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Pathway Paper: #02 M-COMMERCE: BUILDING THE REVENUE OPPORTUNITY FOR BANKS
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M-COMMERCE: BUILDING THE REVENUE OPPORTUNITY FOR BANKS
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3M-commerce: building the revenue opportunity for banks2
In the second of the Monitise Pathway Papers series, we take a
look at m-commerce for banks and investigate the critical factors for sucess.
pg 04: Introduction
pg 06: Why are banks so well positioned to offer m-commerce?
pg 10: The key benefits for banks
pg 13: The key steps to effective m-commerce
pg 16: How can banks make it happen?
pg 19: Conclusion
CONTENTS:
3M-commerce: building the revenue opportunity for banks
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The inexorable rise of the smartphone is powering an ‘always connected’ culture. Freed from the high-street and the desktop, commerce is now mediated through a personal device that accompanies the consumer everywhere. Brand interactions and transactions can occur at any time and any place. For an increasing number of people, mobile phones are the primary and preferred way to engage with banks and other brands, complementing and significantly extending what they can do via the high-street branch, online and the ATM.
M-commerce is real and it’s here to stay. It’s more than just the ability to shop on your mobile or tablet; m-commerce is about adding value to the shopping experience, regardless of which channel the purchase takes place. For instance, discovering an offer in a banking app but actually redeeming it in store.
The possibilities are numerous and the battle for market share is just beginning. So what comes next?
Banks have the ability and the imperative to take advantage of the opportunity. By leveraging key assets, financial institutions can compete head-to-head with would-be disruptors. They are in a unique position to provide consumers with a connected m-commerce experience – while defending traditional services and driving new revenue streams.
In this paper we discuss these threats and opportunities, and provide the key steps to m-commerce success.
In half a decade, mobile has completely revolutionised the way people buy, bank and pay.
Introduction
41%of smartphone owners
using their mobile phones1
purchased
Last
yea
r
5M-commerce: building the revenue opportunity for banks
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For an increasing number of people, mobile phones are the primary and preferred way to engage with banks and other brands, complementing and significantly extending what they can do via the high-street branch, online and the ATM.
1 Forrester Research (2013)
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Why are banks so well positioned to offer m-commerce?
1 Market Force webinar: ‘M-commerce, the threats and opportunities for banks’
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1. Trust and confidenceBanks have a head start over their competitors as they are already trusted to handle consumers’ money.
Ben Green, Head of Mobile for Santander in the UK: “The point of leverage for the banks
is the fact that trust [in security] has never gone away. The discretion and relevance you can have in helping people get more from their money; that’s the real heartland in the transition from payments to purchases.”1
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Customers are more confident if m-commerce is provided by banks
60%
68%
Spain
Agree Strongly agree
UK Germany
57%
50%
40%
20%
I would feel more confident in buying goods
and services through a mobile phone if i could do so through an app
offered by my bank
#1
#2
#3
#4
#5
#6
(Research conducted by Future Foundation 2013, commissioned by Monitise. Among Smartphone Users.)
57% of UK consumers say they “would feel more confident buying goods and services through a mobile phone if [they] could do so through an app offered by [their] bank”. Half of Germans and more than two thirds of Spaniards agree. Similar levels of trust are afforded to websites that have been endorsed by banks.
Who else are consumers going to turn to on their mobile devices for trusted m-commerce?
How important would it be for you to connect to the following services when you buy a product?
Checking bank balance is more important than price comparison when buying
Consumers would buy different - and higher value items through a banking app
UK
UK
Germany
Spain
SpainGermany
The right balance Trust in bank endorsement
Check Balance 69% 57%51%68%
59%
53%
64%
36%
14%
64%
67%
61%
58%
34%
30%
80%
73%
63%
59%
38%
37%
Price Comparsion
Consumer Reviews
Budgeting Tool
Social Network
I would trust websites that have been endorsed by banks
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2. Data and insightsFinancial institutions possess a wealth of data, safely stored in customer records, account activity and other banking services. Upon analysis this data will reveal strong indicators of lifestyle, predictable behaviour and receptiveness to commercial offers.
