks card. They can’t ditch their wallet, but they do make it one card thinner  - and they thank Starbucks for it.

Look at the new T.G.I.Friday’s application. It lets you pay your bill and leave when you’re ready. There’s no reason to wait for your server to find his way back to you. Just pay and leave. That makes the dining experience much better and differentiates T.G.I.Fridays from every other restaurant chain on the planet.

So this is my point: Find a way to improve the customer experience incrementally. The money and glory will follow.

Don’t wait for a miracle. Do something.

While there are only tidbits of publicly available information currently, there are some things to look at in terms of interpreting adoption rates, when disclosed. As you might imagine, adoption of mobile deposit can be all over the map since so many factors impact it – availability by risk profile, transaction limits, cost/fees, ATM density, branch density, mobile banking penetration (online banking penetration if dependent), device support and marketing. Many of these are FI specific decisions, so keep these in mind if and when you see published adoption rates, and of course when projecting your own.

One of the interesting things about that survey is that the bulk of FI’s that have, or plan to deploy mobile deposit were the over $10B crowd, while those still considering or without plans at all were firms with under $10B in assets. I find this difficult to understand because if anything, it’s the latter camp that would get the most out of this solution as it compensates for their smaller branch and ATM networks.

Let me share a little story with you to put some perspective on this. Granted, it’s a sample size of one, but is the exact rationale I have heard from some institutions under $1 billion in assets who do have plans for deploying mobile capture. When I attended my oldest child’s college orientation last June, 400 miles away from home, there were several financial institutions present to enroll new students for accounts. Most were national banks and all had a local presence, while our primary FI did not. Rather than opening an account with one of those firms, I showed her how she can use her cell phone to make deposits with her current FI should a generous aunt send her a check. She has been using it ever since, allowing her to maintain her relationship with the same FI even though they have no local presence (it helps that they reimburse for ATM fees when she makes withdrawals). Mailing a deposit would not occur to her as the last time she mailed something was Flat Stanley back in second grade – she barely even does email anymore, just Facebook and SMS. Also, when I excitedly demonstrated it to her, she just shrugged nonchalantly as if it were commonplace, expected. Many FI’s offer a “campus checking” account. The rationale for that is similar to the rationale for offering mobile deposit – you want to catch them young with the hope they’ll stay with you through their earning years.

Keeping that thought, I’ll never forget a remark I heard a couple of years ago with respect to mobile banking in general from the COO of one of the largest credit unions in the country that “people over 62 don’t use cell phones.” All I can say about that is ignorance is dangerous to your business. Even if this statement were true, what happens when those customers or members die? Their heirs inherit what’s left, which gets transferred to the FI that younger generation is using because they have made the investments that demographic expects. By the way, the fastest growing segment for smartphones is the 55+ age group, with more than half of new mobile phone purchases by that group being smartphones.

Since November 2010 I’ve been at Kony Solutions full time and recused myself from Mobile Strategy Partners to prevent any conflicts of interest. At Kony, I ran Product Marketing until December 2011 when I was named General Manager of Financial Services.

While at Kony, I accomplished what founder Raj Koneru and I set out to do. I built a strong Product Marketing team that cranked out a tremendous amount of high quality deliverables across seven or more verticals. We did two full web site redesigns and rewrites.  We also trained over 60 sales professionals and supported sales in the field as we helped the company grow about 400% in one year (!!).

As GM of Financial Services I led the development of cutting edge mobile financial products that are scheduled for release later this year, including wealth management, commercial banking, and insurance agent portal apps. I also developed a strategy for down-market retail mobile banking that included pricing packages, channel partnerships, and building adapters for key financial services providers.

As rewarding as my time at Kony was, I really wanted to come back to building my own business and help companies compete effectively in this exciting mobile market. At Kony I’ve  gotten to discuss mobile strategy with companies around the world including southeast Asia, Europe, and Latin America in addition to North America. April is the start of Kony’s fiscal year, so the time was right.

I still believe in the strength of Kony’s technology and their approach. Fragmentation is still an issue every company must develop a strategy for. As always, however, we will remain vendor neutral. I have an equity position in Kony, as I do in Apple, Google, JP Morgan Chase, Wells Fargo, TD Ameritrade, and Bank of America.

So if you have a mobile project and want the benefit of a team that has seen mobile projects around the world, give us a call. We can help you develop an actionable strategy to leapfrog the competition and take the lead. Possibly more importantly, we can help you execute that strategy and repeat success across your organization.

We look forward to the opportunity to help you succeed.