ROI for Mobile Banking?

What is the ROI for mobile banking now?  And by now I mean today, and not in 5 years.  Many of the ROI or Value Propositions for Mobile Banking I have read and researched miss the mark by only briefly mentioning, or worse yet not at all addressing, the cost the banks will need to incur to launch and support the mobile channel.

Based on what I have read it would appear that there are only benefits to mobile banking, and that banks can effortlessly and for very little investment implement these solutions.  Of course implementing a mobile banking solution will cost money.   It may or may not be difficult from a technology perspective (lets remove that from the equation), but it will be a cost expenditure in some form, which raises many questions:  

How does a bank justify the expense or measure the success? 

• Will costs be reduced?  Will the cost go up briefly for implementation, but decrease long term?
• Is it all about customer acquisition and retention? And if so, is this the only benchmark to measure a successful mobile banking initiative? 
• Is the reduction in fraud going to justify all the costs and potential increased costs?
• What percentage of shift from higher cost channels needs to occur?
• Will you need to reduce headcount to achieve the ROI?
• How are the variable expenses managed to ensure costs are reduced?

These are just some of the questions that should be answered when determining if mobile banking should be introduced or if it already has if it has achieved a true ROI. 

The interesting thing is that the reports and research on this do not focus on the bank’s bottom line, but rather they focus on whether the customer will adopt the service.  Of course it is very important to understand if consumers are interested and willing to adopt a new service, but that is not the entire story.

The reports I have read focus on data points that ensure mobile banking will work based solely on customer adoption rates and fail to address the bank’s investment and ROI.   These facts and figures detailing general mobile phone usage or the amount of data service usage, mobile phone penetration, or even SMS vs. voice calls are important, but provide little insight into how this new channel will impact the bank’s bottom line.

Almost any article addressing mobile banking ROI will mention how fast smart phones are penetrating the market, and then go on to describe the new demographics made up from the members of Gen Y and Gen X.  I think we can all agree that mobile phones are here to stay, and that smart phones make it easier and easier to access content, but are those cost justifications; not really? 

And of course what article or research report would be complete without a survey or two pointing to astronomically high new trends in the market.   These articles and related research are very interesting, and I agree with many of the mobile banking adoption rationale, but how do those facts address a bank’s bottom line?

Dozens upon dozens of banks (both large and small) around the world have implemented mobile banking, so there is no question that the mobile channel has its place, but is there a real ROI for banks that implement it today?  If so, how long does it take to achieve?

In my next blog I will attempt to answer some of these questions in a more detailed fashion, but for now the argument for mobile banking sounds very familiar to the original argument for online banking, which actually increased the cost to banks.

Posted on: Tuesday, November 17, 2009