The growth of the mobile sector is unmistakable. Not everyone owns a mobile phone or tablet device yet, but the world is assuring us that that will be a definite reality in our lifetime. Technology has moved so fast that third world use has skipped many of the previous technologies and already integrated into some of the latest in smartphone and tablet technology. With such growth, businesses are failing at customer onboarding, and the only solution seems to be deregulation and a powerful banking API. To get there, they will have plenty of help from fintech startups and powerful social media giants and established internet companies.
According to the Report from the Federal Reserve on key findings in Consumers and Mobile Financial Services 2015: more than half of all smartphone users’ access mobile banking features regularly. An additional 12% of users with smartphones are considering utilising financial services on their mobile devices. The growth in use is not just limited to The United States. In Canada, in 2015 31% of smartphone owners were using mobile banking on a regular basis, with 26% of responders reporting that their frequency of mobile banking is increasing over the previous year.
In stark contrast, research from KPMG illustrates that mobile banking use in developing countries – notably China and India - has dwarfed the growth in the developed world of The United States and The United Kingdom by more than 70%. In the less financially regulated continent of Africa, mobile devices account for the majority of banking as individuals partner with lending and financing start-ups to make carrying cash or even wallets irrelevant. The same can be said for much of Africa and even Latin America. In Asia financial education is being promoted to every smartphone user at every level of learning through games and entertainment.
Looking at the data for growth in mobile use in accessing financial products and services, it is clear that further growth is only inevitable. Physical banks are certainly not dead and as we will see regulation and privacy concerns do slow down innovation. Nevertheless, with the growth of mobile use and the staggering amounts of money being invested in fintech, from traditional banks and some of the biggest names in technology - like Paypal, Apple, Facebook, Amazon, and Google - it is only a matter of time before mobile banking is the preferred norm.
These companies thrive in offering to their customer’s methods for making their lives easier in our digital age. And rather than just improve lives, they do what industry professionals call: disruption. Yes, they do build on previous technologies, but far beyond that, they are responsible for introducing new products and services. Before customers did not even know these things existed, now they are practically required for daily life. Examples include an online payments platform, a social media profile, a smartphone to stay connected at all times. None of us needed these things and certainly did not know we wanted them before their invention. Now we know we need better access to our finances on our mobile devices. These companies will use their disruptive nature and pair with emerging fintechs or buy them out to make this happen.
At its heart customer onboarding is building a relationship with the customer. From a technical standpoint, it means having the legal, accounting, and customer relationship management (CRM) information available to all parties. From a practical standpoint, it is the action of bringing new customers into a financial environment that is seamless, easy to understand, and useful for both parties.
What does successful customer onboarding look like in the financial sector? Most important is customer onboarding that makes a smooth transition and locks a customer into a long-term financial relationship. Less important is to keep costs minimal for this process and to maintain standards in line with regulation. Both of these functions are intimately related. Be advised though that there may be separate paths to executing on solving these challenges in customer onboarding.
What often gets in the way are the myriad of legal challenges, as well as the inability to access data across several different avenues that slows down the onboarding process. The legal challenges come from government and regulatory bodies. Initially, these programs are seen as a positive way to protect person’s identities and limit the ability of financial fraud. The problem is that they often slow down actions considerably even within the same financial institution. Examples of policies like this include Know Your Client (KYC) and Foreign Account Tax Compliance Act (FATCA).
The inability to access this data and personal information in a way that is economic (cost effective) for the financial or lending institution is a logistics nightmare. Much of this information is stored in secure servers across countries and continents, among anonymous persons, and different departments. Again, the goal is security, but the result is just a mess. It is in the best interests of customers as well as the financial institutions for this process to smooth out. Data can maintain private and anonymous, but it must be able to be used so that financial institutions can better serve their customers in mobile banking.
There are some high profile cases of regulatory compliance getting in the way of customer onboarding, albeit for preserving privacy and security. Dwolla, a little brother to Paypal in online payments processing, was fined $100,000 by the Consumer Finance Protection Bureau for the deception of their clients in security practices and in the overall cyber safety of their online payment system. The majority of Dwolla users are mobile users, and their activity suggests they were quite content with the online safety of using this platform. Actions like these, although with the warrant, are discouraging and slow down the processes for innovation and customer onboarding. From a media perspective, they also have the potential to turn off potential clients, which means the company in question is back to investing in marketing before even thinking about customer onboarding.
Finally, the importance of banking API cannot be overstated since it provides an easy way to authenticate users on the mobile devices and requires a minimum amount of data. Banking API has many advantages in the coming years. First and foremost it makes developing around a particular goal or function for financial institutions a breeze since the source software is not edited. This allows in-house developers or clients to cater an API to their needs without having to worry about augmenting the underlying software or crashing the whole thing and starting from scratch. Everyone has a secure and level playing field.
The strongest attribute for banking API is how it can complete a successful customer onboarding process for mobile banking. The API utilises the vast amount of data available, which includes customer habits and trends, and tailors it for us to better that customer’s financial experience. The greatest example of utilising API for customer satisfaction is with card-linked marketing. This is a development in fintech that recognises the use of a particular financial credit or debit card and offers bonuses or discounts based on that user's’ experience and at the point-of-sale.
Some parties have already invested heavily in making banking API a reality, including the United Kingdom Government. Earlier this year the government body took major steps in acknowledging the legitimacy and usefulness of banking API. From their perspective, it should boost security, improve technology, and stimulate the economy by offering more options and better deals for the customers of financial institutions. The UK government also recognises that the mobile device era has some of the worst financial literacy and fiscal responsibility in generations. The utilisation of a banking API will enable the financial institutions to educate their customers better on the decisions they make. It will even capture risky moments at the point-of-sale, advising against poor spending habits. This also highlights the trend the financial world is seeing in which banks turn to the practice of whole banking, not just depositing and withdrawing money.
Research can continue to blame the lack of proper customer onboarding with a failure of technology and weep for a future in which everything just works out perfectly as planned. The reality is, we do not need the future to implement positive reform in customer onboarding in mobile. Right now, financial institutions have the means for implementation. Fintech startups have the drive and the ideas. Governments are starting to take notice. Executing on these advantages will continue to happen each day, especially as tech giants continue to leverage their weight and whet their appetite in the financial landscape, utilising their powerful hardware or social media platform as leverage. Either way, the easiest way for successful customer onboarding is going to be the use of a powerful and reliable banking API. Taking the risk is worth the reward.