18
Wisconsin Community Banker
November/December 2014
The Future of Mobile Banking: Big Data Is Here
Mary Lou Santovec
T
he future was being made while
you were at lunch,” Lee Wether-
ington told the
CBW members in
attendance at the
association’s Man-
agement Confer-
ence & Expo in
September.
The future that
Wetherington
referred to was
Apple’s announcement of its new
devices that will work with Apple Pay.
“Apple Pay has recalibrated the mobile
payments landscape.” The product
replaces a number of cards with a
device and a token that allows the user
access to multiple accounts.
Lest bankers worry over more lost
market share, Wetherington assured
them that “mobile payments will
reinforce your card franchises, not
cannibalize [them].”
Will it be one of your bank’s
cards that customers put into their
Apple Pay accounts? Or one of your
competitors’?
Wetherington, director of strategic
insight for ProfitStars, a division of
Jack Henry & Associates, provided
a forecast and summary of industry
research on online, mobile, pay-
ments, and branches in his conference
presentation.
The Holy Grail of Data
Bankers have the “Holy Grail” of
data in the era of Big Data, he said.
Google wants what banks have.
Google Wallet 1, 2, and 3 were the
company’s attempt to enter the world
of banking in order to gain access to
data. Yet Wetherington all but guar-
anteed that banks will win the mobile
and data wars.
Still, the way that consumers make
transactions is changing:
• Fewer transactions are consum-
mated every month at brick-and-
mortar sites.
• The cost of building and staffing
branches continues to rise.
• It’s likely there will be a 30- to
40-percent reduction in the total num-
ber of financial institution branches
over the next 10 years.
• The number of cash transactions
is down.
• Some four to six percent fewer
checks are being written.
Emergence of a New Market Segment
During the Great Recession,
off-the-shelf prepaid cards became
popular as Millennials discovered they
couldn’t overdraw the account or get
charged for overdrafts. Pre-paid isn’t
solely for the poor or unbanked; even
20 percent of wealthy consumers have
prepaid cards. “Prepaid is unhing-
ing money storage from traditional
checking.”
Some customers already use Wal-
Mart’s Bluebird card, developed in
conjunction with American Express.
The card has a very robust mobile app
that makes it look, behave, and feel
like a checking account.
We’re witnessing the emergence
of a new market segment — the
pre-banked and de-banked consum-
ers. The “pre-banked,” according to
Wetherington, are the 90 percent of
people who own a prepaid card and
a checking account. The “de-banked”
are those who choose to manage their
financial lives without a checking
account.
Mobile is growing and reinforcing
the primacy of a bank’s card fran-
chise. Credit card volume is up and
is expected to produce five to seven
percent compound annual growth
rate through 2019 despite the drop in
interchange rates due to the Durbin
Amendment.
We’re reaching a tipping point,
Wetherington said. Bank bottom lines
aren’t growing at double-digit rates
anymore. Profit margins are flattening.
Free checking will become an issue as
the losses on these accounts may no
longer be subsidized by interchange
fee income.
Existing point-of-sale structure will
be unable to handle Apple Pay. Mer-
chants will have to spend billions to
replace the technology to handle the
new, more secure types of credit cards.
It’s time for community banks to make
their move.
Mobile Trends
Adoption of mobile banking
jumped between 2012 and 2013 due
to the increase in the number of
Smartphones. Half of all adults with
a mobile phone will soon be doing
mobile banking. Mobile remote
deposit (MRD) is the on-ramp to
“photo-banking” and key to banks’
migration of 55 million online cus-
tomers who have yet to use mobile
banking.
The fewer the checks being writ-
ten, the more important MRD will
be for consumers. If you only have
one or two checks to deposit, you will
still have to run down to the bank to
deposit them. “It’s the segue for those
who have yet to use mobile banking.”
For banks, it’s a win-win since mobile
costs are cheaper than online, which
are cheaper than human transactions.
Some consumers are holding back
because of security issues. But if the
recent hacking incidents are any indi-
cation, user names and passwords are
dead. Half of us recycle old passwords.
The more online accounts, the fewer
passwords and the more potential for
fraud. “Concerns melt away in the face
of convenience.”
Signatures are also worthless. We
need faster, more secure ways of keep-
ing data safe, and the Smartphone’s
camera and biometrics may be the
answer. Biometrics is rebooting the
security metrics around mobile bank-
ing. EyeVerify uses the vein pattern
“
Biometrics will boost perception of mobile banking
security.
