Banking on mobile
balancing risk and innovation, organizations deliver financial services to customers on the move
BY SARAH FISTER GALE
PHOTO BY EMILY HLAVAC GREEN
“You need to create a consistent experience and user interface across tablets, smartphones, Apple Watch and any other device that your customers will use.”
—Melissa Steward, Westpac New Zealand Ltd., Auckland, New Zealand
“Mobile is where it is at for banking today,” says Tom Roberts, digital lead for banking at PMI Global Executive Council member KPMG in London, England.
The global banking industry spent an estimated US$4.2 billion on mobile banking projects in 2015, according to global tech research firm Ovum. And it's banking on those investments to meet the coming demand. Globally, the number of mobile banking users from 2015 to 2020 is set to double to 2 billion, according to a 2015 Juniper Research report. Adoption rates will be highest in developing countries, reaching 60 to 70 percent in China and India, but consumers in developed countries are also driving demand for mobile banking services. According to a U.S. survey released from the Federal Reserve Bank of Boston, 78 percent of the country's banks and credit unions offered mobile banking services in 2014, with an additional 16 percent planning to launch mobile offerings in the next one to two years.
Mobile apps long have allowed customers to complete simple tasks such as monitoring account balances or transferring funds, but the next generation of financial technology (also known as fintech) projects hopes to help them manage their money more proactively, says Bradley Leimer, head of fintech strategy for Santander Bank in San Francisco, California, USA.
“Past projects were focused on telling customers what they did with their money, not what they could do to grow their money or save additional funds,” he says.
AMOUNT THE GLOBAL BANKING INDUSTRY SPENT ON MOBILE BANKING PROJECTS IN 2015
Banks now are launching more disruptive mobile projects that add value to the financial services they provide. In February 2015, Spain's CaixaBank launched a hands-free mobile banking app that allows customers to access their accounts while driving. In December, Westpac rolled out a mobile “card on hold” service to allow customers to freeze lost cards on the go. And in July 2015, Lloyds Bank trialed a “tap to bank” mobile functionality that streamlines the authentication process for mobile banking.
Mobile banking is expanding its impact around the world—delivering convenience and savings along the way.
APPS ADD UP
Globally, the number of mobile-banking users is expected to soar in the years ahead:
From 1 billion in 2015 to 2 billion in 2020
37% of global adult population will use mobile banking by 2020.
MOBILE IN ACTION
The most common activities completed through mobile banking:
Not everyone's on board yet. The most common reasons cited for not using mobile banking in Africa and the United States also provide opportunities for project managers:
Sources: Juniper Research; Global Mobile Money Report 2015, Mobile Ecosystem Forum; Mobile Banking 2015: Global Trends and their Impact on Banks, KPMG
But this is just the beginning. To meet increasing consumer demands, banks need to harness the power of predictive analytics and gaming design to create engaging experiences while still meeting the industry's stringent regulatory, security, legal and financial requirements. Organizations also must ensure that the valuable personal financial information their customers share via mobile platforms is used responsibly and protected from hackers—a privacy tightrope that emphasizes the value of stakeholder management. All of that starts with accepting—and managing—the uncertainty that comes with innovative projects, Mr. Leimer says.
“The industry should look to our fintech counterparts for inspiration to rapidly test new ideas and see what works,” he says. “You can't stay ahead without taking some form of risk.”
ON THE MONEY
Banks are following very different paths to find their mobile innovation comfort zone. Santander's strategy involves launching a variety of financial apps to see which ones make the biggest splash with its customer base. For example, Santander Poland recently developed an app that lets customers buy things such as concert tickets, transit tickets and pizza, and uses contextual data to recommend other services based on their purchasing history. “It's important to think about tying mobile applications to a customer's financial life in the appropriate context,” Mr. Leimer says.
“Think about tying mobile applications to a customer's financial life in the appropriate context.”
—Bradley Leimer, Santander Bank, San Francisco, California, USA
In July 2015, Santander UK launched a group money management app called KiTTi that lets up to 100 friends create collective pots of money, monitor and manage transactions, and pay for things using a KiTTi prepaid MasterCard. Customers of any U.K. bank can download the app, invite their friends, and save and spend money together. “We are doing a lot of small, stand-alone experiments to see which projects fit the market,” he says, noting the projects often have broader uses within Santander's global footprint. “Banks should be willing to continually iterate and experiment with their customer-facing applications to ensure that they keep their customers engaged and are creating additional client value.”
Barclays is taking a more targeted approach to mobile banking, making sure each new mobile project is strategically aligned, will deliver a strong ROI and can provide a competitive advantage, says Himanshu Warudkar, Barclays’ technology center director in Pune, India. For example, mobile solutions such as Barclays Homeowner app help customers search for a property and apply for a home loan.
