August 19, 2013

Mobile banking sweeping into state's community banks

Photo | Pablo Robles
Photo | Pablo Robles
Farmington Bank recently unveiled a new online banking app for customers who own an iPad tablet. Executive Vice President Kenneth F. Burns said the lender's goal is to get 30 percent of its checking customers to use mobile banking.
Geoff Knapp, online banking vice president, Fiserv

Mobile access to their banking products and services is spreading like wildfire among Connecticut's community banks.

Like their larger brethren, these smaller but aggressive cousins are scrambling to connect with their depositors and borrowers via as many "channels" as they can. Mobile technology also levels the playing field, allowing smaller institutions to offer many of the same services wirelessly that the big banks do, experts say.

While mobile banking won't eliminate branches or automated teller machines, industry experts say it will alter how consumers interact with brick-and-mortar sites in the future.

The driver to adopt the technology is fear, experts say, of missing out on the biggest technology wave to sweep the banking industry since wide adoption of debit cards and online banking earlier this century. Mobile banking refers specifically to using your cell- or smartphone, or other handheld device, to access banking services, or to pay for retail goods and services.

"Back in the old days, online banking was a convenient access made to complement the primary bank relationship'' executed via branches, said Geoff Knapp, online banking vice president for Fiserv, technology platform provider to many large U.S. and smaller Connecticut banks. "Now, the primary relationship is through the tablet, smartphone or other mobile devices. What we're seeing is these new channels evolve.''

Middletown's Liberty Bank in April introduced a downloadable application -- "app,'' for short -- for the Apple iPhone and iPad, and Google Android, plus another for Amazon's Kindle handheld digital reader.

Liberty experienced thousands of downloads the first day, and has seen 19,000, or about a third of its online banking customers, go mobile. Liberty originally projected a conversion rate of 20 percent to 25 percent as "a home run,'' said Patti Jatkevicius, its senior marketing vice president.

"The target audience that's most important … demands it,'' Jatkevicius said. "They demand access to their accounts and finances using tools they have at their beck and call every minute. Their lives are on those devices and we better be there, too.''

Two years ago, Farmington Bank launched apps for customers using iPhones and Androids. In June, it added an iPad app.

Since then, about one of every five of Farmington Bank's primary checking customers uses one of its apps, said its Executive Vice President and Chief Retail Banker Kenneth F. Burns. Meantime, it's witnessing a 1.5 percent monthly growth rate in adding mobile users. The bank's goal is 30 percent penetration of mobile usage among its checking customers, Burns said.

"We expect to reach goal within 18 months,'' he said. "But we also expect to boost that goal as more customers gain mobile.''

Like most, Farmington Bank's mobile users mainly use their apps to track account balances and cleared checks, followed by transferring funds between accounts. It is that convenience and ease of use that mobile users crave, experts say.

Thomaston Savings Bank, a $750 million-asset lender in Plymouth, has had a similar mobile-usage experience since introducing an iPhone app a year ago that has drawn a third of its eligible online banking customers as mobile users, said CEO Stephen Lewis. An iPhone tablet app is due in November.

A mobile app is vital in today's banking market, Lewis said, to not only retain customers but to maintain a competitive footing at a time when so many other deposit-taking institutions offer them, especially large ones like Bank of America, JPMorgan Chase Bank and RBS Citizens Bank.

"It puts us on a level playing field with them,'' Lewis said.

Michael Stern is a strategist with Toronto financial-services consultancy Xtreme Labs, whose U.S. client list includes such familiar names as Connecticut media giant Thomson Reuters, American Express and the National Basketball Association. Stern, Xtreme Lab's director of financial service practice, points to one study showing one in six customers would change banks based on a lousy mobile-banking encounter.

So banks' challenge, he says, is creating a friendly, efficient experience through the devices customers carry with them daily.

"Banks are rushing to roll out all this functionality,'' he said, "but it means nothing if it isn't used. We think there's a long way to go before your grandmother feels comfortable enough with the (banking) apps to use them."

According to the Pew Research Center, nearly one-third of U.S. adults bank online, and a third of those who have cell phones use them to bank remotely.

Pew also found adoption of both digital formats has grown considerably in the past three years.

Not all banks are hurrying into mobile. At least one, First National Bank of Suffield, says it's studying a mobile-banking app for possible introduction sometime next year.

Even Liberty Bank, which at $2 billion in assets, is among this state's largest community lenders, admits some initial trepidation about opening its vault to mobile users. Liberty plans in early 2014 to offer them the ability to deposit checks using their phone or handheld devices.

"We needed to go to school on it a little more," Jatkevicius said, "and ensure we understood the risks and applications correctly.''

Security, too, is a concern, but one that mitigates over time. Some experts say that as more depositors spend time using the technology to interact with their accounts, the odds grow that either the consumer or the bank will detect virtual intruders.

Down the road, such security features as voice and face recognition, perhaps retina scans, could make mobile transactions even safer, technologists say.

Eventually, all banks will get swept up by the mobile banking tide. Indeed, consumers are embracing it faster than any other banking technology ever, observers say.

Mobile also is prompting banks to rethink their branch networks. Increasingly, they are becoming places where customers go to settle complex transactions, to apply for loans, or, for commercial customers, to make daily deposit drops or convert coins to currency, bank operators say.

Matt L'Heureux is vice president of product development for COCC, an Avon vendor of technology platforms banks use for their Internet and mobile banking.

"For the first time ever,'' said L'Heureux, "there's a banking channel and a technology that is on a device that just about everyone has on them at all times.''

For all its pluses, mobile banking won't render obsolete the thousands of branches and ATM sites operating throughout Connecticut. However, those brick-and-mortar sites, too, will evolve.

"The future success of banks and mobile banking,'' said XtremeLab's Stern, "is going to be dependent on their ability to build out all the services but in a very usable, enjoyable way.''

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