I’ve seen this gut-wrenching, wallet-clutching reaction in the mobile banking world, where community banks are learning the hard way that the best cure for triple-play sticker shock is careful management.
It is no surprise that mobile banking is used most often by younger and higher-income consumers, the same demographic most financial institutions are attempting to attract to their institutions. To be competitive, community banks are discovering that they need to provide e-banking access via the triple-delivery channels of PC, mobile phone and tablet. As FIs add delivery channels, vendors add expense. This is true whether the platforms are running in an in-house or outsourced environment. Most vendors have added mobile and tablet to the backbone of their base Internet or e-banking platforms, so customers typically have to start with the base product even if they don’t want to offer access via a PC.
The historical methodology of charging for e-banking by the major core vendors has been on a per-user basis, which is where FIs can incur significant cost increases as they add mobile and/or tablet channels. The use of cell phones and tablets to access financial and other information is rapidly expanding, and customers are expecting their financial institutions to provide competitive channel experiences.
When a customer accesses the bank with his phone or tablet, the vendor typically charges the bank a per-user fee for the app to be resident on the customer’s device. Banks need to conduct a thorough business plan before implementing mobile or tablet delivery channels. If penetration is high, the per-user fees can add up quickly. There are other significant areas for due diligence that can assist in managing ongoing expense since not all mobile applications are created equal. It is imperative that banks determine how they will be charged. If it is on a per-user basis, is there a way to easily delete customers who have downloaded the app but are not using it? Is there a lower fee for inactive users? Banks should ask their vendors how inactive users are identified and what process the vendor users to segregate them for billing purposes or for potential deletion from the product/system. Unfortunately, it is not uncommon for banks to pay for a high percentage of users that are not actually using the application but have merely downloaded it.
So how can banks manage the expense and drive per-user costs down? In many instances a bank has a long-term contract with an Internet banking provider, but it is not always necessary to procure mobile and tablet through that same provider. There certainly can be advantages to going all-in with one vendor, and banks that want to go this route should first conduct a careful evaluation of the vendor’s products and perform a thorough cost/benefit analysis.
A number of non-core vendors have emerged in the e-banking marketplace. These vendors have products and services that can be used in conjunction with other processors for core and other services. These non-core vendors may be more flexible in meeting the needs of clients, and banks should at least conduct an inquiry to evaluate alternative, non-core provider products and services. Depending on where an institution is in the term of its current e-banking contract, it might be worthwhile to delay signing on for a triple play until after taking a look at competitive e-banking components.While the mobile and tablet market offers plenty of opportunity for attracting younger customers who may turn into long-term customers, it is important for banks to weigh the rewards of having these customers against the cost of acquiring and maintaining them. A thorough investigation of the products and costs of potential providers can serve as valuable leverage during negotiations.
A triple play, when managed correctly, can help grow and maintain a bank’s customer base without excessive costs. A best practice banker will arm himself with the diligence necessary to make his triple play a defensive strategy and not a tripling of expenses.
Cornerstone Advisors has helped hundreds of financial institutions negotiate contracts with their Telecom, Internet Banking, Core, Bill Pay, Debit and Credit Card Processing, EFT and Ancillary systems vendors.
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