Struggling With Mobile Services, Banks Risk Losing Customers to Non-Bank Rivals

Consumers using mobile-banking sites or apps make only sporadic use of their ability to pay bills, send money to other individuals, or load a prepaid card, finds new research from Javelin LLC, a Pleasanton, Calif.-based payments-research firm.

In the “2015 Mobile Banking, Smartphone, and Tablet Forecast” released Tuesday, Javelin found in a survey of more than 3,000 consumers that, of those who transfer funds to other individuals, 33% did it one to nine times a month, while most, 55%, either never did it or averaged fewer than one time per month.

Minorities of consumers made that type of mobile transaction more often. Only 6% made did so 10 to 19 times a month, and 5% did 20 or more times a month.

Such person-to-person payments are essential for financial institutions to provide, says Daniel Van Dyke, mobile analyst at Javelin. “Banks are struggling to roll out their P2P services,” Van Dyke tells Digital Transactions News. “Banks have been a little bit slow to recognize the importance of P2P and they have struggled with the challenges from non-bank providers whose sole purpose is to attract a larger user base.”

Nonbank providers like Venmo, Square Cash, and Facebook Messenger aren’t encumbered with many of the requirements, and industry practices, that banks are, Van Dyke says. “They can eat the fees to grow their businesses.” Even Apple Inc. is said to be considering adding P2P to its Apple Pay service.

In the face of ongoing threats from nonbank providers, some financial institutions may cede mobile features to the competition if they are unable to compete on price or quality, the report notes. “This scenario is currently playing out with mobile P2P, a feature that the majority of smartphone and tablet bankers use yet just under half of the largest FIs offered in 2014,” Van Dyke says in the report.

Banks have attempted to fight back, even though revenue from mobile P2P is elusive. Bank-owned Early Warning Services LLC now owns clearXchange, a bank-developed P2P service that it plans to bolster with additional security features.

The Javelin report also examines the role of mobile banking in how banks use branches and make more services available to online consumers.

The overarching discovery from the survey is that legacy systems and legacy providers that do not adapt to the preferred ways consumers want to interact with the world, which is “becoming more and more mobile, are falling to the wayside while those at the forefront are reaping the benefits,” Van Dyke says.