Local Banks Expand Mobile Banking for Businesses
Mobile technology is growing exponentially in virtually all consumer and business areas, but mobile business banking is still playing catch-up. Although mobile banking logins surpassed regular online banking logins in 2013, individual consumers, not businesses, are driving that trend. But in 2015, local financial institutions say they are ready to expand their mobile business banking services.
IB contacted local banks and credit unions to find out where they are in terms of their mobile business offerings and to get a sneak peek at what’s still to come. Because of security and other concerns, mobile services are still more widely used by individual consumers than by businesses, but greater acceptance among millennial consumers and strong global adoption have convinced financial institutions to move faster to enable more business banking services through smartphones and tablets.
Mobile usage has soared in the past few years to the point where mobile is now the most-used digital platform. A 2013 report from the Boston-based Aite Group, a market research firm operating in the financial services sector, found that nearly 50% of smartphone owners in the U.S. had made at least one mobile payment transaction and 45% had used a mobile device to transfer money to someone else.
“You can take a quick look before you’re even out of your car in the morning to see what your cash position is that day.” — Sandy Bruhn, VP of treasury management and international banking, Johnson Bank
More recently, Bank of America’s 2014 Trends in Consumer Mobility Report, which surveyed 1,000 adult smartphone users across the country, found that nearly half of respondents, 47%, now make their banking transactions using mobile or online services while only 23% complete the majority of their banking transactions at a bank branch. The most commonly accessed functions included: reviewing account balances and statements, 81%; transferring funds between accounts, 49%; paying bills, 48%; mobile check deposit, 38%; and receiving alerts, 33%.
Mark Meloy, CEO of Madison’s First Business Bank, which allows both business and individual mobile users to make deposits with their iPhones, said, “What we find is that business clients use mobile more for their own sake, and because of their mobility not everyone is staying in the office all the time,” Meloy said. “For the business client, they can check balances and that kind of stuff with their mobile device, but it’s needed because many of our clients are not only the business owner, they are the chief salesperson and the chief operating person and so on. They need the ability to stay connected to the business even if they are not at the business location.”
Larger banks tend to create their own business banking app, while community banks often rely on a third-party vendor to design one. Whatever the case, some local banks are taking a page from Softcard (pka Isis Mobile Wallet), Google Wallet, and Apple Pay and are preparing to issue their own mobile wallets. Settlers Bank in DeForest, which built its business model around the electronic delivery of banking services, is in the testing phase to determine the level of functionality for its “SB Wallet.”
“What we’re looking at is basically viewing transactional data — account data — and being able to do it from an aggregated perspective,” explained Heather Longhenry, chief financial officer for Settlers Bank. “So we’re adding in not only your business accounts but your consumer accounts at the same time, everything in SB Wallet. We are trying to incorporate our business customers into that and test to see what all the capabilities will be, but right now we believe it will be just viewing transactions.”
Since the competition is thinking along the same lines, Settlers Bank is looking to add more business transactional capability in the form of wires and ACH transactions. With the emergence of mobile wallets like Apple Pay, banks have to decide how to either stay competitive or take advantage of the trend and build mobile pay into their own wallets.
“We don’t necessarily want to take on a company like Apple, but if we can figure out how to use the Apple wallet to our benefit and how to be relevant in that space, those are things that we’re working to develop,” said David Fink, founder and president of Settlers Bank. “Having our own SB Wallet is one way for us to stay relevant in the marketplace right now, be on the leading edge of that right now, and also to learn as we go.”
At the moment, the personal mobile banking capabilities are ahead of the business functionality. “I think that’s pretty standard across the industry,” Longhenry said. “The corporate side has been a little bit more reluctant to push forward on what they’re able to do in mobile banking, but I think it’s definitely going to be in demand. We’re starting to see that.”
Sandy Bruhn, vice president of treasury management and international banking for Johnson Bank, notes that on the consumer side, individual consumers have the ability to deposit checks via a mobile app, a feature the business side is looking into. With the bank’s Johnson Biz Mobile app, business owners can already view balances and transactions, view and approve ACH transactions and wire transfers, make transfers, and set up alerts.
Bruhn says the bank’s small business clients have been asking for a mobile business app because it can help them manage cash flow while they are away from the office. “It’s a great tool for a small business owner, a CFO, or someone on the go to be able to bank anytime, anywhere,” Bruhn stated. “You can take a quick look before you’re even out of your car in the morning to see what your cash position is that day.”
