Investigating the revolution in mobile banking

There is little doubt that fintechs have revolutionized mobile banking, with incumbents realizing that they must keep pace with new features to remain competitive. After all, the days when a bank’s primary interface with a customer was through brick-and-mortar branches are long gone. Mobile banking has overtaken in-person transactions – a trend made more pronounced by the COVID-19 pandemic, when people were told to stay indoors.

According to Insider Intelligence’s UK Mobile Banking Competitive Edge report, 68% of UK adults have used mobile banking in the past year; research from Forbes, meanwhile, shows that over three-quarters (76%) of Americans have used their primary bank’s mobile app in the same period. Mobile is the new battleground where banks – both new and established – will lose or keep customers, so much so that 40% of people will now consider switching to a digital provider without physical branches, according to Forrester research.

After a brief downturn during the pandemic, customers are back to switching current accounts at normal levels, says Forrester’s principal analyst Aurelie L’Hostis. Data from the UK’s Financial Conduct Authority (FCA) shows that 8% of the country’s checking accounts are currently held with digital challenger banks – up from just 1% five years ago.

The trend of mobile payments underscores the banking revolution

The popularity of mobile banking is driven by an increase in mobile payments, where consumers can now pay with their smartphone or watch. Research from fintech unicorn Rapyd shows that almost half (43%) of Britons make mobile purchases on a weekly basis, underscoring the growing popularity of e-wallets. What’s more, mobile commerce in the UK is set to reach £100m by 2024 as consumer preferences change.

Sarel Tal, VP EMEA at Rapyd, says: “With consumers having to go without cash at the height of the pandemic, many realized the convenience of mobile payments and have since kept up the habit. We expect this trend to accelerate, with UK mobile commerce forecast to grow at more than twice the rate of the overall e-commerce sector.”

Banks must accelerate product development and innovation within their mobile apps to satisfy changing consumer habits, and remain competitive with fintech challengers and digital banks. We’ve seen a new wave of mobile apps that include consumer-friendly features like personal budgeting, financial goals, currency exchange, investment tools and easier peer-to-peer payments.

Ahmed Karsli, co-founder and chairman of Turkey’s largest neobank, Papara, says that banks must continue to diversify their product offering. “We have always felt that it is crucial, in good times and bad, not to over-index and rely on a part of the business that may be doing well today – as this may not be the case tomorrow. That said, you always need to make sure your core business is both scalable and has a path to being profitable on its own before you start adding new components.”

With many consumers facing a cost-of-living crisis this winter, Karsli predicts that money management and budgeting tools — developed by the digital challengers and adopted by some forward-thinking incumbents — could become an important component of any mobile banking app. “With global economic conditions not looking positive in the short term, I believe many banks will begin to introduce more money management tools to help customers better understand how to spend more efficiently, while allowing room for save,” says Karsli, suggesting new features around microloans and salary advances as ways traditional banks can support their account holders through the current economic uncertainty.

Should we all strive to become a ‘super-app’?

This raises the question of whether banks or fintechs should still strive to become a super-app, with Elon Musk even suggesting that his takeover of Twitter could be a catalyst to create an “alt-app”.

Papara’s Ahmed Karsli continues: “The truth is that there is a lot of debate in the market about whether it is a good strategy to try to build everything within one package, or just double down on what works well and keep products and services to a minimum. in terms of numbers, but maximum in terms of influence.

“You only have to look over to China and what has happened with WeChat and AliPay to see how successful the super app approach can be if executed correctly, but the reality is that getting to that point is incredibly difficult and also requires some luck.”

He states that instead of consciously setting out to become a super app, it is possible for brands to become one by stealth: “As a company we have always been ambitious, but I have to admit that when we first started, the goal was ours was not to become a super app – rather it was to focus on a few core products that would really benefit those locally who had been left out of the current economic ecosystem.

“Along the way, as we got feedback from users and saw how our customers used Papara, we started adding more elements that we thought would be useful to them. Suddenly we found ourselves with a collection of useful financial features all in one package, and at that point we almost accidentally became a super app.

“I would say that any business that starts out wanting to be a super app is going to have a very difficult time. Nail the core products first, and then you can start thinking about additional benefits. I’ve seen fintechs fail that try to doing too much, too fast without any kind of market penetration on their core products. That’s a bad strategy that just never works.”

And he says fintech has remained ahead of the curve when it comes to rolling out new features: “The advantage fintechs have over incumbents in terms of building a super app proposition is agility. Because the scale is often smaller, new features, products and partnerships can often take less time to get off the ground. However, this does not mean that larger players should not try to diversify their product offering – it may just take them more time to do so effectively.”