“It gave us a new revenue stream and simplified the home-loan journey, which was a significant advantage,” he says. And the team was able to measure these benefits by looking at the number of new customers coming through the app and the increase in home-loan requests. “Understanding the customer's real needs and changing the user journey made it a very successful project,” he says.
A MOVING TARGET
Once a new Barclays project is chosen, all of the key stakeholders across IT, legal, compliance, finance, marketing and information security come together to review the project plan and identify any risks that need to be addressed, Mr. Warudkar says. He calls this meeting “Sprint Zero.”
“It is a core part of our agile process, to make sure everyone is agreed on the goals from the beginning to drive the project forward,” he says. “Our aim is ‘no surprises.’”
For instance, bringing marketing onboard during the planning phase gives the team ample time to understand the app's real-world value and create an effective campaign that will encourage early adoption.
“It's very important that customers adopt the tool quickly once it is in the marketplace so that we can start driving revenue and measuring its impact,” Mr. Warudkar says.
To shorten delivery times, the design and development teams often work simultaneously on various aspects of the project, such as developing the user interface alongside the back-end infrastructure of the app. They also embed testing throughout the project life cycle so that features are reviewed as they are developed, rather than waiting until the end of the project to look for bugs. His team also works with IT security experts who attempt to break into the system and find weaknesses that need to be fortified to keep customer data safe.
PHOTO BY EMILY HLAVAC GREEN
“Look at every idea through the lens of the customer. If it's not valuable to them, they won't use it.”
But even the most agile project can be derailed by unexpected risks—especially in a regulated environment. Mr. Warudkar notes that by the end of January, his team usually has a plan in place that outlines all the projects they expect to deliver for the year, mapped against the organization's resources. But when global regulators change the rules, which happens frequently, the entire portfolio must be reprioritized, he says.
This often translates to putting mobile projects on hold to focus on regulatory projects. In other cases, the team might have to rethink a mobile project plan to ensure it aligns with new rules in targeted markets. For example, some regulatory bodies now require all the infrastructure for mobile banking applications to reside in-country, which could force project teams to build duplicate infrastructure.
“It can be difficult to prioritize a constantly moving target,” he says. To minimize the impact, his team regularly gets input from legal and compliance teams to ensure their projects stay in line with regulatory changes. “It reduced surprises and kept applications in tune with regulatory changes.”
“It's very important that customers adopt the tool quickly once it is in the marketplace. so that we can start driving revenue and measuring its impact.”
—Himanshu Warudkar, Barclays, Pune, India
Melissa Steward, chief digital officer for Westpac New Zealand Ltd., Auckland, New Zealand, asks her teams to remember that mobile banking projects cannot be developed in isolation. Rather, they need to be designed to fit into the broader multi-channel ecosystem.
“You need to create a consistent experience and user interface across tablets, smartphones, Apple Watch and any other device that your customers will use,” she says. “They should be able to begin a transaction on their phone and finish it on their PC or tablet with no problem.”
Even though Westpac takes a mobile-first approach to design, her teams focus on developing user journeys that will work on every platform and deliver the same look and experience. Beginning with a device-agnostic project approach also streamlines the development process. “It means you don't have to redevelop every feature five times over,” Ms. Steward says.
STARTING FROM SCRATCH
Anne Boden, CEO of Starling Bank in London, decided two years ago that building a brand new mobile-only bank would be a lot easier than helping transform a legacy bank for the mobile generation. “In a big bank, mobile is one small piece competing with lots of other projects,” she says. “I realized that to be truly transformational I had to start from scratch.”
Starling benefited from the new U.K. banking regulation established in 2013 that allows startup banks to apply for a license before they have the technology and money in place to operate. “It's really helping startups come into the market without scale,” Ms. Boden says.
She began working full-time on Starling in January 2014, and the app is scheduled to go live at the end of 2016. But Ms. Boden, who has been a project manager for 30 years, knew the success of Starling relied on users loving the app, which is why she has built customer feedback into every aspect of the project.
In the beginning, the team had broad conversations with customers about what they wanted from their banking experience. For instance, one-on-one interviews with customers helped drive behavioral insights, while group sessions with customers helped the team explore features.
“Early on, we didn't even mention what we were working on so that we didn't poison the conversation,” she says.
One of the key insights to emerge from these early conversations was that, whether customers were prosperous or struggling financially, they all do the same mental math when it comes to their finances. “They are putting pools of money aside for different short- and long-term goals,” she says.
In a formal bank, that means setting up multiple accounts to segment funds, which can be expensive and inconvenient. Ms. Boden's team is using feedback on that pain point to shape the Starling app. To keep things simple and scalable, the company will only offer a checking account that will live on customers’ smartphones. But the team plans to build in value-added features, such as using predictive analytics to provide users with insights into their spending patterns and recommendations about how to save money unique to each person. “Customers generate a huge amount of data around their financial transactions,” she says. “We can use that data to make their lives better.”
