Corporate Mobile Banking Report 2010

OCTOBER 2010
Christine Barry +1.917.546.9180 cbarry@aitegroup.com Judy Fishman +1.617.338.6067 jfishman@aitegroup.com
The Business Case for Offering Corporate Mobile Banking Services

Based on a global survey of treasury executives sponsored by:
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The Business Case for Offering Mobile Corporate Banking Services
October 2010
I N T R O D UC T IO N
The global financial services industry is experiencing a paradigm shift as new expectations are placed on banks and the ways in which they interact with their customers. Customers expect higher levels of customization, real-time information, a consistent experience across channels, and anytime, anywhere banking. They also expect technology and bank offerings to match the patterns in their lives. Given the high adoption of mobile devices around the globe, it is not surprising that mobile banking services have become a hot topic among bankers and their customers. This paper examines the demand for mobile banking services among businesses in key geographic regions, and argues that banks should roll out these services to their cash management customers. The paper is based on an October 2010 Aite Group survey of 319 treasury executives worldwide, sponsored by FUNDtech and fielded with the cooperation of GT News. The survey, conducted online, has a margin of error of approximately five points. Figures 1 and 2 provide a breakdown of survey participants by geography and business size. Figure 1: Breakdown of Survey Participants by Geographic Region
Source: Aite Group survey of treasury executives worldwide, October 2010
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October 2010
Figure 2: Breakdown of Survey Participants by Annual Company Revenues
Source: Aite Group survey of treasury executives, worldwide October 2010
D E MA N D FO R MO B I LE BA N K I N G
While mobile banking has been a mid-level IT priority for most banks over the last few years, it is slowly rising in the ranks as institutions struggle to identify new ways to retain customers and improve customer satisfaction rates post- financial crisis. To date, institutions offering mobile banking capabilities have been offering them primarily to their retail/consumer customers. Banks have expressed concerns regarding business customer willingness to use the service, the types of cash management transactions and functionalities that would be conducive to this channel, and their ability to charge for the service. Leveraging greater insight (gained from our October 2010 survey) into the willingness of treasury executives to use mobile banking services, Aite Group believes that a strong business case exists for banks to roll these services out to their treasury services customers as an extension of bank online cash management offerings. Aite Group estimates that only about 4% of businesses around the globe currently use mobile banking services offered by their financial institutions. The majority of these businesses are small, with less than US$10 million in annual revenues, as most larger businesses have not yet been offered the service. Mobile corporate banking is therefore still in its infancy, and a firstmover advantage exists for any institution launching an initiative capable of addressing the unmet market need for corporate mobile banking. Bank decisions to hold off on rolling out mobile banking capabilities to their cash management customers demonstrates a disconnect between bank product offerings and customer needs. Approximately two-thirds of businesses would be at least somewhat likely to use mobile corporate banking services to perform basic transactions (e.g., checking balances, transferring funds) over the next 12 months if their bank offered it; 43% of survey participants described themselves as likely or very likely to do so.
October 2010
More importantly however, 56% of survey participants expressed interest in performing more advanced functions (Figure 3). Examples of such functions include approving transactions (such as wires and the release of payroll batches) and initiating payments. A 2009 Aite Group survey found that U.S. businesses see the greatest benefit in the ability to approve transactions via their mobile devices. A similar scenario likely exists in other regions. Positive pay also lends itself well to this channel by allowing users to view images of potentially fraudulent checks through their smart-phones and instantaneously making pay or no-pay decisions on them. End-user willingness to perform advanced transactions is especially significant because it is where the true mobile opportunity for banks exists. Customer interest in performing basic mobile banking capabilities is not enough to build a strong business case for investing in the mobile channel. Advanced mobile functions are stickier than basic balance inquiries, promising greater retention and more opportunities for cross-selling. They also offer greater value to customers and therefore a stronger justification for service fees to compensate for revenues lost due to new regulations and commoditized products (a point that will be discussed in greater detail in a later section of this paper). Figure 3: Business Willingness to Perform Basic and Advanced Mobile Functions
It is not surprising to find that treasury executives willingness to use mobile banking services differs by geography. Treasury executives in Western Europe are the most willing (25% described themselves as very likely) to perform both basic and advanced mobile banking functions through a mobile device compared with executives in other parts of the world (Figure 4). This finding reflects the very high mobile phone adoption rates found in that region.
October 2010
Figure 4: Regional Differences
Differences also exist by business size. Forty-four percent of the largest businesses (those generating more than US$10 billion in annual revenues) stated they were not at all likely to use mobile corporate banking services to perform advanced functions in the next 12 months, making this group the least likely adopters of the service (see Figure 5). This is due to their larger transaction sizes and perceived subsequent risk. The largest opportunity for this service exists among middle-market customers. Figure 5: Differences by Revenue Size
October 2010
One barrier to mobile corporate banking adoption that banks must overcome is concerns about security. Security is a concern for more than 65% of the treasury executives surveyed. While some businesses believe that the value of the service outweighs their concerns, such concerns are a key deterrent for those businesses less willing to consider using the mobile channel. Among those businesses less likely to adopt mobile corporate banking, 58% would not do so because of security concerns (Figure 6). As mentioned in the previous section, the largest businesses have the greatest security concerns. Fifty-one percent of businesses generating more than US$10 billion in assets stated that security is a concern that would prevent them from using mobile banking. Banks can ease some of these concerns and further increase the size of the mobile opportunity by educating customers on the measures they have taken to ensure information security. Figure 6: Security Concerns as a Potential Deterrent to Adoption
T H E VA LUE PRO PO S IT IO N TO BA N K C U STO ME R S

