As digitisation transforms financial services, traditional banks are facing increasing competition from disruptive app-centric fintech newcomers. The result is an avalanche of people turning to mobile apps for their financial services.
Australians already lead the world in mobile banking: Total sessions in finance apps more than doubled in the two years to 2016. This is far ahead of the rest of the world where total worldwide sessions in finance apps increased by more than 36% between 2015-2016.
If that is not a strong indicator, download of financial apps also increased 15% in Q2 this year to more than 3.8 million downloads compared to Q2 in 2016.
Meanwhile, worldwide downloads for finance apps continue to increase exponentially, up by 100% over the past two years. In Australia, Commonwealth Bank alone has over 20% usage penetration on Australian smartphones.
Getting ahead in the mobile race
Apps provide a unique opportunity to deepen customer relationships and provide convenient, secure and personalised financial transactions. Banks benefit by reducing costs associated with in-branch transactions, and creating new cross-sell and upsell opportunities.
By interacting on a more personal level through a customer’s mobile device, financial institutions have the opportunity to engage on a more consistent basis. The use of big data and analytics captured from the mobile device allows for deeper insights into consumer behaviour, paving the way for the delivery of better-targeted offers and more relevant information sent to customers.
Furthermore, apps have also paved the way for new fintech players, who can both complement and disrupt established banks through innovative services. Banks must keep pace with the constant introduction of new technologies and consumer expectations to ensure a best-in-class app experience. Those who fail to adapt will find themselves left behind. The arrival of mobile, and subsequently these newer, more agile fintech disruptors, are to some extent, driving banks to refresh their offering and keep on top of innovation in order to stay relevant.
Incorporating users’ needs into the app strategy
Across APAC, mobile banking is a firmly established habit among users. Monthly sessions per user in banking apps have stabilised over the past two years.
In Australia, the number of average monthly sessions in the top 10 banking apps is almost 30 times per month. Users between the ages of 13 to 24 are clocking in an average of 30 sessions a month, while those aged 25 to 44 have an average of 22 sessions. That is still much higher than their tech-savvy Japanese and South Korean counterparts who are operating with an average of eight and 20 sessions respectively.
To attract the tech savvy demographic, banks such as CommBank have introduced gamification to the process. This places Australia firmly in the top echelons of worldwide banking app usage.
In Australia, banks tend to consolidate core and value-added services within one single app, rather than spreading their brand and message further through the use of subsidiary apps, which is a common tactic in other Asian markets such as Korea. The Australian strategy offers users a single interface they can come to know intimately, and gives banks a chance to push messages, services and offers to their core audience, rather than spreading across several interfaces.
That said, although mobile apps are used beyond mobile banking by Australians, there is no one-size-fits-all approach to unbundling. Banks still need to prioritise features to ensure their apps are effective in meeting customers’ needs. Any unmet areas could potentially pave way for specialist fintech competitors to move in and start cannibalising market share standard for routine banking transactions.
Since Australia's banking industry was an early adopter of digital technologies, user behaviours are very well established. Apps already offer a full range of financial services - the strong download growth in finance apps over the past two years clearly suggests that customers are still exploring opportunities presented by mobile apps.
Flourishing in the app economy
Evidently, mobile apps present immense opportunities and competition. The disruption in mobile finance has happened, and in many cases, the players outside the financial industry are the ones causing this disruption.
Take for example, start-ups are developing services as a direct reaction to their prior experiences as consumers of financial products and services. Very often, their objective is to provide a better, cheaper and more user-friendly financial experience via a mobile application. Relatable examples in Asia include WeChat and Alipay. If that isn’t enough to convince, App Annie data shows that usage penetration of fintech apps has already achieved a significant 6% in Australia, compared to banks which sat at 21% in 2016.
Banks must be prepared through innovation, investments and even partnerships with fintech players, to stay ahead of the competition or risk losing out. The top five retail banking apps by MAU in Australia only had an average rating of 2.9 stars on iOS in the first half of 2017. Without optimising best practices, the big banks run the risk of losing out.
Understanding app market best practices such as app store optimisation, building an app-specific user acquisition strategy and embracing data will be key to future success. With mobile finance, regulatory improvements and emergence of open frameworks, these present huge opportunities for innovation as well as competition.
As financial services become more accessible through the web and apps, customers demand more personal control and transparency over their financial interactions from banking and credit cards.
Many banks are turning to fingerprints or facial recognition for an enhanced user experience, improving both security and convenience. Peer-to-peer payment solutions have also seen growing appeal. In Australia, CommBank pioneered peer-to-peer transfers between users across banks by using phone numbers. It will be fascinating to see how banks and fintech companies will innovate to offer the best user experience.
As we see it, the next disruptor in mobile will always be imminent. The app economy will continue to flourish, but it is the banks and fintech companies who best prioritise their mobile app strategy that will stand to gain the most. Mobile definitely presents a prime opportunity to streamline services and offer added convenience to users.
By Jaede Tan, Regional Director, App Annie