January 8 would have been the 79th birthday of Elvis Presley, the King of Rock and Roll. For many years his music held the record for the most songs to appear in the Billboard's Hot 100 charts. Interestingly, only the "Glee" cast and Lil Wayne have surpassed Presley's 108-hit record, with 205 and 110 hits respectively. Clearly, no monarchy can last forever.
In banking, the long reign of cash as king also seems to be nearing its end. Industry data suggests that cash is increasingly being replaced by cards. Studies also show U.S. consumers are increasingly choosing plastic over checks, as well. In fact, a new Fed study shows credit and debit card payments now account for more than 67% of all noncash payments, while the number of checks paid continues to decline.
Clearly, the payments space has changed widely over the past few decades and continues to evolve at a fast clip. Within payments, we believe the area of mobile payments deserves some royal attention.
For starters, it's a fast-growing market with forecasters at Forrester Research expecting the U.S. mobile payments market to reach $90B by the end of 2017. In addition, mobile payments are a great way to build and solidify customer relationships. What's more, business payment products can be a good revenue driver for banks, so, simply put, it makes financial sense to explore how to increase mobile payment adoption rates.
Community banks have been slower out of the gate to provide this technology, but most are now making headway. An ICBA study finds 37% of community banks now offer mobile payments and another 43% intend to do so by next year. By asset size, the study found 54% of banks with $500mm or more in assets offer mobile payments vs. 46% of those $250mm to $500mm in size.
This is definitely a step in the right direction, but banks still have more work to do. A recent study by Accenture underscores what we've been saying for some time - it's not enough to build mobile payments technology and believe customer relationships are yours for the taking. Rather, banks need to take extra steps to convince customers to use mobile payments. The biggest banks are working very hard to do this right now, so community bankers know mobile offerings are now needed to level the playing field.
One way to begin is to promote to customers and prospects the many benefits associated with mobile payments. It may also help to incentivize current and potential customers with instant coupons or reward points. At the same time, work hard to decrease the fear factor associated with mobile payments so customers aren't afraid to get started.
Remember to keep an eye on the competition as you go. It will help you know what else is out there, what is working and what is not to better position your offerings. Paypal, for example, recently flexed its muscles with the purchase of Braintree, a mobile payments company. Then it bought StackMob, known for a platform that lets developers and companies easily create and manage mobile apps. Large banks are also very active in this game so it pays to keep your eyes wide open as you proceed.
How long mobile will reign remains to be seen, but banks recognize that there's a new king in town already or arriving soon for an extended gig. You don't need to make controversial moves like Elvis's famous hip swivels to build lasting customer relationships, but you can no longer sit back and hope basic mobile offerings get you noticed either. It is time to form a mobile bank band and start playing, if you aren't already doing so.