As they continue to hone the app, they continue to ask for customer feedback, assuaging any privacy concerns and making changes when users say they don't like something. “You have to be ruthless to make sure you deliver something the customer wants—not what you want to give them.”
“Customers generate a huge amount of data around their financial transactions. We can use that data to make their lives better.”
—Anne Boden, Starling Bank, London, England
Her team follows an agile approach that relies heavily on customer feedback to ensure the best features are adopted and honed to meet user needs. The team interviews customers and hosts focus groups to gather this feedback. Watching users interact with prototypes without any guidance helps the team see how consumers use the tool and what workarounds they find. Her team uses these observations to simplify the user interface and adapt features to make them more user-friendly.
Last year, the company also started hosting a digital disruption contest, inviting entrepreneurs to submit ideas for digital projects as a way to bring fresh thinking into the company. “It's all about gathering new insights and challenging the legacy institution,” she says. “New ideas are a catalyst for innovation.”
Mr. Leimer also urges stakeholders to talk with younger project team members, employees and millennial customers for insights into what mobile banking features need to exist in the market. “When project teams building customer-facing applications talk to millennials and customers in general about how they manage their finances, we really get fascinating insights,” he says. “That helps us prioritize our project plans for the future.”
GETTING IN THE GAME
Developers help Atom Bank level up its mobile banking experience.
While some traditional banks, like Barclays and Westpac, are cultivating mobile innovation in-house, others are looking to leverage outside expertise. For instance, BBVA, the Spanish banking giant, has invested £45 million in Atom Bank, a U.K. challenger bank that has no brick-and-mortar presence. BBVA also acquired U.S. online banking startup Simple for US$117 million in 2014.
“BBVA is a bank that has grown by acquisition, so it inevitably had some legacy systems, but it has a determination to be a technological leader as well as expand its presence in new markets,” says Edward Twiddy, chief innovation officer for Atom Bank in Durham, England.
By investing in these companies, BBVA has been able to enter the U.S. and U.K. markets while gaining access to agile, innovative project teams that can roll out potentially disruptive mobile apps in a way that a big legacy bank can't. Because digital startup banks have no legacy infrastructure to take care of, they can focus all of their project efforts on innovation. Plus, project teams can move through the development process more quickly than larger, more bureaucratic financial institutions.
In exchange, innovative Atom gains access to the resources and industry expertise that will help it get off the ground. “There is a lot of knowledge-sharing about how to do the right project well, cheaply and quickly,” Mr. Twiddy says. “It builds our value and it sets BBVA apart from other competitors.”
“We knew that if we were going to be competitive, we had to deliver a wow factor that was also low cost and high value.”
—Edward Twiddy, Atom Bank, Durham, England
When Atom was founded in 2014, Mr. Twiddy's project development strategy was to create an app that would change the way customers experience mobile banking. “When we talked to customers about the banking apps they used, they said there was no imagination or creativity to them,” he says. “We knew that if we were going to be competitive, we had to deliver a wow factor that was also low cost and high value.”
His solution: add game developers to the project team. “The gamers brought a freshness to the user experience,” he says. “They made it titillating and customized.”
Mr. Twiddy's inhouse team spent the first nine months storyboarding banking customer journeys and adapting them for a mobile environment. They gathered feedback from customers, business analysts, legal experts and programmers to ensure the journeys were authentic, safe and could be reliably produced in a mobile environment. “You can't rush to build something before you know what you want to build. That's something my project team got right.”
In Atom's all-mobile banking environment, the technology includes several layers of security, including facial- and voice-recognition biometrics as part of the log-in process.
Once everyone signed off on the design, the gamers began developing the interface. The team used an agile project management approach, working in two-week sprints to deliver the first version of the app in April. “The gamers quickly outpaced our programmers and architects,” he says. “They churn out code a lot faster than most teams in the financial service space.”
The new app, which is scheduled to hit the market this year, features a 3-D graphic environment that is customizable and configurable for each user. As a customer engages with the app, it will learn about his or her preferences and adapt accordingly, Mr. Twiddy says. And to protect personal data in Atom's all-mobile banking environment, the technology includes several layers of security, including facial- and voice-recognition biometrics as part of the log-in process. “It can even tell the difference between identical twins,” he says.
Mr. Twiddy believes these state-of-the-art features will engage mobile customers in a way that competing banks haven't. But that's not the only thing that will help the company capture market share. The virtual bank also will be cheaper for mobile customers by reducing or eliminating fees for actions such as international payment transfers and overdrafts.
“The joy of digital banking is that you can make it lower cost because you have less overhead and infrastructure,” he says. “If you aren't making digital banking cheaper, you're doing it wrong.”
Ms. Steward agrees. “You have to root everything you do in the customer experience, and look at every idea through the lens of the customer. If it's not valuable to them, they won't use it.” PM
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