Business customers are attracted to services that save them time and increase convenience. In the case of corporate mobile banking, the ability to perform bank functions anytime, anywhere and take immediate actions are likely to be the key drivers of customer adoption and were ranked highest by survey participants among a list of mobile banking benefits presented to them (see Figure 7). Of those businesses most likely to adopt mobile corporate banking, 50% view anytime, anywhere access to banking information as the primary benefit of the service.
October 2010
Figure 7: Perceived Benefits
As mentioned previously, an important component of the return on investment of mobile banking is its ability for banks to generate fee-based revenues to cover some of the costs associated with the technological investment. This is a need more easily fulfilled among business customers, who are typically more accustomed to paying fees than consumers. Approximately 49% of businesses are willing to pay for the convenience of mobile cash management capabilities. Interestingly, there were no significant differences in businesses willingness to pay across regions or even by size of business. Those willing to pay for the service would prefer to pay on an annual, rather than monthly, basis, though a preference does not exist for per-seat or per-transaction pricing models (Figure 8). Selecting the right price point for this service will be critical to its success and will vary across geographies. Twenty-two percent of businesses surveyed stated that the potential for the product to be expensive is a major concern.
October 2010
Figure 8: Willingness to Pay/Preferred Pricing Model
R EC O M ME N DAT IO N S
Whether to offer corporate mobile banking services is something that all commercial banks around the globe should be considering. A large percentage of businesses have expressed interest in the service, recognize its benefits, and are even willing to pay for it. Launching such an initiative requires a well-thought-out strategy to achieve the greatest levels of success, however. Aite Group makes the following recommendations to institutions considering such an initiative: The mobile channel should be viewed as an extension of the online channel for corporate customers. The user experience across channels should therefore be similar, sharing entitlements, customizations (i.e., account names), and functionalities. In order to generate fee-based revenues from this service, bank marketing messages must clearly communicate those benefits rated highest by business customers. Additionally, institutions should target this service toward businesses most willing to perform advanced functions. The ability to check balances and transfer funds does not offer enough benefit to justify paying for it. Banks must educate their customers on the level of security offered through the mobile channel. While security concerns are not strong enough to prevent many businesses from considering using the service, they are likely to be strong enough to prevent some of a banks largest customers from doing so. Easing those concerns could increase the size of the opportunity for banks. In an effort to differentiate themselves in a competitive environment, many technology vendors are leveraging their experiences across their broad customer bases to take on more of an advisory role for their customers. Banks should leverage the expertise and experience of their partners to implement best practices and achieve a higher return on investment.
October 2010
ABOUT AITE GROUP

Aite Group is an independent research and advisory firm focused on business, technology, and regulatory issues and their impact on the financial services industry. With expertise in banking, payments, securities & investments, and insurance, Aite Groups analysts deliver comprehensive, actionable advice to key market participants in financial services. Headquartered in Boston with a presence in Chicago, New York, San Francisco, London, and Milan, Aite Group works with its clients as a partner, advisor, and catalyst, challenging their basic assumptions and ensuring they remain at the forefront of industry trends.
C O N TAC T
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Corporate Mobile Banking Report 2010

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OCTOBER 2010

Christine Barry +1.917.546.9180 cbarry@aitegroup.com Judy Fishman +1.617.338.6067 jfishman@aitegroup.com

The Business Case for Offering Corporate Mobile Banking Services

The Business Case for Offering Mobile Corporate Banking Services

Source: Aite Group survey of treasury executives worldwide, October 2010

The Business Case for Offering Mobile Corporate Banking Services

Figure 2: Breakdown of Survey Participants by Annual Company Revenues

Source: Aite Group survey of treasury executives, worldwide October 2010

The Business Case for Offering Mobile Corporate Banking Services

Source: Aite Group survey of treasury executives worldwide, October 2010

The Business Case for Offering Mobile Corporate Banking Services

Figure 4: Regional Differences

Source: Aite Group survey of treasury executives worldwide, October 2010

Source: Aite Group survey of treasury executives worldwide, October 2010

The Business Case for Offering Mobile Corporate Banking Services

Source: Aite Group survey of treasury executives worldwide, October 2010

T H E VA LUE PRO PO S IT IO N TO BA N K C U STO ME R S

The Business Case for Offering Mobile Corporate Banking Services

Figure 7: Perceived Benefits

Source: Aite Group survey of treasury executives worldwide, October 2010

The Business Case for Offering Mobile Corporate Banking Services

Figure 8: Willingness to Pay/Preferred Pricing Model

Source: Aite Group survey of treasury executives worldwide, October 2010

The Business Case for Offering Mobile Corporate Banking Services

ABOUT AITE GROUP

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