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Mobile Banking Features at the Top 70 Banks: Are You Keeping Pace?

A recent American Banker article by FIS' Chief Product Officer Bob Legters contained the following prediction:

"Smaller banks’ digital capability won’t reach that of the big banks, but open banking and other disruptive technology will help narrow the gap."

It got me thinking: Do smaller banks' digital capabilities really fall short of the bigger banks?

CPR Study

Mobile Banking Features at Top 70 Banks

Thanks to some good work from S&P Global Market Intelligence, the answer is "yes." They defined 15 "advanced" mobile banking capabilities, that is, features beyond the standard ones like branch/ATM locator, check balance, review transactions, pay bills, photo check deposit, and account transfers. They reviewed the mobile banking capabilities of 70 banks--26 with assets greater than $50 billion, and 44 with assets between $10 billion and $50 billion.

Across the 70 banks reviewed, roughly eight in 10 provide balance or fraud alerts, and three-quarters offer non-fingerprint biometric login capabilities (presumably face recognition) and P2P payments. From there, however, the prevalence of features falls off.

Mobile Banking Features by Asset Group

The larger banks really do offer more advanced mobile banking features, however. Of the 15 advanced features defined, the four megabanks (with assets>$1 trillion) provide, on average, 12.75 features. Banks with $50 billion to $1 trillion in assets offer an average of eight (8) features, with the banks in the $10 billion to $50 billion range offering an average of 4.7 features.

Of the 15 features, the megabanks offer nine of them. The smaller (but not really "small") banks are particularly lagging in features like turning on/off lost cards, travel notifications, credit scores, and card rewards information (probably because they don't offer rewards on their cards).

Alexa Skills

One area where smaller institutions appear to be keeping up with the megabanks, however, is with Alexa skills. According to S&P's analysis, a fair number of credit unions are providing a range of skills, in line with what the megabanks offer.

Smaller banks may be lagging larger ones in mobile banking feature deployment--but really, whose fault is that? The overwhelming majority of institutions below $50 billion in assets rely on vendors for their mobile banking capabilities, so if those institutions are lagging the megabanks, shouldn't the blame be placed on the vendors?   

That said, there's blame to be placed on bank execs for choosing vendors who don't have advanced capabilities (or who don't keep with advancements) and select vendors based on cost.

It would be a fair comeback to ask: What's the ROI of deploying all those advanced features? The ROI is this: 57% of Millennials have their primary checking account with one of the four megabanks. It's not because they have branches on every street corner, and it's not because the megabanks are better corporate citizens, blah blah blah. It's because of two reasons:

  1. They have more (and better) digital banking tools, and
  2. Frankly, too many Millennials just don't give a damn who they bank with.

It's mid-size banks' and credit unions' choice on how to compete with this: Get better digital banking tools or get more Millennials to care. Or do both. But #1 is actually the easier path.

Now that said, I'd be remiss if I didn't revisit Legters' comment that "open banking and other disruptive technology will help narrow the gap."

If by "open banking," Bob means "using APIs," I would agree that mid-size institutions could and should be making more use of the technology. But again, they're going to need help from their vendors. And if the smaller institutions can't close the gap by deploying advanced mobile banking features, how are they going to do so with APIs and whatever "other disruptive technologies" are?

I've said it before, will say it again: The path to competing with the megabanks is not by trying to keep up with (or heaven forbid, leapfrog) the megabanks on technology features, but by offering product innovations.

p.s. Want the spreadsheet with the detailed list of functionality across all 70 banks? It's available in the Library section of the Insight Vault for subscribers only.

Ron Shevlin
Director of Research
Cornerstone Advisors

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