The use of mobile devices just crossed a major milestone two years ahead of projections: More than half of mobile subscribers now have smartphones, according to research from Nielsen. Members’ use of your mobile-service channels will continue to grow—perhaps dramatically—in the next few years.
Finding the right balance between technology and personal service in this increasingly mobile market remains the industry’s Holy Grail.
Most experts fall into one of two camps:
Camp #1: These adherents envision a future where branch staff would provide only financial counseling and assistance with more complex loans, such as mortgages. In this scenario, basic transactions would take place either off-site or through self-service channels.
Camp #2: These folks believe the cost of technology and the enduring popularity of tellers’ personal service mean traditional branches will remain largely intact.
Widespread adoption of remote channels might seem to suggest Camp #1 ultimately will prevail. But even tech-savvy users still want their traditional branches, according to a study by Cisco Systems, which showed the most avid technology adopters are those who visit branches most frequently.
The Cisco report also showed that most respondents would be unhappy with only a virtual branch option, and that nearly 30% of them would either reduce their deposits or switch their financial institutions if a virtual branch were the only option. In addition, the traditional branch remained the preferred channel for loan applications and services that required additional support.
The number of branches has increased 22% since 2000, according to The Economist. And two studies by Ban-cography show that financial institutions with denser branch networks gain a disproportionately larger share of deposits.
Virtual channels continue to grow in popularity. In developed countries, 78% of consumers prefer to use their financial institutions’ websites for transactions such as paying bills, managing accounts, and checking balances, according to Cisco Systems.
A Fiserv study showed rapid adoption of mobile banking:
25% of online households used a mobile banking service in the past month (browser, app, or text message);
40% paid bills using their mobile phones (vs. 28% in 2010); and
32% used their mobile phones to transfer money (vs. 25% in 2010).
Mobile devices will be the tool most consumers use to access the Internet by 2014, many experts agree.
But technology cost-savings might be overrated. Although technology can lower the costs of individual transactions, these benefits seldom lead to a decrease in overall costs, and might actually increase expenses, according to a Filene Research Institute report.
In fact, one study highlighted in the report showed that the profitability of online members actually dropped by 16%. The reasons behind this include members’ own online research that drove away activity from the credit union; better account management, which might cut into fee income; and the fact that engaged online users add technology to their overall channel mix, using both expensive and inexpensive channel options.
On the brighter side, engaged online members have a better retention rate in the long run. “The more channels members use,the more connected and involved they are with our credit union,” says Susan Brunner, director of community development for Carter Federal Credit Union, Springhill, La.
“Our research shows strong correlations between the depth of member relationships and their proximity to a branch,” says Paul Seibert, vice president of financial design at EHS Design.
“Branches play a major role in the acquisition, sales, and service of members,” agrees Kevin Blair, president and CEO of NewGround. While alternative channels like the Internet, mobile, and remote ATMs are the preferred choices for transactions, on their own they’re not effective in managing the total relationship, he adds.
“People are actively trying to determine how to best use their branches, and in the past 24 to 36 months this has been an evolutionary process with the growing popularity of the Web and smartphones,” says Beau Wingate, executive vice president, director of sales at Financial Supermarkets. “The branch is the last place you can reach out and connect with members.”
In its behavioral analysis of more than 1.5 million consumers during the past 12 to 18 months, Diebold found that:
27% of consumers depend on or prefer attendants;
34% prefer self-service channels; and
21% are mixed.