Mobile Banking’s Impact on Revenues and Attrition Is Astounding

The penetration and use of mobile banking still has not reached full potential. In fact, an average financial institution can generate $2 million in revenues and reduce attrition by 15%.

By Matthew Wilcox, SVP of Marketing Strategy and Innovation, Fiserv

Though increasing adoption rates seem to have settled the question of demand for mobile banking services, the ROI of mobile banking has proved more elusive. Mobile banking, which may not be perceived to produce direct revenue, must be evaluated by indirect results. Accordingly, Fiserv in conjunction with Raddon Financial Group studied mobile banking users, online users, and branch-only users, and compared their product usage, transaction frequency, attrition rates, and revenue generation.

The study found that mobile banking currently offers financial institutions significant ROI with the unrealized potential being in the millions for the average bank or credit union. The value was determined by comparing key attributes in the three months before and after consumers enrolled in mobile banking. The year-long aggregated analysis was conducted at select banks and credit unions using the Mobiliti? banking and payments solution from Fiserv.

Eight credit unions and nine banks across a range of asset sizes up to $3 billion participated. The exhaustive, one-year study anonomously tracked the activity of 240,000 credit union members and 283,721 bank customers. Respectively, these included about 27,000 and 39,000 mobile users.

The objective of the study was to assess specific return on the mobile investment. Non-users of mobile services served as a control.

The study found that an engaged mobile banking consumer:

• Uses more services
• Conducts more debit, credit, ATM and other types of transactions
• Stays with their financial institution longer
• Decreases costs

The study also found that by increasing the mobile banking adoption rate, the average institution can generate close to $2 million in incremental revenues and reduce attrition by an average of more than 15%.

Mobile Banking Users Hold More Products

Compared with 1.3 products for branch-only consumers, mobile banking users average about 2.3 products each from their primary financial institution. For new adopters of mobile services, however, the average number of products per customer increased by 12%. The difference between credit union and bank customers was negligible.

The so-last-century term for average number of different products was “share of wallet.” Perhaps the term has fallen out of fashion as wallets themselves seem to be doing, but the importance of products per customer remains. Consumers who use mobile banking are more engaged with their financial institution, and as a result, this allows for deeper penetration when consumers need mortgages, business services, and other higher-end products.

This potential is greatest when financial institutions use online and mobile channels to provide personalized, contextual offers. Unfortunately, as mentioned in the article, Justifying Investments to Become a ‘Digital Bank’, not all institutions have the same digital channel cross-sell maturity.

Mobile Banking Users Transact More Frequently

There is a positive correlation between mobile banking use and debit/credit card POS transactions as well as ATM use. As a result, there is an increase in interchange fee revenue that follows from this increase in debit/credit card use.

Although mobile users account for only 14.4% of the studied banks’ entire customer base, they drove more than 39% of total POS spend. (note: the mobile penetration noted in most industry studies is against the online banking customer base which is closer to 44%).

As for the new adopters of mobile banking during the course of the study, they significantly increased their volume and value of POS transactions. Within three months, new mobile users in credit unions increased monthly POS transactions by 19%. Bank clients came in at an increase of 46%, and, coincidentally, with a 46% increase in average transaction value – from $550 to $801 per month.

Moreover, their ACH transactions increased more than 30% after adoption.

For established and new mobile users alike, the higher transaction volumes may be due to the ready availability of account balance information. Being able to check balances on the fly, at the point-of-sale, might allow more users to purchase with confidence.

Given the revenue-producing nature of debit/credit card transactions, the above increases alone are a strong indicator of the worth of mobile adoption. But mobile adoption appears to enhance cost savings as well.

Within three months of mobile adoption, credit union members decreased monthly in-branch transactions from an average of 4.4 to 3.0. Since Javelin Strategy reports an average branch transaction cost of $4.25 and an average mobile transaction cost of only $.10, the prospects for long-term overhead reduction due to mobile adoption look promising.

To read more about the metrics that make mobile banking usage so valuable, go to the complete article here ...

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