IBS Journal February 2017
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million in a single month in 2015, while the amount of active accounts is set to surpass that of PayPal.
QR codes largely failed in the western world but in China, accompanied by the mass adoption of social communications app WeChat, adoption has taken off at rocket speed. China’s WeChat has more than 600 million monthly active users. Every time the app is downloaded onto a mobile phone, so too is a QR code reader. The ubiquity of QR payments in China has lead multiple vendors in Europe and the US to activate the same functionality for Chinese tourists abroad.
One major player emerging from the new mobile money trend is WorldRemit, a mobile-based remittance service for foreign workers and those without the means to reliably use traditional banking. CEO Ismail Ahmed reckons that the industry is worth an estimated $600 billion, with a projected growth of 7-8% every year. Telcos understand the needs of their customers and directly target the underbanked and “the bottom of the pyramid”. Two billion people across the world never touch a bank, says Ahmed, and their lives used to revolve around cash – now it revolves around mobile wallets. The reason behind this is that those in the developing world aren’t being held back by “archaic” banking systems.
Mobile laggards
The contrast could not be greater in the “developed” world. The US and Europe, particularly, seem to lag behind the trend. Surveys have found that fewer than 50% of banking customers in the US have used their mobile to perform banking functions. A further 70% had not made a mobile payment in a year prior to being asked. Despite these figures, there are encouraging signs for the future. “We are seeing an uptrend in the adoption of mobile-banking activities,” states Anil Antony, Executive Director of Consumer Insights at Nielsen Singapore. “This is further girded by the fact that retail banks are increasingly going digital with their processes and driving automation.” 77% of those asked by the firm indicated that they were going to check their balance in the next six months, while 67% added that they would send a payment. It’s hard to consider one payment over
a period of six months an exceptional rate of adoption, however.
What is it that makes customers so ambivalent? The prevalence of branch banking in abundance is one explanation, with many able to visit their branch on a whim. Security is another factor – there is a sense of danger when using an app to move money around, and the types of cybercriminals evolving to take advantage of that are growing year on year. As banks try to deal with new mobile technology, so they become more and more vulnerable to security flaws, exploits and hackings. “Fraud and security concerns are at the heart of consumers’ reluctance to both adopt the channel and use it to its full capability,” says Eugene Danilkis, CEO at Mambu. “They fear their money is more at risk during self-service transactions. This deprives customers of a convenient and customisable digital banking experience and challenges financial service providers wishing to encourage adoption to generate revenue and reduce costs. 85% of users and non-users in the UK and the US would increase their usage to some extent if providers built in more security measures and 44% said additional security measures would increase their mobile banking usage significantly.”
This doesn’t mean that there aren’t banks in the US and Europe trying to buck the mobile trend. The UK especially has a (some would argue overly) active challenger bank scene, with a number of new entrants challenging the established names on what it means to provide a convenient service to customers. “The world is full of examples of banks that offer richer and more complete mobile experiences than those currently available to UK customers,” says Mark Mullen, CEO at UK challenger Atom Bank. “In part that’s about regulation and in part about customer appetite but most of all its heavily influenced by the nature of competition in the UK. With a small number of banks dominating most product categories, the impetus for change just hasn’t been there.”
Banking is for the most part a local thing for customers, adds Mullen, but that doesn’t mean that technology can’t challenge the long-established way of doing things.
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