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In 2008-2009, the financial service industry in the United States underwent one of the most stressful financial period in modern times. The collapse of the real estate and the subprime mortgage market led to a deep recession in the market. The financial crisis was so dire that it shock the even the giant financial institutions. One of such institutions was the Bank of America, which at the time was one of the largest bank in America in terms of deposits, revenue income and customer base. To survive in those hard times, the management of the bank had to reinvent its operations as well as change its strategies. Jen McDonald, the then head of Bank of America Corporation’s (BofA) Digital Marketing group found the solution in Mobile Banking. The corporation knew little that mobile banking has its share of challenges due to a number of factors (Gupta & Herman, 2012).
The banking industry has undergone tremendous transformation from the way service is provided to the number of products offered. Founded in 1904 as Bank of Italy, Bank of America has evolved to become the largest banks with over 53 million customers. By December 2009, this bank had 6000 banking centers and over 18000 ATMs across the United States. Managing this multitude of customers as well as the banking centers is a tedious exercise, fostering the bank to be dynamic in the way it offers its services. For this reason, the bank introduced mobile banking in 2007 the same year mobile banking was introduced in the country. However, the dynamics of the mobile service providers has proven to be a compelling factor to change the way mobile banking is done.
At the moment, mobile banking is done in three frontiers namely mobile messaging, mobile internet, and mobile applications. On one hand, mobile messaging works through the use of short message system (SMS), allowing customers to perform those tasks they would otherwise perform at the banking hall. Major advantage of this frontier is that it is possible to work across all wireless operators. However, the use of SMS is limited to a maximum of 160 characters. On the other hand, mobile internet works through wireless application protocol (WAP). This connects the mobile users with the online website of the bank. The only disadvantage of this frontier is that the mobile users need data plan to accesses this service. Lastly is the use of mobile apps. This module provides the end-user with better banking experience through the optimization of the user interface. Nonetheless, all the banking apps must be installed in smartphones and this shun other mobile users. In addition, the development and maintenance of mobile apps is very costly.
Structure and size of the main business under consideration
From 2009, mobile banking in the United States has grown tremendously. In addition, most consumers were adopting mobile banking due to its convenience. This quick adoption is attributed to improvement in mobile devices and network, constant improvement of banks’ features as well as increased awareness among the users. Posit that by 2009, there were over ten million mobile bankers and the number was bound to increase to thirty seven millions by 2014. However, the overall mobile banking concept was still small compared to other banking channels that had been in operation for long. For instance, most of the people preferred online banking since the use of internet was at an advanced stage compared to mobile banking.
The main competition for mobile banking is alternative mobile payment. This concept entails consumers using their mobile phones to pay for goods and services as opposed to the use of credit or debit cards. This concept is thus divided into three segments namely local mobile payments, mobile commerce, and person-to-person payment. On one hand, local mobile payment entails the use of mobile devices to make contactless payment. On the other hand, mobile commerce requires the consumer to use their mobile numbers to make the payment. The advantage of this method is that consumers can be able to purchase items that are not within their vicinity. Lastly, person-to-person payment entails sending money to another person using a mobile channel. The most popular mobile channel in this method is the use of PayPal. It is good to note that mobile payment as a completion has continued to growth, with the entrance of new services in the market that are compatible with the local mobile devices.
Other banks offering mobile banking services also pose as a major treat to Bank of America. Its major rivalry included JP Morgan Chase, Citigroup, Wells Fargo, and PNC Financial Services Group. The financial strength of these banks as well as the number of financial consumers they control can shift the U.S banking industry. For instance, JP Morgan Chase and Company is known to be the leader in investment banking, small business, and commercial banking. This bank has an estimated asset worth of $2 trillion and employs more than 200000 employees. For this reason, its mobile app designed for corporate and business customers had a profound effect on mobile banking in the country. On the other hand, a move by Citigroup in 2009 to be nationalized after a subprime mortgage crisis also affected the way Bank of America was operating. By the mere fact that both banks received bailout money from the government, regardless of the terms of the loans, their share prices were affected.
Decision criteria
To consider whether to adopt mobile banking and the best frontier, Bank of America had to assess the past, present, and the future of mobile banking. Past lessons indicated that mobile banking was one way of offering customers with a more convenient and potentially cost-effective way of banking. For instance, when the bank introduced online banking in the late 1990s, customers were reluctant to try the new technology. However, with increased awareness and elimination of registration protocols, the bank was able to change the consumer mindset. On the other hand, the current situation indicated that the use of mobile phone was rapidly growing. Douglas Brown, the senior vice president Mobile Product Development, had observed that while there were four people being born every second, the number of mobile phones sold the same second was eight times higher. In addition, consumers were willing to adopt mobile banking due to its convenience and ease of payment. For instance, the mobile banking app took BofA by surprise. Within a year of its launch, the bank had over a million active mobile users with the number tripling a year after.
