Mobile banking users in India account for over 50 per cent of its population today

Mobile banking users in India

Mobile banking users in India account for over 50 per cent of its population today, according to research by KPMG and UBS

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Mobile banking users in India account for over 50 per cent of its population today, according to research by KPMG and UBS

Mobile Banking

  • India has the youngest population of mobile banking users across the globe at a median age of 30, asopposed to 32 in the U.S. and 39 in Europe
  • Banks are increasingly adopting ‘mobile first’ strategy
  • Large banks are already acquiring technology start-ups to keep up with the rapid pace of change and thegrowth of challenger banks
  • Challenges including cyber security and the lack of collaboration with developers, are preventing banks toinnovate and capitalise upon ‘open banking’              

New Delhi, 10 August 2015 – The number of mobile banking users globally is forecasted to double to 1.8billion, over25 per cent of the world’s population, in the next four years, according to research by KPMG using primary survey datasupplied by UBS Evidence Lab.

The Global Mobile Banking Report, finds that while the mobile is already the largest banking channel by volume oftransactions, its adoption by new customers is now entering an exceptionally rapid phase. Interestingly, adoption ratesare highest in developing countries: reaching to about a 60-70 per cent in India and China, rather than developed nationssuch as the USA, Canada and the U.K. It also suggests that mobile banking and payment systems are increasinglybeing integrated with other technologies, driving an era of ‘Open Banking’.

The report warns that banks who do not have clear mobile banking strategies may lose customers and cross-sellopportunities in the short-term, as well as risk jeopardising competitive advantage. Akhilesh Tuteja, Partner and Headof IT Advisory services at KPMG in India, summarises this as, “The differentiation in mobile banking has been adifficult area and sustained differentiation is almost impossible. Many banks are adopting ‘Mobile First’ strategy, whichprovides a relatively better competitive advantage.”

In the short-term, the availability of mobile banking services is a key indicator when consumers choose to switch banks;and the report highlights a clear link between a strong mobile proposition, customer satisfaction and advocacy. However,mobile bank users, who are typically in their mid to late thirties, are among the most likely to switch banks, suggestingthat even an effective mobile banking offering may not be enough by itself to retain these high value customers. Indiancustomers demonstrate the highest likelihood of changing banks driven by the availability of better mobile banking services.

In the long-term, the report suggests that as mobile banking technology is driving an area of ‘Open Banking’, whereconsumers can bank within context, across a variety of channels, operating systems and devices, including phones,tablets and wearables. For example, as a consumer holds up their phone to a television in a store, an augmented realityapp can recognise it and provide information including reviews and credit options.

The report highlights three key areas for banks to focus on in order to take advantage of the surge in mobile banking,and therefore prepare for the ‘Open Banking’ era:

1) Expand mobile banking services – Banks should investigate the potential of value added services, suggestingthat virtual customer support can bring the personal touch of a branch to a handset, but banks need to treadcarefully.

For example, mobile banking offers many opportunities for cross-selling other financial services, but unwantedsales messages can ‘invade’ what the report calls ‘device intimacy’ and lead to customer complaints, reducedusage or even switching to another provider.

On the other hand, consumers tend to value personalised support via mobile services. The report urges banksto explore areas such as virtual support, social media banking and ‘life tools’ such as cloud storage.Furthermore, banks should also consider mobile-enabled technologies such as wearables and augmentedreality as they proliferate.

2) Banks need to be more open - While banks offer Application Program Interfaces (APIs), allowing third-partydevelopers to develop such technology, the report highlights that there needs to be greater collaborationbetween banks and the developers.

Additionally, even as banks invest unprecedented amounts in mobile and other technology-led capabilities,challengers unencumbered by legacy IT infrastructure are already one step ahead. To stay at the fore, manylarge banks are increasingly acquiring technology start-ups and investing in incubators.

3) Invest in security - Innovation must be underpinned by rock solid security. Banks are urged to heavily investin technologies that can evolve and protect against future threats, as well as tackle current pressures frommalware and social engineering.

Forty per cent of consumers, cited concerns about entering card details in mobile devices, and the possibility oflosing a handset ranks highly amongst the list of worries.

Banks find themselves having to both protect the customer, while at the same time providing uninterrupted andspeedy access to their services to attempt to ensure greater consumer satisfaction. Biometric apps andfingerprint scanning are earmarked as ways to bolster the security of mobile banking, whilst ensuring ease ofaccess; only a handful of the main banks assessed in the research currently offer this service.

Akhilesh Tuteja further analyses the impact of these data findings for India, saying “Customer experience andfrictionless engagement will likely remain a key driver for mobile banking adoption. The winners may have toinvest as much as in creating a strong perception of security as they may be required to implement technicalsecurity measures. The intangible aspects like experience and sense of security could overplay the adoption ofnew banking models. What we have witnessed so far is possibly just a tip of the iceberg. With increasing deviceintimacy and the convergence of interaction channels, we could see completely transformed customerengagement models. Also, the banks may further universalise the services portfolio beyond core bankingservices. The pervasive adoption of wearables and augmented reality could create unimaginable possibilitiesto drive frictionless interaction.”

About the Report

This report has been produced using primary survey data provided by UBS Evidence Lab. UBS has also published areport for institutional clients leveraging this primary data source.UBS AG (UBS) and KPMG LLP, the U.K. member firm (KPMG), have cooperated to produce their separate reports onmobile banking which use data from the UBS Evidence Lab, amongst other sources. Whilst KPMG has had access tothe results of the UBS Evidence Lab research, it has produced its report separately from UBS and each report issubject to the disclosures and disclaimers set out therein. Accordingly KPMG and UBS are each responsible for theirown respective reports and not for the report of the other. KPMG has not had access to drafts or to the final version ofthe UBS report and analysis prior to publication. KPMG is not responsible for UBS’s conclusions and /orrecommendations. KPMG’s report does not constitute investment advice and KPMG has not seen, input to orendorsed any investment advice provided by UBS in its report.

Other key findings include:

Mobile banking services are led by banks in the developed world and largely by telecoms companies in thedeveloping world.

The reports identifies three distinct mobile banking strategies:o Incremental – cautious and conservativeo Transformational – high levels of investment, pockets of genuine innovationo Pioneering – repeated first-of-a-kind services, primacy of mobile channel with overall customerexperience.



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