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BirdsEye View

There is clear consensus that mobile is the future. The future of what, you ask? The future of everything! Witness the frenzied build-up to every Apple new iPhone release, or just walk down the street and see how many people don't have a phone visible in their hands, at their ear or on them, or a pair of earphones dangling from their ears. On a recent visit to Sydney I saw for the first time hordes of people walking relatively briskly while watching their phone. It's a walking hazard but it does talk to the increasing importance of the device. Last, my son Paul and I walked by Central Park in NYC around 9pm on a weekday. There were conservatively 300 people there, all sitting playing Pokemon Go. Learning: the phone is more important to us than ever, and we've only just begun.

While Apple has introduced its iPhone7 with facial recognition and two cameras, we in the banking industry are more frustrated than ever at our molasses-slow vendors. Our apps largely look antiquated, and their functionality limited. Our forum members tell us they are held hostage by their vendors. Whether I agree with the statement or not, this isn't the issue. Mobile lost its optionality three years ago. It's now beyond table stakes. It is quickly becoming THE primary channel for customer interaction across the board, and banking is not too far behind, thanks to AMEX and other leading providers.

Our industry must gain a deeper understanding of what drives consumer behavior on the phone and what we can learn from our (and others') past mistakes. These two steps should come first, before we shoot for the elusive omni-channel strategy. First let's figure out what are the new table stakes we must offer.

1. What we use the phone for?

   The phone, even the smart phone, used to be a voice communication device for us. Those days are long gone. Have you tried calling your kids lately? They are unlikely to answer. But if you text them, the likelihood increases exponentially. Making phone calls is no longer the most important function of the phone. Sending and receiving messages, accessing the internet and social networking sites, taking pictures (the phone as a camera) and entertainment (games, movies,YouTube) have overtaken the phone's traditional primary usage as its functionality and related apps proliferate.

2. Mobile Payments

   Payments, as we all know, has also become a phone function, although its progress is slower than we'd like. Mobile money transactions have been growing, but I believe we haven't reached the tipping point yet when it comes to ApplePay type transactions. Two factors are of interest here:

   1. Age plays an important role in payments; younger people use the phone for payments much more than older folks (have you Venmo'ed money lately?)
   2. Mobile payments aren't limited to storing money or credit card on the phone. They include buying from Amazon, using Uber and using your bank's bill-pay service.

   There are numerous methods to use the phone as a payment device at a physical location:

   • NFC technology (GoogleWallet, ApplePay etc.)
   • Text (to authenticate PayPal or Venmo)
   • Scanning a barcode
   • Using a merchant's checkout service (Amazon 1-click)
   • Entering payment information in advance and only stating your name at the checkout counter (OpenTable; Uber; Starbucks)
3. Changes in consumer behavior

   Smartphones are now widely used by consumers in daily shopping activities. They use the phone to research product and store features, to spot discounts and coupons, check prices and loyalty points, and receive recommendations on products that might be of interest (from Amazon to iTunes). Again, younger consumers are heavier users of the phone as a shopping and information gathering device (about 90% use the phone that way, based on BAI's Payments Connect information).

   The use of the phone as a shopping and information gathering tool can be leveraged to drive convergence of shopping and payments. Amazon is already doing that and is becoming a force to recon with in terms of payments. It's authentication and payments "rails" are being used not only for Amazon partners that warehouse with the company, but also for completely independent merchants who use Amazon solely as a payments vehicle to ease the customer transaction (much like Facebook is used as an authentication tool for many apps).

   This convergence is revolutionary, and mobile devices are at the center of it. Banks need to develop better understanding of how their customers use their mobile devices and capitalize on that to facilitate both banking and payments services. For example, piggy-backing on mobile biometric authentication (iPhone7 offers facial recognition) can improve in-branch authentication and customer service in one fell swoop.

4. Learning from the past five years

   We now know that mobile functionality is an important consideration in bank selection and switching factors. Look at how effective Chase's mobile strategy has been in both customer acquisition and retention. We further know that mobile engagement is highly predictive of customer loyalty (much like ATM usage used to be). Interestingly, brand equity and trust become more important in the mobile world than in the past, which explains partly PayPal's tremendous success as a digital wallet provider, and Venmo's victory as the premier P-to-P vehicle for younger people and Facebook users.

   Customer segments have now emerged which are clearly distinguished by their digital and payments behaviors. Such segments range from "digital shoppers" (average age 35), folks who are comfortable with the technology and have grown up using it, to the tech-savvy card users (average age 48), to traditional shoppers (average age 57) (Source: VISA Digital Commerce Study, 2015). Marketing distinctly to each segment and not wasting resources on segments which do not embrace mobile payments will increase your marketing dollars effectiveness as well as customer satisfaction.

5. Mobile is fully integrated into our lives

   As mentioned in my opening paragraph, Mobile is an integral part of our daily lives. People use the device to manage their life, research and management their lifestyles, even find a place to live. Linking bank products and services to the context of daily events and decisions has been an effective marketing tool for generations. Doing so in the mobile generation will also increase effectiveness and engagement if done thoughtfully. Any event  from having a meal with friends to visiting family on holidays to managing through a divorce  can be made easier through mobile experiences. Banks need to take the next step in their marketing, merchandising and advertising to link specific events in their customers' lives to mobile solutions. Show how the device your customers already use to make their lives easier also offers financial and payments solutions to daily decisions and events.

   A small example can bring this point to life: iconize (or emojize) your products and services to reflect the customers' daily experiences. Icons can be used to represent not only channels but also transaction methods and sources of funds. Icons  pictures  are the most common communication method in this new age. Consider the explosive growth or Emojis, and now, Bitmojis. It's time to Bitmojize your bank and get closer to your customers. They will click on your app more often if it's easier.

   This is but one example of the many opportunities you have to create a better customer experience and put your app ahead of the competition. Take a fresh look at your marketing and mobile presence. A refreshed look of the same product line can go a long way to engage your customers in a sustainable way and position your bank as a winner in the Mobile Wars.