MN Banks build mobile platforms
Biz Journal, by Jim Hammerand
It’s go mobile or go home for Twin Cities banks, the largest of which are expanding their mobile-banking platforms or offering them for the first time.
Accessing bank accounts with cell phones has evolved from simple text-messaging programs and stripped-down, mobile-phone-accessible websites to custom smartphone programs, or apps, that let customers view account information, transfer funds, pay bills, get alerts and use GPS to find nearby branches and ATMs.
Now banks say they can’t compete for new customers or expect to keep those they already have without offering increasingly robust platforms. And while mobile banking can cut the cost of servicing customers, banks are finding ways to make money off it, too.
The biggest Twin Cities banks are already well established in mobile banking.
U.S. Bancorp and Wells Fargo & Co., which operate the two banks with the largest Twin Cities market share, expect to upgrade their mobile-banking features in the coming months, bank officials said.
San Francisco-based Wells Fargo will introduce mobile remote deposit capture — depositing a check by snapping a photo of it with a smartphone — in Minnesota by the end of the year, while Minneapolis-based U.S. Bank will try to monetize mobile banking next year.
Wayzata-based TCF Bank, Chaska-based KleinBank, and Bloomington-based MidCountry Bank also offer mobile banking and have their own upgrades in the works. MidCountry officials said they’ll launch mobile business banking next year to complement the bank’s consumer app. TCF will update its app this fall, while KleinBank said new features are coming in 2013.
Banks aren’t the only lenders with mobile offerings. Three of the state’s four largest credit unions have their own apps: Wings Financial Federal Credit Union in Apple Valley, Affinity Plus Federal Credit Union in St. Paul and Hiway Federal Credit Union, also in St. Paul.
Customer demand sending banks mobile
Twin Cities banks that don’t have mobile platforms are getting in the game, citing competitive pressure and demand from customers.
St. Paul-based Sunrise Community Banks and Stillwater-based Central Bank both plan to release a mobile platform by the end of 2012.
“Everybody’s asking for it,” Central Bank CEO Larry Albert said. “You gotta keep up with the technology.”
Wayzata-based Anchor Bank and Venture Bank in Bloomington both plan to release a mobile-banking platform sometime next year.
“To be competitive, we’re going to have to implement some sort of mobile solution,“ said Venture Bank Cash Management Officer Stephanie Hansen.
St. Paul-based Bremer Bank is redesigning its website for mobile access and plans to launch a mobile platform in the second quarter of 2013.
“Our customers demand it,” said Rich Michaelson, Bremer’s e-commerce director. “Changing demographics have new needs and expectations that we’d better be prepared to meet.”
Once considered a perk, mobile banking is now a must-have for smartphone-wielding customers who already use them to shop, share with friends and manage other parts of their lives.
More than 8.5 million Wells Fargo customers use mobile banking — a distribution channel that has grown faster than any other since its 2007 launch and twice as fast as online banking.
“We are adding features as fast as we can,” said Brian Pearce, head of Wells Fargo’s retail mobile channel. “Customers have just adopted this mobile lifestyle.”
Bankers said the real money in mobile banking has yet to be realized. Smartphone check depositing, same-day bill pay and other features consumers will pay for are largely untapped revenue sources.
Banks could more effectively market their products and third-party advertising by targeting customers based on personal financial profiles, purchase histories and even real-time locations.
Those are all part of U.S. Bancorp’s plan to monetize mobile banking in 2013, said Niti Badarinath, U.S. Bank’s head of digital strategy and mobile banking.
“If I have over a million people logging in and looking at a tiny piece of screen every month for many minutes at a time [and] I know everything about them, about their financial life, can I be more relevant about pushing offers to them?” he said.
The bank’s preliminary research shows customers are open to sharing their location to get discount offers from nearby stores if they pay with their U.S. Bank card, Badarinath said.
“This is a feature we are thinking about very carefully,” he added, noting that other banks are, as well.
U.S. Bank also has an eye on emerging mobile technology that will turn phones into payment devices, making more mobile-banking revenue opportunities possible.
“Mobile payment, I think, is the next frontier,” Badarinath said.
That technology could overcome security, infrastructure and standardization barriers and become widespread within five years, said Jake Ward, a user-experience designer at The Nerdery, a Bloomington software firm that counts financial institutions among its clients.
“Our mobile devices are becoming our wallets. The banks are doing everything they can do right now with the limitations of the hardware, the ecosystem and the stakeholders,” he said.
A worthwhile investment?
For now, bank officials say mobile apps retain customers and provide basic services at a lower cost than call centers and branch tellers.
“It’s a relatively small investment with a large benefit to us and our customers,” said MidCountry Bank Chief Information Officer Jay Prybylo.
Since its second-quarter 2011 launch, mobile banking has taken off at MidCountry. About 20 percent of its online banking customers had signed up for mobile banking by this March, a figure the bank’s e-commerce manager, Jillian Botz, said has since grown to 24 percent.
Bank officials interviewed for this article declined to quantify their mobile-banking spending. An off-the-shelf mobile-banking package is the cheapest and fastest way to get started, while custom builds cost more but offer advanced features, said Nerdery Business Development Manager Mike Woods. Beyond the up-front spending, banks that go mobile need to continuously monitor their systems and upgrade to keep pace with smartphone innovation.
“When you launch your app, that’s just the beginning,” Woods said.
Even with the ongoing expenses, mobile banking doesn’t come close to the cost of a new branch, said KleinBank Product Manager Mark Worwa. “It’s an investment worth making as far as we’re concerned.”