Banking on mobile apps to improve customer engagement

The Competition and Markets Authority (CMA) has urged retail banks to offer smartphone apps to consumers and small businesses to help them to decide which banks offer the best rates and to help them to switch accounts.

To encourage innovation among older banking institutions and to facilitate competition from new banks, the CMA wants the retail banking sector to make better use of technology, enabling customers to benefit from new services. A key part of the report calls for UK retail banks to adopt “Open Banking” by 2018, so that customers can view their financial histories across several providers and third parties, via a single digital app.

However, the British Chamber of Commerce was wary of the CMA’s request for banks to use application progamming interfaces (APIs) to share customers’ transaction information via mobile apps, citing potential security risks.

Engaging digital natives

In fact, prior to the CMA’s calls, a wave of innovative payment apps had already hit the industry’s shores.

The financial services industry has seen tremendous changes to the way that services are accessed. A growing proportion of people have grown up using online services and smartphone apps. British Banking Association figures reveal that use of traditional branch and telephone banking services is steadily shrinking, while online and mobile banking is on the rise. The convenience of being able to bank from anywhere has fuelled the popularity of payment apps such as PayPal, Snapcash, Apple Pay and Venmo. The British Banking Association recently reported that mobile banking apps were used four billion times in 2015 and logins to mobile banking had risen from 7 million per day in 2014 to 11 million a day in 2016.

These apps can already call up customer data from core banking systems, as well as using email, messaging and social media services to engage more effectively with consumers. Mobile apps that make use of APIs, backed by strong two factor authentication (2FA) with secure back-end integration to banking records, can provide mobile banking customers with secure instant access to their own transaction records, along with the latest borrowing and saving rates.

Mutually beneficial

While the CMA’s calls could be viewed as placing a burden on the financial sector, apps offer the potential to benefit banks as well as consumers. Mitek Systems’ Mobile Deposit app is used by 75 million consumers and is estimated to have saved US financial institutions $2.5 billion in cheque processing costs.

To enable these apps to function, many financial sector organisations are adopting mobile application development platforms (MADPs) that enable critical back-end integration and centralised security management. MADPs also enable banks’ IT teams to oversee security policies and manage developers’ access and re-use of app components to maximise efficiencies in the ongoing development of financial service apps.

In February, Royal Bank of Scotland opened its Open Experience technology centre at its Edinburgh offices, with the goal of developing apps for Royal Bank of Scotland customers and fostering the creation of new apps and technologies for the bank. Open Experience IT experts are supporting local start-ups and working with open source technology partners and financial technology companies. These teams are working collaboratively to explore innovative new technologies and develop ideas into customer pilots, while identifying emerging financial sector trends and technologies from around the globe.

Moving to Mobile-first

With or without the CMA’s calls for UK banks to deliver smartphone apps, recent reports indicate that the global banking industry is embracing the use of apps. In addition to the popularity of mobile payment apps, phone-based features such as automatic GPS stamping, pre-filling forms and barcode and QR scanning can further transform traditional paper-based transactions using mobile apps.

Standard Bank has rolled out a mobile banking and trading app to its customers in six African nations, as well as customers in the Isle of Man and Jersey and stated its commitment to mobile banking. Meanwhile, it reports that its ATM and branch transactions have shrunk to just five per cent of all banking transactions. 

In the B2B space too, wealth managers and insurance brokers are benefiting from being able to call up customer information on their tablets or smartphones. Mobile apps help them to access client information, generate quote while they are still with customers and update back-end systems with quotes, payment information and images of signed documents. This move away from paper-based forms can save time, improve efficiency and reduce errors, so that deals can be closed faster and with greater accuracy.

Meeting app demand

One of the challenges voiced by the financial services sector is the scarcity of developer resources in meeting the demand for apps. Royal Bank of Scotland's Open Experience centre shows the bank addressing this demand by adopting collaborative development processes with continuous updates to apps.

Mobile app strategies that are underpinned by MADPs, APIs and microservices-based architectures, and open source technologies, can help reduce the time, effort and cost of the initial development and ongoing maintenance of apps, while avoiding vendor lock in as banks engage in a cycle of continuous development, updates and management of mobile apps.

Return on Mobile Investment

Reports indicate that embarking on a mobile app strategy is an investment worth making. An international survey of 6,000 of the highest earning banking customers, undertaken by Collinson Group, found that 81 per cent of affluent middle class customers in 2016 use banking and finance apps, an increase from 69 per cent in 2014.

In a July 2016 press release announcing the findings, Christopher Evans, director at Collinson Group said, “We can expect to see digital engagement continue to soar over the next three to five years. Brands need to act now in order to improve their digital offering, or risk missing the opportunity to build loyal relationships with lucrative audience segments.”

Having all of their financial information quite literally at their fingertips empowers customers to select the best account to suit their needs and drives competition between banks. As the CMA points out, this fosters innovation and competition, which will benefit the whole market.

Image source: Shutterstock/Aleksandra Gigowska