Mobile technology forcing firms to adapt their business models
The dramatic rise in smartphone and tablet use is changing customer expectations, putting longstanding companies out of business while providing fertile growth opportunities for others. To succeed in a competitive financial services marketplace, CUNA Mutual Group’s Kevin Miller recently urged "Online Discovery" credit union attendees to adopt a “mobile first” digital strategy.
Miller, vice president of information technology, said the explosion of digital devices has changed the landscape of many industries, negatively affecting stalwarts Eastman Kodak, Borders Books, and Blockbuster Video, among others.
“These were big, respected companies with powerful brands and histories run by talented and smart individuals. Yet, new technology devices stressed their business models and overwhelmed them. Unfortunately, many ran out of time to fight back,” Miller said.
Big technology trends – social, big data, analytics, and cloud -- all converge with mobile. “The number one mechanism for participating in social networks is via a smartphone. Most cloud application designs have a ‘mobile first’ approach and an expectation that mobile devices are the primary user interface. Likewise, people want big data insights delivered to their mobile phone.”
Sales of mobile devices are soaring. According to a 2013 Gartner Research study, mobile phone sales dwarf those of PCs and tablets. By 2015, more than 2 billion mobile phones will be in the marketplace. Sales of tablets and PCs are heading in opposite directions. PC sales are expected to decline 7.6 percent in 2013, while tablet sales are forecast to increase by almost 70 percent. “Mobile devices are growing and will represent the lion’s share of devices in end-users' hands.”
The number of mobile banking users is also increasing rapidly. According to the Forrester Research Mobile Banking Forecast, 2012-2017, there were 7.4 million users in 2008 and 61.1 million in 2013. By 2017, it is forecast to be 108.3 million - roughly one-third of the U.S. population. In addition, security company iovation and CEB's TowerGroup announced August 13, that 20 percent of all online financial transactions are performed on a mobile device, up from 11 percent last year.
To avoid the fate of some other companies, credit unions need to be aware of technology trends and the impact on their business models. “Banking is moving toward a contextual, customer-centric view as competitors better leverage proximity, preference, and proliferation of engaging experiences. We are moving away from banking relationships defined by the goal of being a customer's primary financial institution to one where we focus on becoming their primary financial application,” Miller said.
Not surprisingly, branch visits and transactions are declining, which will result in fewer branch locations and tellers. Management consultancy Novantas expects the number of tellers in the U.S. to drop to just 125,000 in the next five to seven years, from 500,000 today.
Mobile is no longer a “nice to have.” According to Callahan & Associates’ January 2013 Technology Priorities Survey, about 60 percent of participating credit unions have earmarked funds this year to introduce or upgrade some form of mobile banking, such as Short Message Service or Remote Deposit Capture. Miller cited CUNA Mutual Group’s Smartphone Loans and AskAuto™ app as technology examples credit unions and members are embracing.
Miller offered attendees these tips:
- Embrace digital disruption – The rules have changed. Whereas the big used to eat the small, the fast now eat the slow. Barriers to entry are smashed, the cost to compete is low and everyone can exploit the same economics. Anyone can win.
- Expect and recognize evolving consumer expectations – Start with the customer and work backwards to solve their problems, recognizing their needs will change quickly.
- Develop a “mobile first” digital strategy.
- Enjoy winning AND failing – Ideas are often killed by concerns over viability or cost. Even if an idea doesn’t work today, it could lead to new ones in the future.
- Recognize it’s not “either/or” but “all.” Maintain and modify existing business models while adding new ones.