Mobile Banking: Distribution Channel or Defining Experience

July 18, 2015

Mobile centred banking image

Imagine you are transported back to the 1970s. You visit your local bank branch and meet your bank manager. They welcome you by name and you sit down to discuss your finances.

They certainly have the balances of your accounts available and can show you your recent transactions. Because you’ve met them a few times over the years they know much more about you though: what your financial objectives are and probably many of your broader life ambitions - buying a car, starting a family, or buying a bigger home in a nearby town. They would certainly have a set of financial products they could offer you and would introduce and explain these to you when relevant.

The bank manager and the local branch were the defining experience of banking in the 1970s. Customers didn’t have other channels or other product providers; it was all about the branch and it’s staff.

Manufacturing And Distribution

Clearly the world has changed a lot since the 1970s. Customers visit the branch much less and very few would consider that they had a close relationship with their bank manager. Banks and banking have also changed. One of the biggest changes has been the introduction of new ways of interacting with the bank. First ATMs then telephone banking then online banking, each with distinct features, customer experiences and operating costs.

Each of these ways of interacting became a channel and banks adopted language and a model from the production industry: manufacturing and distribution.

Manufacturing created products - current accounts, savings, loans, insurance; distribution managed channels. This model was powerful because it allowed the banks to optimise.

Manufacturing optimisation meant delivering performance from financial products by pulling levers like product features, pricing, risk appetite and customer selection. Distribution optimisation used channel levers like branch footprint, branch format, staffing levels and opening hours.

Enter Mobile

Viewed narrowly, digital - and in particular mobile - is simply another channel. We have branches, ATMs, contact centres, the website and now mobile apps.

From this lens the answer is clear: Distribution should own and manage mobile and use it to optimise features, customer experience and costs. And Manufacturing should view the mobile app as a channel to push financial products through and optimise sales against.

Mobile - The New High Street?

There is an alternative view of mobile. Mobile is increasingly being used by consumers as the primary access point into a whole range of services - from shopping to transport, eating out, travel, social networks, financial services and much more.

Mobile is increasingly analogous to the 1970’s high street: consumers are accessing all of their products and services through this digital high street. If something doesn’t exist on this high street it doesn’t exist in consumers lives. The experience on this high street is the whole experience consumers have of the companies behind the products and services.

Viewed from this perspective the bank’s mobile app is the defining experience of the bank - similar to the bank branch of the 1970s.

It’s certainly easy to see the parallels today between the mobile app and the 1970s bank manager. A well designed app knows who you are and can let you know about the current state of your finances and recent transactions. It can also understand your financial and life goals and help you meet those goals by offering timely advice and product recommendations. It can also do much more like connecting you to relevant services outside of traditional banking - like recommending a restaurant when you visit a city for the first time based on your restaurant spend in your home city or simply letting you know that your salary has been paid.

In the 1970s, bank branches were the centre of a customer’s relationship with their bank. This perspective seems much closer to how consumers increasingly view bank mobile apps - as the defining experience of their bank.

Mobile As Defining Experience - Some Implications

If we adopt this perspective of mobile what would we do?

Customer experience first

Firstly, we would focus on building the best possible customer experience on mobile given the capability of the device. We wouldn’t optimise for anything else – like cross-platform reusable code.

This is similar to building the best branch network and hiring the best possible bank managers in the 1970s - as the primary reference point for the quality of the bank.

New product propositions built for mobile

We would also view the bank’s products differently. As opposed to seeing mobile as a way to sell existing financial products, we’d look for ways to tailor bank products to make them particularly relevant for mobile.

Perhaps a health insurance policy that can be bought by the second before going for a run in the park, or allowing an easy ‘swipe left to pay now, swipe right to pay later’ capability, or perhaps rounding up all spending and putting the change automatically into an investment product.

All channels centred around mobile

We would certainly continue to manage distribution channels - and would work hard to integrate them into the customers’ mobile experience.

An example would be branch staff knowing who’s just walked into the branch from their mobile, greeting them by name and helping the customer without needing additional authentication. Another would be allowing customers to use their favourite messaging app to easily contact their Relationship Manager.

A ‘Mobile-Centric’ Future for Banking

‘Branch-centric banking’ has been the focus for retail banking for decades. With the central role that Mobile plays in consumers lives, banks should adopt a ‘Mobile-centric banking’ strategy.

The focus should be on delivering the best possible customer experience on mobile, having a great mobile team and creating relevant products and services to support this channel.


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The intersection of business and technology.
Written by Charles Allen who lives and works in Hong Kong.

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