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Traditional banks cut out by mobile, digital offerings: study

Thirty-five percent of the market traditional banks currently control may be shifted over to digital-only services by 2020, according to a new study from Accenture.

Accenture’s “Banking 2020: Capturing Emerging Opportunities” report looks at how digital and mobile are disrupting the traditional services that banks have traditionally offered. Although there is still a significant opportunity for banks to sell services at a branch location, the growing trend is moving towards digital and mobile offerings.

“It reinforces the importance of banks investing in digital to strengthen ties to customers as the role of the branch diminishes,” said Wayne Busch, managing director of North America banking practice at Accenture, New York.

“Digital is not about adding or extending another channel, but about rethinking the customer experience and how to interact with the customer during their moment of need for different financial services products, both physically and virtually,” he said.

“It is also about reducing the cost to serve, as digital banks will spend less on new account acquisition. As banks come to appreciate the full significance of this digital revolution we anticipate a major rethink within the industry.”

Bank on mobile
The report breaks up the 35 percent of potentially lost revenue from traditional banks into two factors.

The first is revenue shifting towards retail-backed programs. Twenty percent of traditional banks’ revenue could move towards these services, including the partnerships between retailers and financial institutions.

As consumers increasingly become more comfortable paying for goods via their smartphones and tablets, mobile is significantly shifting how retailers set up these joint partnerships with banks.

The partnerships also highlight how banks are developing new branch formats for better efficiencies and retention.

The remaining 15 percent of the lost revenue from traditional banks has the potential to move towards branchless banks and other digital-only services by 2020.

Mobile banking has seen a 50 percent year-over-year growth, according to the study.

One of the more interesting aspects of the study is that as consumers increasingly choose to interact with their banks via digital and mobile, they are interacting more with their banks than they would at a branch location.

For example, 32 percent of United States consumers participate in mobile banking at least once a month.

Additionally, 20 percent of respondents said that their banks should be putting a bigger focus on mobile banking. Twenty-one percent of consumers said the same about ATM investments.

Forty-three percent of consumers picked online banking as the No. 1 area of investment from banks, while 38 percent said that branches should be a top priority.

Mobile sales of products
Additionally, the online sales of banking products has spiked double-digit growth from 2012. The sales of these same products from a branch have decreased in the past year.

For example, mortgage sales via the Internet are up 75 percent this year and down 16 percent within branches.

Auto loan sales are also nearly doubled via the Internet while sales made at a branch decreased 10 percent.

Given that 60 percent of services are sold within a branch, it is no surprise that the top 25 banks in the U.S. spend more than $50 billion per year in keeping up their branch services.

However, as more consumers choose to buy services online, banks should also be pumping more money and investment into streamlining the online sales of services.

“Our survey research does not specifically identify a trend of movement away from traditional banks today,” Mr. Busch said. “But we saw double digit increases year over year in customers acquiring products online in areas such as mortgages and auto lending.

“The direction of customer behavior to embrace digital is clear,” he said.

Final Take
Lauren Johnson is associate reporter on Mobile Commerce Daily, New York