Making the Most of Mobile

CU360
April 22, 2010 | COMMENTS

Visualize this: A woman is pushing a loaded grocery cart through the frozen-food aisle when she gets a mobile phone alert. Her checking account balance has dropped to $100. Uh-oh, the food will be well over that amount.

But wait. Up pops a clickable ad, offering her the chance to sign up—right now—for overdraft protection.

That might be a marketing no-brainer, but it's still wishful thinking in mobile banking. "Banks are starting to ask for this capability," said Drew Sievers, co-founder and CEO of mFoundry, a Larkspur, Calif., technology firm that creates software for mobile banking and mobile payments. "But security risks are a big concern."

Current mobile marketing strategies have great potential for helping banks gain a greater share of customers' wallets, says Sievers. For one thing, financial services firms can partner with other businesses that want access to their customers, as Visa has done with Starbucks.

This type of partnership strategy has merit, according to Mark Schwanhausser, senior analyst with Javelin Strategy & Research. “Banks have incredible insights into how individual consumers spend their money,” he says, “and they sit in a spot where they can play an instrumental role in directing coupons, offers, rewards and other savings to consumers.”

Financial institutions also should be looking to drive traffic to their own products and services by connecting with mobile users, says Sievers. Someone seeking real estate information on Zillow.com is a prime candidate for a mobile mortgage ad, for example. "The banking industry has only barely begun to tap into this potential," he adds.

Mobile opportunities for financial service firms are different from those of other industries. For example, a bank is unlikely to add new customers via a mobile ad, but it can grow revenue from existing customers. This is what Schwanhausser predicts will blossom this year. After all, connecting advertising to the deep demographic and financial information banks already have on customers is powerful marketing, he says.

At Bank of America, which had enrolled 3.8 million customers in mobile banking by yearend 2009, the interaction with customers via handheld devices is progressing from offering basic banking services to better targeting products at customers. This year the bank plans to increase spending on mobile marketing by more than 20% over last year.

A similar jump is expected industry-wide. Forrester Research estimates that financial services companies overall will spend $91 million on mobile marketing in 2010, up from $77 million last year. Still, mobile will continue to make up just 2% of the budget for interactive marketing.

Financial services companies are the largest growth sector for mobile marketing, according to the Mobile Marketing Association, a trade group for wireless carriers, technology vendors, and advertisers. The kinds of transactions that banks can spur with mobile ads carry greater dollar values than mobile come-ons from most other businesses.

This promise of lucrative mobile transactions is drawing traditional wireless players into the payments space once reserved for banks. Finnish handset maker Nokia plans this year to launch Nokia Money, allowing customers to transfer funds or make payments via their phone. With 4 billion handsets in the world, Nokia believes the potential is vast

But the trouble is that not enough of those handsets are smart phones, with the PC-like functionality needed to make banking-related mobile marketing truly robust.

Mobile marketing has other limitations. Most institutions—especially smaller ones—will have to kick their back-office data systems into real time if they truly want to capitalize on the future potential of offering a customer a product like overdraft protection at the moment it's needed.

Another obstacle is that mobile marketing is hard to measure and there are limitations on tracking specific ads. Still, notes Jen McDonald, head of digital marketing at Bank of America, no other marketing strategy has the same potential as mobile: "It's personal. It's local. Your phone knows where you are."

This article was orginally published online by CU360, an online portal for benchmarking tools, market insights, industry data, and analytical information at cu360.cuna.org. Reprinted with permission.