Mobile Banking Strategy: Competing in a Post‑COVID Consumer Climate

Financial institutions have for years been moving towards expanding digitization, offering remote banking services, and prioritizing the customer experience in digital platforms. But in 2020, the COVID-19 pandemic and ensuing social distancing protocols dramatically accelerated this shift in the industry. Suddenly with less access to bank branches and ATMs, the mobile and online banking channels were the primary or in some cases the only banking options available. Now over a year since the initial outbreaks, the priorities of financial institutions and the consumers they serve have been rearranged. Forrester Research has found that mobile banking is now the top touchpoint in Asia, and 68% of adults in the UK use their smartphones for mobile banking at least monthly. In 2020, 66% of Canadian online adults used online banking on a mobile at least once a month.

To compete, financial institutions must adopt a mobile-first strategy and offer an exceptional digital experience.

By investing in the right technology solutions, FIs can build wholly digital processes that offer their banking customers the entire portfolio of financial services and empower them to conduct their transactions and activities using exclusively their banking app if they so choose. In doing so, they can also ensure the appropriate security for each transaction without injecting unnecessary friction into the process.  

Digital Banking Strategy for Rising Consumer Standards and Competition from All Sides

FIs are not alone in recognizing the importance of digital channels in a post-pandemic world. The traditional financial institution is beset by competition on all sides. The Financial Brand found in a survey that 75% of FIs listed digital banking transformation as a top banking priority through 2021. Beyond their typical competitors, FIs must also contend with challenger banks built from the outset as exclusively digital offerings. With the expansion of fintech solutions, organizations not typically thought of as financial institutions can now offer financial services that were once the exclusive domain of banks and credit unions.

These organizations are all recognizing and responding to the reality of changing consumer behavior and standards. In an environment in which such a large portion of transactions are conducted online, the digital banking experience must be all things to all people. It must deliver attractive and competitive financial services. It must be the banker, the teller, the customer service representative. It must represent the brand and the brick and mortar. It must be a tool and a brand all at once.

Financial Brand also notes that “29% of mobile users will switch to another app or website if they fail to find what they are looking for within three seconds.” This puts an enormous amount of pressure on the FI to create the best possible digital experience for opening checking accounts, mobile payments, and other retail banking services.

Building such an experience is not always a straightforward process. There are distinct challenges and obstacles to overcome.  

Familiar Challenges to New Solutions

Overhauling the digital channels involves technical requirements that existing IT infrastructure may be unable to accommodate. Supporting new applications and capabilities in-house on legacy infrastructure would require significant capital expenditure. At a time when profitability is down, many organizations will be hesitant to make such an investment.

Furthermore, enabling digital transactions cannot be done without ensuring security. Fraudsters have also noted the movement towards digital channels and are all too happy to exploit new and first-time mobile banking users. In December 2020, after the FBI warned of an increase in malicious activity targeting mobile financial services during the pandemic, bank account holders in the U.S. and Europe were defrauded of millions of dollars by an evil emulator farm attack  that mimicked victims’ mobile devices. The attacks were facilitated by malware that had infected account owners’ mobile phones. Any expansion of the mobile channel should therefore be done with a commitment to building app, device, and account security into the process.

Once again, FIs must find the right balance between security and the customer experience, but in the mobile channel, the stakes are much higher. As cited by Financial Brand, customers have high expectations and will readily seek out an experience that meets them, however the potential for fraud in a remote process cannot be understated. The balance lies in a combination of enablement and security.

Overcoming Challenges - How Technology Offers a Way Forward

Thus far, we have identified three core challenges facing financial institutions as they move towards a mobile-first strategy:

• How to overcome the challenge of legacy infrastructure
• The challenge of creating an exceptional customer experience
• The need to ensure mobile banking is secure from fraud.

Fortunately, there are cloud technology and software as a service (SaaS) solutions that can help overcome these challenges. Let’s look at each in turn.

Overcoming Infrastructure Challenges with SaaS Solutions

Cloud technology and software as a service (SaaS) solutions offer financial institutions a way to circumvent the large up-front expenditures required to provision and deploy IT infrastructure. Rather than building a new wing to the data center, FIs can keep their existing hardware and supplement with cloud resources to accommodate their needs. Some organizations may find that leveraging a public cloud will be the ideal road to supporting and expanding their mobile applications, while others can use it as a stop gap measure to offer remote services today as they create a roadmap for a long-term solution.

