Mobile – The Key to Challenger Bank Digital Strategy around the World

Mobile banking is becoming an increasingly important part of digital banking strategy around the world, particularly in emerging economies where a mobile phone is often a consumer’s best or only Internet access device.

Getting the mobile experience right is essential for challenger banks – the ones with big ambitions but less mindshare and market share and real estate. When you do not have as many bank branches as the competition, providing opportunities for customers to access services without visiting a branch levels the playing field. Done right, it is also a better, more streamlined experience for the customer and allows the bank to deliver services at a lower cost of operations.

I’m not the only one to see revolutionary potential. In a recent report on Digital Finance for All, the global consulting firm McKinsey predicted, “Delivering financial services by mobile phone could benefit billions of people by spurring inclusive growth that adds $3.7 trillion to the GDP of emerging economies within a decade.” By 2020, McKinsey projects that more than 90% of the adult population in emerging economies will have a mobile phone subscription. That’s true for more than 80% of adults today. Many of those mobile phone users have access to data speeds of 3G or better, at least in urban areas.

The dominant banks in each market can exploit this potential, too, and some are. On the other hand, incumbents can be complacent, expecting their success in the digital frontier to be as inevitable as in other market segments. I know of banks who stick to a schedule of releasing new software once a year, if not once every two years, which is hardly the pace of innovation we expect from the online world.

That leaves an opening for challenger banks who can move at a faster pace, while being more creative and more responsive to their customers. Midsize banks looking for growth have an opportunity here, but they are also threatened by digital-only challengers who have the potential to move even faster without operating any branches at all.

For example, Thailand’s TMB Bank trails some larger competitors in size but it was the first to introduce a mobile banking app specifically for small to midsize businesses. More than any one app or app feature, Martijn Van Keulen, Head of Digital Channels & UX at TMB, sees maintaining a rapid pace of development as his best asset. Since joining TMB in 2015 from ING in The Netherlands, Martijn has led a series of initiatives, together with his Technology colleagues, to create and improve mobile banking experiences for TMB’s retail customers.

One of these initiatives is ME by TMB which is a digital-only savings proposition, unique in the Thai market place. ME allows retail customers to securely conduct transactions anytime, anywhere, primarily through its ME by TMB App and internet banking. 

“My main focus has been on building the agile software development teams and establishing a heartbeat of continuous releases – at least 5 a year,” Martijn says. “That is what I feel will bring the most value to our customers and the company, especially over a longer period of time.”

TMB was originally known as Thai Military Bank, although membership is no longer restricted to the military. The mobile banking opportunity in Thailand is large – mobile phone adoption is about the same as in the U.S. – but the challenges are also large. This is a country where the vast majority of all transactions are still conducted by cash or check, not credit card, let alone a mobile app. Mobile banking adoption is currently at about 25%, not just for TMB but for its competitors as well, Martijn says.

Although mobile banking adoption is now growing rapidly, the initial reluctance to embrace mobile banking is puzzling, given how much Thai consumers embrace other sorts of mobile app experiences and their voracious appetite for online content such as YouTube videos. In surveys conducted by the bank, consumers still express fears about digital banking. “What if something goes wrong, they’re wondering, and the money doesn’t get to the right place?” Martijn says. They worry about both the security and the reliability of mobile banking.

Some of the ways TMB is addressing those fears are contractual, such as a digital security guarantee against hacking, provided that the customer follows basic best practices such as using antivirus software and a strong password. This legal framework is a good reminder that what matters is the total customer experience, not just what appears on the screen.

One of the reasons TMB can make this guarantee is because it has worked to make its mobile banking software as secure and reliable as possible. However, many of the security and reliability features come from behind-the-scenes infrastructure (including Kony technologies). One of the challenges Martijn’s UX-team and TMB’s developers are tackling with a series of incremental improvements is making those underlying strengths more visible in the user interface. For example, the latest refinement of the confirmation screen displayed after the customer submits a transaction features a big green checkbox. This simple refinement offers visual reassurance that the transaction did indeed go through.

Recently, Martijn’s team has also been working on making it as easy as possible to get started with mobile banking. A consumer who sees a television advertisement for TMB’s mobile services can download the app and be up and running in a few minutes, just by entering their debit card number and PIN, verifying their phone number, and providing a few other items of information like their citizen ID.

“I’ve discussed this with colleagues back in Europe as well. It’s a great low-barrier way for customers to start using mobile banking,” he says.

Some of the other challenger banks I’ve spoken with are even more aggressive about using mobile banking to cut steps out of traditional banking processes. I’m thinking of one that wants to approve loans through an entirely digital mobile experience, even for people other banks would write off as “high risk.” Because they are smaller, they feel they can take more risks – maybe even that they must take more risks – to get ahead.

Will that prove to be the right strategy? If not, a focus on speed and agility also positions an organization to make course corrections until it finds a strategy that works. But when pursuing breakthrough performance, fortune favors the bold.

Challengers must be more agile and smarter than the competition. The good news is mobility creates many possibilities for those who can imagine new ways of doing business.

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