Digital Transformation and Code Halos - 12 Trends that are Impacting Banks Today

The banks of the future, will not look like the banks of today. 

I have met with the business and IT strategy teams of many banks around the world over the past 12 months.  These discussions have been some of the most interesting as there is a sense of urgency.  The banking and financial services industries are feeling tremendous pressures from both internal and external sources to respond quickly to emerging mobile and online technologies, and the changing behaviors of consumers.   

Here are 12 talking points from my latest workshops:

1. Mobile and online technologies are transforming the way banks serve clients
2. Mobile banking adoption rates will reach 33 percent this year, up from 20 percent in 2011. Source: Swacha
3. Mobile payments will reach $90 billion by 2017, up from $13 billion in 2012.  Source: Forrester’s 2013 US Mobile Payments Forecast report
4. 60% of smartphone or tablet users who switched banks in the fourth quarter said mobile banking was an important factor in the decision. Source: AlixPartners
5. Consumer preferences are changing and a generational shift in behavior is driving to new digital channels
6. There is a rapid adoption of digital consumer banking in both developed markets and in markets where consumers are predisposed to using mobile technology rather than bricks-and-mortar (emerging markets)
7. Banks are being presented with new competition from non-financial firms providing financial services
8. The ability to innovate will be a key competitive differentiator, and innovation a critical driver of growth in the future for banks
9. Uniform experience (omni-channel) will be required across all channels, and is a prime factor in customer satisfaction
10. There is a growing convergence of personal financial management tools and mobile banking
11. After providing basic consumer banking services on mobile apps, the next steps are to understand individual consumer’s transactions, and the nuances of their unique investment behavior using Code Halo strategies
12. Banks are seeking efficiencies and cost reductions.  The average cost of a mobile transaction is 10 cents, about half that of a desktop-computer transaction and far less than the $1.25 average cost of an ATM transaction. (Source: Javelin Strategy & Research).

Mobile apps are rapidly replacing branches as the preferred form of customer interactions with banks. Customers are evaluating the quality of a bank based upon their mobile banking capabilities today.  In customer service surveys, providing great mobile apps represents an important component of customer satisfaction.  As a result, you would think that budget priorities and investments in mobile technologies would be jumping up in response, but as of today, budgets for mobile apps and mobile banking services represent less than 5% of IT budgets.  

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Kevin Benedict

Writer, Speaker, Editor

Senior Analyst, Digital Transformation, EBA, Center for the Future of Work Cognizant

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***Full Disclosure: These are my personal opinions. No company is silly enough to claim them. I am a mobility and digital transformation analyst, consultant and writer. I work with and have worked with many of the companies mentioned in my articles.

Banks, Mobile Technologies and SMAC, Part 3

This article is Part 3 in a series on Banks, Mobile Technologies and SMAC.  Click here to read Part 1 and Part 2.

In this article my colleague Peter Abatan, a Mobile Technology Consultant and banking expert with Cognizant, shares his insights into the digital transformation happening in the banking industry.  This transformation reflects new and innovative business models, the rapid adoption of mobile apps for banking, social media and other cloud based solutions.  In this article Peter and I discuss P2P (peer-to-peer) lending services and their potential integration with Internet based and mobile banks.

P2P lending sites are part of the emerging digital transformation happening in the banking industry. Their purpose is to provide higher returns for investors/savers, while using SMAC (social, mobile, analytics and cloud) based technologies to help find lenders for people/companies that may not meet a traditional bank’s criteria for lending.  They are a in effect, match makers.  They are the match.com for people wanting to lend money for higher returns, and people or companies wanting to borrow it.

P2P lending sites can be risky, however.  There is little protection for investments.  If you invest and a borrower defaults on their loan, your money is at risk.

According to the P2P Finance Association this market sector is growing at a rate of 250% per year, but not all are successful. In December of 2011, P2P lender Quakle became insolvent and many lost their investments.

I believe the logical evolution of this market is for P2P lenders to evolve into, or integrate with Internet/mobile banks.  As an Internet/mobile bank, P2P lenders would be able to expand their products  and services into things like mortgages and insurance to compliment money lending services.

P2P lenders as Internet/mobile banks, will be in a good position to compete with traditional brick and mortar banks as they can offer better rates on savings and other investment tools, plus they will likely have a lower operational cost.   Lower operational costs are the result of not needing to maintain traditional banking processes like check processing, money handling and logistics, large numbers of employees, bank branches and physical security services.

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Kevin Benedict, Head Analyst for Social, Mobile, Analytics and Cloud (SMAC) Cognizant

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Learn about mobile strategies at MobileEnterpriseStrategies.com

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***Full Disclosure: These are my personal opinions. No company is silly enough to claim them. I am a mobility and SMAC analyst, consultant and writer. I work with and have worked with many of the companies mentioned in my articles.