Based on the past and present results, the future of mobile banking for Bank of America looked bright. The bank thus chose to implement mobile banking through SMS and later develop the appropriate apps for smartphone users. That rationale behind this choice was that only 15 percent of mobile users had smartphones at the moment. This meant that implementing mobile banking through mobile applications would only cater for fifteen percent of the target consumer. On the other hand, using SMS meant the bank was catering for the whole population even for people with regular phones. One of the major challenge with this move was the increase in cost since the bank had to pay mobile operators for every SMS message. Another challenge was the integration of mobile banking with the existing channels of the bank. Unless the bank was ready to deal with channel proliferation, it was at the risk of failing to track customers’ mobile transactions.
Evaluation of alternatives
To understand the effectiveness of mobile banking, BofA compared the effectiveness of various banking channel during marketing. Mobile marketing was compared to other digital marketing channels such as ATM advertising, search and display advertising, as well as the use of social media. On one hand, mobile marketing proved to an effective way of marketing since it served a dual role for the company. These roles included offering banking services to the customers while at the same time serving as an advertising and promotion channel. The marketing was designed in several forms such as customized SMS, display ads on mobile devices, and interactive campaigns with outdoor media. After the campaign, the marketing department found out that mobile marketing had a high response rate compared to other forms of digital marketing. This was in addition to the low cost of running the mobile marketing.
Online marketing was one of the alternative to mobile marketing. This marketing alternative took several forms from search and display ads, videos at site, email marketing, and in-game application. While online marketing was an effective way of regaining customer trust, the cost of running the advertisement was very high. Michael Bailey, senior vice president of Online Marketing explained how the company was a top client of Google. This meant that the cost of running online campaign was very high. The use of social media was another alternative to digital advertisement. While the bank was aware of benefits associated with social media advertisement, it had to consider the conservative culture of a large national bank. For this reason, social media advertisement did not yield much result. The last alternative was onsite marketing, in which case advisement was done at bank branches, ATMs, and at the bank’s own website. This proved to be an effective advertisement tool as long as the bank did not oversaturate the consumers with clutter.
Point to success
To remain competitive, offering mobile banking alone is not sufficient. Bank of America has to customize its mobile banking services to suit the need of every customer. One way of doing this is to invest in research and market survey in order to determine what the customers want. In addition, the bank needs to develop a product that is consumer-friendly depending on the services it is offering. Borrowing from the competition and improving on the same should be the first step. For instance, BofA should borrow the idea of tracking and managing one’s credit card transactions using the mobile phone. Apparently, most people, especially low-income earners, cannot use their credit cards conveniently, simply they are afraid to exceed the credit card limit. Another idea that BofA needs to borrow is approving as well as cancelling ongoing payment through the mobile phone applications. This not only increases convenience but also ensures that the customers are in full control of their funds.
The integration of the three forms of mobile banking can also improve the efficiency of mobile banking. Customers need to understand the best form of mobile banking to use and for what purposes. The rationale behind this is that certain services, such checking the account balances, are not complicated and need minimal authentication. Such services can be offered by the use of an SMS as opposed to approving an ongoing payment, which requires proper customer authentication. On the same note, mobile banking services should be tailored towards the needs of the customers. For instance, young consumers need to learn how to manage their finances. The use of mobile banking services may be a good platform to offer advice on the best investment to make as well as the best saving plan to have. It is good to note that such simple and deliberate actions not only makes customers feel valued but also increases customer trust to the system.
Successful development and implementation of mobile banking calls for an overhaul of the company’s management, strategies, and technology. Apparently, modern technological advancement calls for rapid change to the way people think, make decision, and implement such decisions. It requires people to be dynamic and open to new ideas. For instance, with so many people moving towards the use of smartphones, it would be unwise for BofA to stick to SMS as a form of mobile banking. Equally important, company CEOs not only need to be business oriented but should also be technologically oriented in order to fit in to the new era. Lastly, every organizations strategy should be bound to change in order to achieve the ultimate goals of the organization. The management should not be static simply because they laid down the strategy at the beginning of their financial year. For instance, BofA should be open to changes in the mobile banking services should anything happen that would improve its service provision.
Conclusion and recommendation
The financial service industry is very fragile and requires players to be wise and focused. Any wrong move may lead an organization in to bankruptcy. The competition is usually very stiff, with consumers ready to jump ships if the services are not worthwhile. The use of mobile phones has revolutionized the whole industry due its convenience. Mobile banking services have emerged, with most banks devising apps to serve the customers. The features and complexity of the apps determines how well consumers are going to assimilate the mobile banking services. It is for this reason that the Bank of America was determined to devise the most appropriate app for its customer, which would complement its other banking channels. Much of the design and implementation process was a success although the bank needs to consider some other factors in order to remain the leading mobile banking provider in the country.
One of the recommendation is designing mobile sim cards, which acts as the customers’ account numbers. In such a case, customers will be in a position to transfer their money into their sim card and can perform payment services without being physically in the bank. Another recommendation is to customize banking apps to suite the specific need of the consumer. In such a case, the consumer need not go through a tedious process just to access simple service such as checking account balance. Lastly, the bank needs to invest more in mobile marketing. This will not only build consumer confidence but also sensitize people on the effectiveness of mobile banking.
References: Bank of America: Mobile Banking Essay
Gupta, S., & Herman, K. (2012). Bank of America: Mobile Banking. Harvard: Harvard Business School.
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