Supermarkets have strived hard to earn their customers’ loyalty and revenue opportunities by mining the data from individual purchasing habits in their own stores. Banks however have visibility of numerous transactions across all their customers’ spending. They don’t have everything though. For instance, bank data alone will not reveal the contents of a shopping basket. However, by intelligently combining their data with other sources, banks can generate unique and powerful insights.
These insights can be used to create location specific, time sensitive offers and recommendations linked to transactional history. Customers can opt-in to receive contextual, convenient services at their discretion.
A permission-based, preference-driven approach enables banks to deliver a higher quality experience and create a stronger bond with the customer. Merchants meanwhile benefit from highly accurate targeting, which enables them to reduce brand damage from spam, increase loyalty and maximise the cost-effectiveness of their market spend.
“We need to realise that data protection is changing. The younger generation are happy to share personal information much more readily” Jerry Norton, Director of Strategy, Financial Services, CGI1
Whereas new entrants have to fight for customer engagement (e.g. through massive advertising spend), banks that have built robust, high-engagement m-banking have a strong base from which to build (as opposed to those who have simply created ‘Internet banking on mobile’, which is not the right starting point.)
Current m-banking app penetration in major European markets is around a quarter of the population and rising. Many banks are already seeing their customers log into their apps 25 or more times a month. This level of engagement makes banking one of the top six to eight apps for many consumers, earning the coveted home-screen position – providing a perfect platform for growth.
Nearly three million customers use RBS Group’s mobile app, with more than 100 million transfers completed to date. Transactions and usage figures are doubling year-on-year and mobile banking usage is ten times that of Internet banking.
3. Home screen positioning
A key lesson from e-commerce is that content follows traffic. So high engagement apps provide banks with the opportunity to bring relevant content to their customers.
This content will vary by country and by customer segment, but might include national and local offers as part of a loyalty scheme, online voucher (e.g. iTunes) and gift card purchase, transport and entertainment tickets, airtime purchase or cross-border payments.
If consumers are already using an app multiple times each month, banks can introduce new functionality which complements their existing services to create a mutually reinforcing platform.
Aggregation allows genuine seamless ‘one click’ shopping instantly – goods and services offered through a banking app, connected to the customer’s bank account and contact details make purchasing and delivery very easy.
4. Seamless aggregation
Front of mind and moneym-banking penetration across Europe
(Nielsen/Datamonitor - Feb 2013)
Banks already see daily traffic from a massive, transaction ready market.
Country M-banking app M-banking users
France 26% 3.2 million
Netherlands 34% 1.0 million
Spain 22% 2.8 million
Sweden 26% 1.1 million
UK 22% 5.7 million
Banks that have built robust, high-engagement m-banking have a strong base from which to start.
1 Market Force webinar: ‘M-commerce, the threats and opportunities for banks’
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The key benefits for banks
1. Bringing consumers closer
While the successful migration of banking to the Internet heralded a victory for security and convenience, financial institutions also lost an important level of engagement with customers.
The rise of online banking led to a decline in face-to-face interactions in local branches. This coincided with an increasing commoditisation of financial services and a frugal financial climate that encourages customers to shop around,
with technology empowering consumers to manage their money on their own terms.
The uniquely personal nature of mobile offers a way for banks to reverse this worrying trend.
Next-generation mobile banking, with seamlessly integrated m-commerce, will enable financial institutions to grow as service providers and forge even stronger relationships with their customers – closing the gap that ‘remote’ banking created.
2. Protecting against disintermediation
It’s already happening in the form of payments (PayPal, Amazon1) and market innovators are prising away secondary and even core banking functions where the financial incentives are sufficiently tempting.
There is a danger that banks could become a ‘transaction pipe’, simply moving customers’ money around while all the exciting services and revenue opportunities are controlled by other players.
By using m-commerce to deepen their relationship with customers, banks can simultaneously defend against disruptive innovators encroaching into traditional banking services, eroding revenue and taking the most profitable ‘slivers’.