However, the online banking functionality is still preferred over a mobile app for more complex tasks in which customers need a larger computer screen. One example is uploading a payroll file. “It’s a matter of where the client would want to access the function or certain information,” Bruhn says. “Normally, you would not have access to your payroll data when you are sitting in your car in a parking lot between meetings. That’s probably when you want to be accessing your mobile app, and I don’t think most CFOs or business owners would want to try to process payroll on their mobile device.”
Kim Sponem, CEO of Summit Credit Union, says consumers have access to Summit’s mobile banking platform for features like remote deposit capture. When the bank launches its mobile business app this year, the business side will have many of the same things. “The consumer side has really widespread usage today,” Sponem noted. “On the business side, how helpful that all is depends upon the type of business that you have. A lot of our business lending, for example, is in real estate, so it’s good for people who might have their day job and then dabble in real estate management. For them, mobile banking is a bit more pertinent.”
Much of what Summit Credit Union could eventually add is now being researched, including person-to-person payments and a mobile wallet. Apple Pay, she noted, is its own app, so it will be interesting to see how the wallet market develops. “The downside with Apple Pay is that you have to have an iPhone, and you have to have the latest iPhone,” Sponem noted. “If you have an Android phone, Apple Pay is not going to work for you, so that takes out 50% of the population right off the top.”
In addition, not all merchants are onboard with Apple. “So then it becomes [a matter of] what’s going to happen on the mobile wallet side in terms of Google Wallet, for example, and Google Wallet would work with the Android phone, so it’s going to be interesting to see where Google takes theirs now that Apple has kind of disrupted the market.”
Mobile business banking has lagged behind consumer mobile primarily because of security concerns. The widely publicized data breaches of the past 12 months haven’t made it any easier for reluctant business owners to expand mobile services, but as part of a regulated industry, banks have invested heavily in network security, particularly firewalls, encryption, and tokenization. The latter, which relies on a randomly generated number with no exploitable value, makes it more challenging for the hacker but also less convenient for the client. Nevertheless, “the security needs to be there because of all the fraud that we are seeing,” Long-
To help mobile banking customers monitor their accounts, banks communicate via text alerts whenever transactions occur. There are also built-in security text alerts to indicate whether an account has been accessed outside the normal process, or when an unusually large payment is requested. For bill payments, the mobile app can also work in conjunction with online banking in that consumers would have to set up the recipient with online banking, and then they could send payments through the mobile app. “Every circumstance is different, every transaction is different, and since their pay is already set up, they would have a relationship with that payee,” Bruhn says.
Meloy says more mobile services are coming, but that trend is tempered by the need for the heavily regulated banking industry to balance the evolution and introduction of mobile solutions with the certainty that banks are providing the utmost security. That means banks like First Business can’t offer mobile or online services to business clients unless the client’s network is secure.
“We frankly spend a lot of time with our clients talking to them about how they can conduct their own day-to-day business, making sure they are keeping their own computer networks and Internet connections and hardware as secure as possible,” Meloy said. “As much network security as banks provide, as any bank does in terms of making sure our systems and processes are secure, if a business client isn’t taking the same steps, that’s where most of the security issues come from — when somebody at XYZ company opens up a malicious email and gets a virus in their system.
“It’s incumbent upon everybody to have the responsibility with email and Internet security.”
Going hand in hand
The conventional wisdom is that the banks and credit unions that adopt mobile banking (consumer or business) the fastest will be the most likely to capture younger customers. While Bruhn says that’s true, she noted that Johnson Bank finds a lot of early adopters among its older clientele. She can’t really speak to the reasons for that, but she noted that retired people seem to have more time to investigate mobile banking.
Sponem agreed that young consumers are not the only ones driving mobile banking. “We definitely have a younger membership, so there is a lot of that,” she said. “Also, when you work globally, mobile everything is so much greater in other countries like Australia, where everything is on the phone now. They have it all on their phone, and that’s how they pay for everything.”
Another driver is the use of mobile on the consumer side. “I think as business owners use mobile on the personal side, it drives their demand for mobile on the business side, too,” Sponem said. “It does go hand-in-hand, and it’s really critical for us to offer that and to unfold those services this year.”
The tricky part for all financial institutions, and businesses in general, is the speed of technological change, whether it’s a new service or the functional upgrade of an existing app. “As soon as you think you’ve got one thing up, there are new features coming out,” said Longhenry, “and so one of the challenges is the constantly changing evolution of the mobile technology.”
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