Open banking: How banks must respond to the mobile boom

Consumers around the world are becoming more interested in using their mobile devices to manage their financial affairs, with the use of mobile banking technologies set to double by the end of the decade. This is according to a new report by KPMG, which revealed the total number of mobile banking customers is set to hit 1.8 billion by 2019, accounting for a quarter of the world’s population. Its Global Mobile Banking Report noted that although mobile is already the largest channel for the industry in terms of transaction volumes, its adoption rate is now entering an “exceptionally rapid phase”.

Therefore, KPMG warned that financial institutions will have to respond to this new era of ‘open banking’, where consumers are able to interact across a variety of channels, operating systems and devices. Those that do not have a clear strategy for this are likely to lose customers and miss out on new cross-selling opportunities, as well as jeopardise their competitive advantage.

So what should banks be doing to respond to this environment and ensure they are well set-up for long term success?

Expanding services

Banks will find there is great potential for offering value-added services using mobile technologies, but they will have to be careful not to annoy customers with their messaging. Consumers will generally value the more personalised services that mobile offerings can provide, with the report urging businesses to consider areas such as virtual support, social media banking and ‘life tools’ such as cloud storage, as well as emerging device categories such as wearables.

However, unwanted sales messages can invade what the report described as ‘device intimacy’ and lead to customer complaints, reduced usage or even switching to another provider.

The need for security

Banks will also need to invest in the most advanced security systems possible for their mobile offerings in order to ensure users have confidence in the solutions. For instance, four out of ten customers admitted to having concerns about entering their card information into a mobile app, while the implications of losing their handset also rated highly among their worries.

KPMG identified biometric technology such as fingerprint scanning as being vital to the future of mobile banking, as this can help ensure a high level of security without compromising on ease of access or convenience. We can see biometric authentication exploding as mobile banking takes off. Online passwords are increasingly seen as risky and are being abandoned. Even the PIN may have had its day. Therefore, coupled with any drive for mobile banking will need to be a strong authentication method through some form of biometric identification.

Openness the key

The report also urged financial institutions to improve their level of collaboration with developers to facilitate the creation of innovative solutions that provide users with the features they expect. Emerging challengers that do not have to deal with legacy infrastructure are already a step ahead of their more established competitors, so large banks are increasingly acquiring technology start-ups and investing in incubators to stay ahead. David Hodgkinson, author of the report and KPMG’s UK digital and mobile banking lead, said that mobile banking is clearly supplanting other channels as the main method for interactions between banks and customers, and businesses must “adapt or die” to deal with this.

“This new, exciting phase of mobile banking innovation, spearheaded by new market entrants as well as pioneering banks, will be a rollercoaster,” he said. “Banks must overcome substantial infrastructural challenges and reconcile consumers’ appetite for ease of use with greater security.”

As ever with banking and payments it comes down to the central balance between security and accessibility. Mobile banking apps should be easy to use to be relevant (more convenient than visiting a branch), but they still need to have the same level of security as you have by walking into a branch.

Written by Andy Brown

Andy Brown

Andy is marketing director for payments at NCR. He has nearly 30 years' experience in e-payment systems from the delivery and support of systems in the Far East and Europe, from both the product management and marketing perspectives. Based in the UK, Andy is responsible for marketing NCR payment solutions.

Read more articles from Andy Brown