If there’s nothing stopping financial institutions from entering the m-commerce space, then consider the reverse implications.
M-commerce through banking apps is a win-win for banks and retailers. The latter will pay significant commissions for new customers, while the former’s home screen positioning provides the audience.
Data driven analytics allow providers to continually refine their service and create highly targeted, relevant offers – leading to longer, more profitable customer relationships.
Banks can take inspiration from mobile operators. Rather than focusing on individual transactions, customers are considered in terms of Annual Revenue Per User (ARPU). This shift in perspective reveals the strategic value of commissions earned through m-commerce.
3. Driving new revenueCrucially, m-commerce provides compelling new revenue opportunities.
Market innovators are prising away secondary and even core banking functions where the financial incentives are sufficiently tempting.
1 http://www.finextra.com/news/fullstory.aspx?newsitemid=25675
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The key steps to effective m-commerce
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Successful m-commerce combines simplicity, ease of access, and direct and compelling offers into one high engagement platform.
‘Human first’ is one of the guiding principles of the high engagement approach. In other words, understanding consumers’ needs and how they like to interact with technology in order to develop intuitive user interfaces that drive commercial performance.
Just as the simplicity and elegance of the iPhone set the benchmark for subsequent smartphones, the shining lights of m-commerce share Apple’s prioritisation of the idealised customer-centric, intuitive experience.
Amazon’s successful mobile app, for instance, is a great example of direct
engagement and analytics-driven, cross selling opportunities. Customers can browse quickly and efficiently, discover items related to their purchasing preferences and interact directly with the brand and other users by posting reviews on the go. But it’s never finished – Amazon appreciates more than most that any app can benefit from refinement.
When Monitise Create was challenged to revamp one of the travel world’s most successful applications – Premier Inn’s booking app – the re-launched app saw conversion almost double from 3% to 5.9%. Careful monitoring of the previous application’s effectiveness revealed powerful data-driven insights that allowed Monitise Create to design an experience that anticipates the needs of the customer – including the ability to
generate drop-down selections based on popular choices and the ability to offer optional extras to increase spend and encourage repeat custom. It was discovered that most bookings were made near a person’s current location. The redesigned app pre-selected the nearest hotel by default, using geo-location info – reducing the number of clicks and boosting conversion.
When it first launched in 2011, the app was downloaded over 2 million times; with guests booking more than 150,000 stays in 2012 alone.
‘Human first’ is the dominant philosophy of successful mobile design. Banks must create a high engagement app in order to achieve that sought after home screen positioning.
However strong the strategic case for m-commerce success, it would mean nothing without the actual service to back it up.
1. Design a great customer experience
‘Human first’ is the dominant philosophy of successful mobile design. Banks must create a high engagement app in order to achieve that sought after home screen positioning.
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It’s about subtly nudging consumers in the right direction, rather than pushing them abruptly.
This begins with establishing mobile purchasing via the bank. From this stable base, banks can extend their service into all aspects of m-commerce. The key is to create a high-engagement platform and gradually bring in relevant content, so that banks play a bigger role in customers’ lives. Simple, easy to buy and repeatable commodity products like iTunes vouchers or gift cards – such as those provided by Monitise’s scalable service – are an ideal
way to prepare customers before moving into more targeted offers.
Throughout the journey trust is retained by remaining permission-based and preference-driven. Relevance and context are paramount. To devise effective incentives and build loyalty banks must continually listen and learn, ensuring that customers only receive information and offers directly related to their interests or stated requirements.
With such a wealth of information already at their disposal, banks can identify
distinct groups by their earnings and outgoings and begin predicting behaviour and marketing specific offers to particular demographics – including variations by market segment, country and region.
For instance, institutions could create m-commerce products specifically targeted at SMEs, or high-net-worth individuals, creating a new level of revenue opportunities by becoming increasingly granular. This drive towards segmentation supports the end goal for any marketing proposition – to become a service ‘so good, you’d pay for it’.
