M-Commerce: Why Banks Should Promote Mobile for Small Business

 

By Debbie Smart

 

Banks have struggled with finding ways to offer mobile services to business owners profitably. But if offered the right mix of payment services, small businesses will pay for value.

 

 

 

According to Forrester Research, since 2007, the use of mobile banking applications has more than doubled. This trend is predicted to continue, with usage doubling again by 2015. The key is for financial institutions to begin revamping their mobile offerings with functionality that ties directly to business needs and creates a value proposition for both customers and financial institutions.

 

As newer technologies emerge and subsequently become antiquated, financial institutions often struggle to adapt and capitalize on opportunities to maximize revenue and attract new business. There’s no better example of this than in online and mobile-banking services.

 

While many financial institutions have successfully integrated online banking into their bevy of services, a recent boom in mobile capability has increased the demand for a more robust mobile-banking experience for business customers on the go.

 

Financial institutions of all sizes have looked to small-business banking as an opportunity to generate revenue for several years now. However, for community financial institutions, small-business clients are often hard to attract and retain due to limited resources.

 

In an effort to amplify the profitability of small-business banking, many financial institutions are beginning to market their mobile-banking capabilities to meet the needs of these clients, and in turn tap into a new revenue stream.

 

The Danger of Free Apps

 

As mobile banking emerged in the past decade, financial institutions only offered basic mobile account-management functions, such as obtaining balance information and reviewing previous transactions. The technology that was available wasn’t capable of offering more than the basic functions.

 

Today, with the growth of 3G and 4G networks and the explosion of smart phones and tablet devices, businesses are demanding more access with greater abilities for mobile banking from their financial-institution partners. According to a May 2011 study conducted by Dimensional Research, which polled 448 business stakeholders, 72% are already using iPads and other tablets within their businesses.

 

Over the past few years, larger financial institutions began offering scalable mobile applications to satisfy their customers’ needs. At the community level, financial institutions are still trying to catch up. The expertise and resources needed to add and improve solutions and to sell mobile banking to customers simply hasn’t been available.

 

The downturn in the economy, combined with new regulations, has also had a recent impact on the ability of financial institutions to deliver new solutions. However, the largest obstacle has been that most mobile applications have been given to customers at no charge, limiting the financial institution’s ability to justify investment in new technology.

 

To date, financial institutions have had to offer mobile solutions to remain competitive, but cannot afford to keep buying technology that doesn’t have a clear justification in terms of return on investment.

 

So. financial institutions today must look for ways to address the challenges business owners face in payments—invoice creation, input in the back office, and deposits—while at the same time generating revenue. Delivering time savings and error reduction via mobile-payments services translate to real hard-dollar savings for business owners.

 

A Turning Tide

 

Experience has shown that once personal customers of smaller financial institutions were introduced to mobile banking, there was a sharp increase in demand. Customers were granted full access to their account and given the ability to transfer funds and conduct mobile transactions in addition to the previously offered mobile functions.

 

While there exists an equal opportunity to offer mobile-banking services to small-business customers, many financial institutions aren’t taking full advantage of it because of the challenge of providing a product or service that enables wide adoption, accommodates the diverse needs of small-business customers, and at the same time provides a clear return on investment for the financial institution.

 

As a result, it’s no surprise that, while mobile banking has certainly advanced from its humble beginnings as a tool for basic banking needs, small-business adoption is still lagging. If industry pundits are correct, the tide is finally starting to turn. According to Yankee Group, mobile-banking transactions are expected to surpass $1 trillion by the year 2015.

 

As financial institutions look to increase revenue from their small-business clients, many have begun to offer customizable mobile applications for which customers pay a monthly fee or transaction fees to use.

 

As an example, technologies exist today that offer businesses the ability to work in the field (repair services, installation services, cleaning services, etc.) and remotely conduct business transactions through mobile devices. Some solutions allow the businesses’ mobile device to be tethered to its internal systems, syncing information (such as labor rates, parts costs, and inventory availability) so that it is readily available.

 

Through a mobile-payment application, the financial institution’s back office can easily accommodate check conversion on the automated clearing house via remote deposit, credit cards, and other payment methods.

 

In less time than it would take to fill out a traditional paper invoice, the service person is able to update inventory, e-mail an invoice to the customer, send the payment to the bank for processing, and have the invoice paid.

 

Such a solution could save small businesses up to 15 minutes per transaction, freeing up time to work with more customers, while pulling forward the deposited funds by depositing the item immediately rather than at the end of the day.

 

A recent study by Aite Group shows that, out of 300 small businesses surveyed, more than 27% said they would be willing to pay for mobile banking if their bank offered it.

 

Clear Benefits

 

Financial institutions are in a position to offer solutions that will monetize financial-transaction and ancillary products that businesses use in the creation and acceptance of transactions—creating a new revenue stream.

 

There are clear benefits for small-business customers. By establishing value for the business, the financial institution can monetize the mobile service and increase revenue from business customers using the application. Not only does the financial institution’s revenue increase, but it is in a better position to cross-sell other services.

 

Financial institutions must capitalize on the surge of mobile-banking demands made by their customers by adopting payment solutions. Traditionally, most financial institutions have provided mobile services to customers at no cost, but as market dynamics continue to shift, the need to generate new revenue is more crucial than ever.

 

To monetize this trend, financial institutions must seek ways to address the challenges business owners face in payments: invoice creation, input in the back office, and deposits.

 

As mobile banking becomes more advanced, the time for financial institutions to break into the small-business mobile-banking market is now.

 

Offering a mobile-banking experience with advanced options that save businesses time and money is also a great way to attract new business.

 

Mobile banking presents banks with the perfect opportunity to increase profits from their small-business customers and potentially generate new business for themselves.

 

 

 

Debbie Smart is senior vice president of product management for Rockwall, Texas-based Aptys Solutions. Reach her at dsmart@aptyssolutions.com.