In 2016, Well Fargo closed 84 bank branches. By end 2018, the banking giant aims to close 400 more. As the closure rate of physical ways of interacting with their customers, we must ask – is mobile banking the future?
The shift to mobile banking has been driven by a number of factors and events. Consumer demands have shifted rapidly over the last decade, along side the explosion in smartphone use. Smartphone penetration in the US reached 81% at the end of December 2016. In December 2006, only 3% of the population owned a smartphone.
Smartphones and the apps they hold have completely changed the way we interact with the world. From reading books to hailing down transportation, we use our phones for almost everything. And these methods tend to be much quicker and easier for us. Banking is another of those industries to have undergone great disruption thanks to the rise in smartphones.
With mobile banking, you can literally do your banking from anywhere. There is no need to be at a specific location to deposit checks into your account. Or to apply for a loan, or pay a bill etc. Ok – you cannot withdraw physical cash from using your mobile. But this is less of an issue anyway nowadays.
Smartphones have changed the way we spend our money. eCommerce and mobile shopping mean we spend our money directly from our bank account without a bank – and if we do, we can simply access our money on our phones.
Conveniently, most modern mobile smartphones also have some kind of Near Field Communications (NFC) compatibility. If buying things in a physical store or restaurant, mobile users can simply tap their device onto a the merchant’s PoS terminal. And voila, the transaction is completed. No cash, no card.
A report by Nasdaq listed strategy consultants, Forrester, found users feel more engaged with mobile banking if they feel they’ve managed to do what they wanted to do with their finances. With app developers taking note of customer needs, mobile banking apps and other apps adding new features and ways of managing your finances than ever before.
Alerts and notifications are another great benefit of mobile banking that will only drive its adaptation. With a 24/7 connected mobile device, users can set up limits and alerts for when their bank account hits certain amounts, or certain payments weren’t made correctly.
This was impossible before with branch banking, as you would travel far and wide to a bank teller, wait in line for longer than you feel you should, only to find out that your bank couldn’t process a payment because you put “I” instead of an “E” in a receiver’s name.
Not only do we see positive trends in mobile banking from developed countries, but in poorer nations such as Kenya, there is evidence that mobile banking can help push people out of poverty.
For these people, mobile banking is their only accessible channel to the financial system. So the effects of financial inclusion from mobile banking can be – and has been – life changing for these communities. For these reasons we can only further expect mobile banking to proliferate amongst the world’s poorest.
As smartphone costs continue to come down, we can expect global phone penetration to continue to grow. This will drive financial inclusion, financial education and a chance for more and more people to escape poverty.
Lastly, but perhaps most importantly from a bank’s economic point of view, the average cost of servicing a client in branch is $4 per visit. At an ATM it costs only 48 cents, whilst using mobile channels only costs 4 cents.
Following the huge losses of banks during the global financial crisis, there has been a great pressure for these institutions to reduce their cost base. By switching from branch banking to mobile banking, they have found a sure fire and in demand way to appease both their shareholders and their customers at the same time.
Branch banking has its functions – presently, we still need branches and ATMs to withdraw cash and perform certain other transactions. But the positive impacts and convenience that mobile banking brings will only grow as the closure in bank branches accelerates. And in the future, who knows, will bank branches only be something we tell our kids about. “Why? That’s silly that you had to wait in line to take out your money,” I can hear them say.