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Mobile banking users in India account for over 50 percent of its population: Study

India has the youngest population of mobile banking users across the globe at a median age of 30, as opposed to 32 in the U.S. and 39 in Europe

The number of mobile banking users globally is forecasted to double to 1.8billion, over 25 per cent of the world’s population, in the next four years, according to research by KPMG using primary survey data supplied by UBS Evidence Lab.

The Global Mobile Banking Report, finds that while the mobile is already the largest banking channel by volume of transactions, its adoption by new customers is now entering an exceptionally rapid phase. Interestingly, adoption rates are highest in developing countries: reaching to about a 60-70 per cent in India and China, rather than developed nations such as the USA, Canada and the U.K. It also suggests that mobile banking and payment systems are increasingly being integrated with other technologies, driving an era of ‘Open Banking’.

The report warns that banks who do not have clear mobile banking strategies may lose customers and cross-sell opportunities in the short-term, as well as risk jeopardising competitive advantage. Akhilesh Tuteja, Partner and Head of IT Advisory services at KPMG in India, summarises this as, “The differentiation in mobile banking has been a difficult area and sustained differentiation is almost impossible. Many banks are adopting ‘Mobile First’ strategy, which provides a relatively better competitive advantage.”

In the short-term, the availability of mobile banking services is a key indicator when consumers choose to switch banks; and the report highlights a clear link between a strong mobile proposition, customer satisfaction and advocacy. However, mobile bank users, who are typically in their mid to late thirties, are among the most likely to switch banks, suggesting that even an effective mobile banking offering may not be enough by itself to retain these high value customers. Indian customers demonstrate the highest likelihood of changing banks driven by the availability of better mobile banking services.

In the long-term, the report suggests that as mobile banking technology is driving an area of ‘Open Banking’, where consumers can bank within context, across a variety of channels, operating systems and devices, including phones, tablets and wearables. For example, as a consumer holds up their phone to a television in a store, an augmented reality app can recognise it and provide information including reviews and credit options.

The report highlights three key areas for banks to focus on in order to take advantage of the surge in mobile banking, and therefore prepare for the ‘Open Banking’ era:

  1. Expand mobile banking services – Banks should investigate the potential of value added services, suggesting that virtual customer support can bring the personal touch of a branch to a handset, but banks need to tread carefully. For example, mobile banking offers many opportunities for cross-selling other financial services, but unwanted sales messages can ‘invade’ what the report calls ‘device intimacy’ and lead to customer complaints, reduced usage or even switching to another provider. On the other hand, consumers tend to value personalised support via mobile services. The report urges banks to explore areas such as virtual support, social media banking and ‘life tools’ such as cloud storage. Furthermore, banks should also consider mobile-enabled technologies such as wearables and augmented reality as they proliferate.
  2. Banks need to be more open - While banks offer Application Program Interfaces (APIs), allowing third-party developers to develop such technology, the report highlights that there needs to be greater collaboration between banks and the developers. Additionally, even as banks invest unprecedented amounts in mobile and other technology-led capabilities, challengers unencumbered by legacy IT infrastructure are already one step ahead. To stay at the fore, many large banks are increasingly acquiring technology start-ups and investing in incubators.
  3. Invest in security - Innovation must be underpinned by rock solid security. Banks are urged to heavily invest in technologies that can evolve and protect against future threats, as well as tackle current pressures from malware and social engineering.

Forty per cent of consumers, cited concerns about entering card details in mobile devices, and the possibility of losing a handset ranks highly amongst the list of worries.

Banks find themselves having to both protect the customer, while at the same time providing uninterrupted and speedy access to their services to attempt to ensure greater consumer satisfaction. Biometric apps and fingerprint scanning are earmarked as ways to bolster the security of mobile banking, whilst ensuring ease of
access; only a handful of the main banks assessed in the research currently offer this service.

Akhilesh Tuteja further analyses the impact of these data findings for India, saying “Customer experience and frictionless engagement will likely remain a key driver for mobile banking adoption. The winners may have to invest as much as in creating a strong perception of security as they may be required to implement technical
security measures. The intangible aspects like experience and sense of security could overplay the adoption of new banking models. What we have witnessed so far is possibly just a tip of the iceberg. With increasing device intimacy and the convergence of interaction channels, we could see completely transformed customer engagement models. Also, the banks may further universalise the services portfolio beyond core banking services. The pervasive adoption of wearables and augmented reality could create unimaginable possibilities to drive frictionless interaction.”

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