The transition to full blown m-commerce via a banking app won’t happen overnight. Financial institutions must take consumers on a ‘trust journey’ – using insights they learn along the way to continually refine their service.
Percentage of consumers who would switch banks to get access to targeted digital coupons/offers
2. Relevant content
21%
18-25
25%
26-34
16%
35-44
8%
45-54
2%
55-64
1%
65 and above
15%
Overall
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Source: AlixPartners Financial Services Digital Couponing Study Q2 2013
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How can banks make it happen?
Financial institutions are historically very good at keeping their service delivery in-house, but do they have the time and resources to become experts at mobile development and delivery? Or should they leave the delivery to an established expert and focus instead on creating the most compelling propositions and best possible customer experience?
There is a growing recognition from the most forward looking banks that the success of Mobile Money will depend on seizing the opportunity quickly by bringing the right specialist third party partners on board early.
As an example, Visa Europe is working with Monitise to develop and deploy m-payments and m-commerce solutions for the Continent’s leading financial institutions. Extending the spirit of collaboration, IBM has recently been brought on board to support the partnership’s plans for delivering enhanced cloud-based services.
“You do it by selecting the correct ecosystem of partners around you,” says Ben Green. “For many of the large banks that’s a mind-set shift. Typically the banks have been very good at ‘build it here’ and it’s something of an anathema to start working with third parties. However if you’re going to be successful here, the IP is not going to reside in any one specific area. It’s going to be found in collaboration.”
A specialist like Monitise can:
• Remove the complexity of delivery – with the technical expertise to develop a successful solution
• Bring valuable creative expertise – to develop a high engagement UX
• Provide connectivity to the Mobile Money ecosystem – opening up access to a world of merchant offers
The m-commerce opportunity is there to be seized, but it is fleeting. Financial institutions must be frank about their core competencies, and not be afraid to seek complementary skills from reputable partners in order to achieve consumer buy-in and attain their m-commerce objectives.
Few organisations possess the expertise or resources to create a robust m-commerce experience. And with rapidly evolving technology and multiplying competition, there is not much time to source the necessary skills.
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“You do it by selecting the correct ecosystem of partners around you.”Ben Green, Head of Mobile for Santander in the UK
M-commerce: building the revenue opportunity for banks
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Conclusion M-commerce is no longer tomorrow’s opportunity. It’s here and it’s changing the way we shop. Christmas 2013 provided a new benchmark in mobile shopping habits, with major retailers like Amazon and John Lewis reporting record figures.1
In the UK alone, 2013 UK mobile traffic accounted for 58 percent of all online traffic to retail websites, an increase of 42 percent over 2012. Sales completed via mobile devices were also strong, growing 63 percent year-on-year, and exceeding 45 percent of total online sales. 2
Globally, m-commerce transactions conducted via mobile handsets and tablets are expected to exceed $3.2 trillion (£2.08 trillion) by 2017, representing a substantial rise on the $1.5 trillion figure for this year. 3
Banks must move swiftly to take advantage of their unique ‘window of opportunity’.
By leveraging data, home screen presence and customer trust – and linking up with specialists to deliver a fully connected mobile experience – there is a real opportunity to create a new golden era of banking.
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1 http://econsultancy.com/blog/64057-christmas-2013-ecommerce-stats-round-up-john-lewis-amazon-and-m-commerce2 IBM data, released on Boxing Day 2013 http://www-01.ibm.com/software/marketing-solutions/benchmark-hub/boxingday.html3 Juniper Research, June 2013
Banks must move swiftly to take advantage of their unique ‘window of opportunity’.
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Monitise designs, develops and implements Mobile Money solutions for some of the world’s leading banks and financial institutions.
By simplifying the complexity of Mobile Money and providing a single point of connection to an ecosystem of technology partners, content providers and financial institutions, Monitise helps its clients to identify and maximise revenue opportunities and improve customer engagement.
Interrogate your Mobile Money strategy and explore the next generation opportunity via a no cost, no obligation Discovery Workshop with a Monitise product specialist.
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