Do Disruptive Mobile Apps Spell the End for Banks?

November 6, 2014 Veronica Orzechowski

featured-mobile-eating-banksIn the past week, one of Andreessen Horowitz’ partners presented “Mobile is Eating the World” at two tech conferences, and, in just a few days, there are over 160,000 views. The presented statistics amount to a manifesto for why a mobile-first strategy is crucial in today’s business environment.

Banks and financial institutions should take heed, and our US Banking and Financial Services Trend Report captures the research and outlines the key actions mobile bankers should consider. For example, a strategy arm within Viacom found that over 30% of millennial consumers, those born between the early 1980s and the early 2000s, believe they won’t need a bank at all in five years. And, a whopping 73% would be more excited about a new offering in financial services from Google, Amazon, Apple, PayPal, or Square than from their current bank. As well, 71% would rather go to the dentist than listen to what their banks are saying.

If mobile is eating the world, are banks and financial services institutions the main course?

Beyond the millennials, the stakes are high in banking overall. Accenture research shows that, by 2020, 35% of banking revenues are estimated to be at risk due to disruption in the financial sector, mainly related to change in technology and consumer preferences. In addition, consumers are now using their mobile device more than PCs and television. Reports by The Federal Reserve and Forrester point out the substantial growth in the use and importance of mobile banking within the eyes of the consumer. In addition to these points and many others cited in our report, banks have a strong basis to take action.

Yet, there is another perspective to consider—consumers aren’t just changing, new market entrants are taking market share. Companies like Merchant Cash and Capital, Simple, Square, PayPal, and nD bancgroup as well as Google and Apple all focus on an internet-centric consumer. Outside of the U.S., banks in China, Germany, and Australia are focused on online interactions—and they are getting traction. In prior decades, retail branch and ATM locations played a significant role in addressing a market, but in today’s world, physical location doesn’t play as large of a role in the ability to service customers. Mobile is the new, primary customer touch point.

While many banking and financial services organizations recognize the need to change quickly, their ability to develop and deploy software is anything but:

  • Only 5% of banks can develop and launch a banking app in less than three months
  • 45% of banks have six to 12 month development cycles
  • 22% need more than a year to develop an app

2014 US Banking and Financial Services Trends Report

Four Keys to Achieving a Winning Mobile-First Strategy

At Pivotal, we have spent two decades working within agile development models and have built over 400 mobile apps with 400 million downloads. Based on our experience, there are four key elements banks need in order to act like more like disruptive software companies:

  1. Agile Development—banks must move through faster cycles of iterative development. But becoming a truly agile enterprise requires more than adopting a few software development methodologies—it requires an inherent cultural transformation within the entire organization to drive the creation of innovative offerings for customers.
  2. Innovation through Analytics—banks must also maximize the advantage provided by the vast quantity of customer information in databases, customer support inquiries, online banking, and mobile data.
  3. Lean Startup—beyond agile, the Lean Startup approach intends to reduce waste by quickly getting products in the hands of customers to increase feedback. While agile methodologies guide how a product should be built, Lean Startup focuses on ensuring the right product is built.
  4. Delivering Apps on an Agile Platform—banks must embrace the same type of technology platforms that allow start-ups and companies like Google or Facebook to automate the deployment of new releases of software on a continuous basis and without downtime

These are the four key capabilities banks must achieve to become an innovative, mobile-first, visionary to compete, attract, and keep customers. Our 2014 US Banking and Financial Services Trends Report covers the reasons why and outlines how established banking and financial institutions can become mobile-first enterprises, change the way they do business, pioneer new strategies that build on their strengths, and undermine the growth of non-bank disruptors. Download it here.

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