Getting the Right Balance Between Customer Experience and Risk

With the infrastructure question answered, we can address security and the customer experience (CX) simultaneously as they are both intertwined.

At the outset, one of the first cloud solutions to consider is mobile security technology such as mobile app shielding to help prevent fraud attacks. Every smartphone is a different environment on which the mobile banking app must be run. Some smartphones have been jailbroken/rooted and others are infected by apps and malware waiting to exploit a banking application. App shielding ensures that applications can operate safely, even in these unknown environments.

Next, the financial institution can deploy biometric authentication to the app, such as fingerprint or facial recognition. Biometrics are both widely accepted by mobile banking users and significantly more secure than both SMS one-time password and traditional username password combination authentication steps. In addition, biometric authentication challenges are easier and faster to complete, thereby removing and reducing friction in the process.

With security in place, FIs can then start to improve the customer experience by enabling customers to do more on the mobile app – from opening new accounts to applying for loans and mortgages. With electronic signatures and digital identity verification technology, FIs can digitize even the most complex, regulated processes, such as loans and account openings, with confidence knowing the solution can verify the identity of the signers at the outset.

The Impact of a Negative Experience — Abandonment

The direct consequences and opportunity costs of not pursuing a mobile first strategy can be severe for financial institutions. FIs face higher customer abandonment and will lose potential new customers to challenger banks, neo-banks, and the new entrants to the market with better, richer mobile experiences. The Financial Brand states that “the impact of a negative experience will be faster than ever before, possibly without the opportunity to get it right once a customer becomes upset. One in three consumers (32%) say they will walk away from a brand they love after just one bad experience.”

On some level, fraud may be considered part of the cost of doing business. But by neglecting security when committing to a mobile-first strategy, FIs leave themselves open to significant instances of fraud that can damage their reputation with customers and result in the bad experiences that drive consumers to look for other options. Attacks such as emulator farm fraud attacks damage customer trust and expose vulnerabilities in authentication processes such as SMS one-time passcodes (OTP).  

Best of Breed or Single Holistic Provider

When considering technology solutions, the evaluation process at many institutions favors looking for the leaders within each market and individual technology, and it is understandable why that would be the case.

While this may be an ideal strategy for siloed processes or independent tech solutions, the focus shifts to interoperability as more and more technologies need to interact and integrate for a single process to be successful. For example, in the account opening process, standard application security needs to function alongside biometric authentication, identity verification, and electronic signatures. Ensuring coordination of all of these technologies complicates the evaluation process and creates potential points of failure in the new process.

A single holistic vendor offers the peace of mind of a technology platform. Each of their solutions are designed to work together and complement each other. Furthermore, a single vendor also provides a single point of contact for troubleshooting and other complications that may arise. There is no blame to shift onto another vendor. There’s one rep and one number to call.

Digital Transformation with the OneSpan Trusted Identity Platform

OneSpan’s Trusted Identity Platform gives you the flexibility to deploy cloud solutions when and how you need them, in harmony with your existing security technology. From this platform, integrate and coordinate identity verification, authentication, mobile security, and other solutions, to work together or in a modular way. From a single platform, eliminate inconsistent user experiences and optimize your existing infrastructure by simplifying workflows and related customer journeys. Our modular solution stack provides a seamless way to bolt-on new solutions when you’re ready.

Starting the Digital Transformation Journey

The rapid changes in the business and consumer landscape brought about by the pandemic left just about every industry scrambling for short-term solutions to maintain business continuity and meet customers’ financial needs. Today, we can look ahead to what the future of the financial services industry will hold, and it is a clear shift to prioritize mobile banking services. This is where financial institutions will compete, and the greatest differentiator will be the customer experience. To stand out, FIs need the right technology solutions to digitize their processes while ensuring the right balance between experience and security.

Digital transformation has been on the roadmap of the banking industry for years. The time is now to accelerate the journey and meet customer demands for mobile solutions.

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