Mobile apps for community banks: In search of business value

Mobile apps could grow in importance for community banks

Aware of the disruptive changes in how banking products and services are delivered, community banks continue adopting new technologies to keep up with competition and customers’ demand. But while mobile banking is becoming a must-have component of community banks’ offerings, it can still trigger a reasonable question about return on investment. Will a mobile banking app really help to solve community banks’ challenges or is it just a waste of money? In this article, we explore the business value of implementing a mobile banking app in regard to helping to tackle community banks’ everyday challenges.

A way to outcompete?

US community banks have entered a tough race, with large banks and fintechs setting standards for mobile banking. What does it mean for community banks? On the one hand, they are bound to introduce mobile banking apps in a bid to stay relevant for their customer base, and 81% of them did adopt mobile banking according to the latest Federal Reserve and the Conference of State Bank Supervisors survey. On the other hand, just offering out-of-the-box mobile solutions won’t work since customers’ expectations are getting higher.

Unable to make considerable investments in mobile software development or implement a large-scale mobile banking strategy, small community banks should find their own way to stand out from other financial institutions. So what can we suggest?

Since community banks have always been known for having close ties with customers and providing high-quality service, focusing on the needs of the local community can help them gain competitive advantage over larger or more innovative institutions.

This in-depth knowledge of their customer base rests on understanding of the local area. Thus, community banks have greater agility in keeping their local economies vibrant and growing through genuine risk understanding and applying in practice their deep insights about the needs of the communities they serve. For example, Bank Newport, a Rhode Island community bank, has been serving locally for nearly 200 years. Founded in 1819, it is one of the oldest mutual savings banks in the entire United States. Another community bank, Union Savings Bank, was founded in 1866 and ever since has been a pillar of the local financial milieu across Western Connecticut. Translating this knowledge into mobile would mean speaking customers’ language at a whole new level and gaining a competitive edge on the basis of technology, the hottest competitive differentiator nowadays.

Solving challenges with mobile

With mobile banking solutions, community banks can stay customer-focused and develop their own mobile banking strategy around specific needs of the local community. By translating their traditionally strong competence of personalized customer communication into mobile, community banks can gain value from solving the following challenges:

  • Reducing service costs. Community banks can count on long-term service costs reduction thanks to mobile banking software. Once deployed, it can save up to 97% of transaction costs compared to branch-based transactions (Javelin Strategy & Research).
  • Meeting customers’ expectations about convenience. Providing remote access to most banking services is an exemplary element of customer-oriented service nowadays. Additionally, with mobile banking, community banks get the opportunity to reach out to geographically remote areas without opening new branches.
  • Attracting funds. By delivering convenient mobile banking services, community banks can earn higher customer satisfaction and loyalty. After becoming banks of choice for their customers, they can count on decreasing interest rate sensitivity and getting access to cheaper funds, i.e. deposits with lower interest rates.
  • Meeting small business needs. Community banks make up about 45% of the industry’s small loans to local farms and businesses (FDIC).Therefore, combining individual and business banking in one application can help community banks stay competitive in attracting small businesses.

Looking at the bottom line

As consumers are getting more comfortable with mobile banking, it’s quite evident that stakeholders should consider the ways of getting the revenue from its usage. Now the majority of banks offer their mobile banking apps as a complementary service mostly with basic functionality (e.g. the ability to check account balances or transactional history). Beyond that, mobile banking can include value-added transactional and interactive features, such as personalized reminders and notifications, financial analyzers, person-to-person payments, etc. In this case, community banks encourage greater mobile banking adoption and usage.

With this, mobile banking can drive revenue through carefully selected, relevant functionality and engaging user experience. In fact, in 2015 Fiserv and Raddon Financial Group conducted research to determine the return on mobile investment for small banks and credit unions. The study found that a bank can gain up to $2 mln of annual incremental revenue as well as increase annual interchange, account and service fees by $38 mln.

To introduce a value-added mobile banking app with relevant functionality and engaging user experience, community banks should seek expert guidance and advice. Applying for professional mobile software consulting, they can fulfil this crucial need.

Written by Natallia Babrovich

Natallia is a Business Analyst at ScienceSoft, a software development and consulting company headquartered in McKinney, Texas. Since 2013, her advanced focus is IT solutions for healthcare and the financial sector, with such projects in her portfolio as reporting for CMS and a care coordination portal. She is also a HIMSS member.

Read more articles from Natallia Babrovich