Banks Can Keep Customers, Make Money With Mobile

Paying With Devices to Hit Critical Mass in Four Years, Says Yankee Group

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Bankers who want to cut customer churn and make money should look no further than the mobile device in their pockets, argues Yankee Group in new research.

Generally, banks have largely viewed the channel as a way to generate savings by diverting customer service away from call centers or interactive voice response. But at some point, they have to look beyond saving overhead and use mobile as a revenue generator.

A big piece of that will depend on the adoption of near-field communication (NFC) payments, the study said.

What are NFC payments? It's when a phone can be used to pay for a transaction because it has an on-board commerce chip that can talk with a receiving chip inside a point-of-sale device. NFC is made for speedy, high-volume transactions used at places such as fast-food outlets and convenience chains because all consumers have to do is tap their phone against a reader and input a password, which is quicker than using cash.

In other words, banks are hoping that more consumers will whip out their phones to pay for burgers and fries, instead of using cash. Each time credit is used, the issuing bank gets a cut of the total transaction.

The market isn't quite there in the U.S. yet, as the phones supporting these transactions are not available, but banks are already priming consumers by issuing no-swipe credit cards that can be used at NFC readers that are installed in outlets such as McDonald's. Yankee Group says how the success of NFC will depend on whether banks will continue to invest in mobile banking. Yankee expects mobile banking -- along with NFC -- to gain critical mass in 2013.

Still, today banks should be looking at mobile as another channel that consumers can use to interact with it, in addition to the ATMs, phone and online -- essentially deepening their relationships and averting defection.

Most financial institutions are seeing about 3% of online banking users adopting mobile banking, according to the report, though Bank of America is ahead of the pack, having logged 1 million users as of this summer, on a base of some 25 million users.

One hurdle to the launch of mobile banking in 2008? The fact that call centers are often involved in the activation of mobile banking. As many as 30% of all mobile banking application downloads in the U.S. have necessitated help from the carriers' call centers, to the tune of an average $6 per call, according to the Yankee Group.

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