Mobile banking alerts are becoming more popular as banks put more muscle behind marketing and expanded offerings. The most popular alerts right now tend to be ones that help customers keep on top of their balances. Bankers and analysts say tough economic times and a greater desire to play a proactive role in managing their day-to-day finances as well as mitigate fraud are fueling customers’ growing interest in such services.
“Financial institutions should be thinking about alerts as a fundamental offering,” says Mark Schwanhausser, senior analyst for multichannel financial services for Javelin Strategy & Research of Pleasanton, Calif.
Most banks do not charge customers for alerts, but the potential upside from these services comes in other ways such as limiting potential fraud. Bankers also say that customers who receive alerts are more loyal and that banks benefit from the cost savings derived from customers making simple inquiries using the lowest-cost channel as opposed to tapping live call center representatives or branch employees.
Industry experts say the challenge ahead lies in making alerts both faster and more actionable, which can be hampered by the sometimes slow and siloed nature of banks’ back-end systems.
Banks on the Alert
For several years, banks have been offering customers the capability to receive emails about account activity or specific transactions. These can range from critical, often security-related notifications that a password has been changed or that a large or atypical purchase has been made on a credit card to letting customers know if their account balance has dipped below a certain level or that a bill is coming due.
Now, many of these alerts are being delivered via short message service (SMS) to customers’ mobile phones – a channel that’s arguably better suited to the pressing nature of many of these notifications. According to June 2010 statistics from the Cellular Telecommunications Industry Association, U.S. wireless subscribers send an estimated 1.81 trillion SMS messages annually, or 173.2 billion per month – an exponential increase over years past.
Larry McClanahan, vice president and director of digital delivery for Cincinnati-based Fifth Third Bancorp, which has been offering mobile alerts for two years, says that the number of alerts sent by the bank more than doubled between January 2010 and January 2011. “The uptake has been strong, but it’s not where we’d like it to be,” he adds, noting that Fifth Third has lately been putting more marketing oomph behind mobile services in general and alerts in particular.
Bank of America Corp. offers its customers the ability to receive more than 40 types of alerts on their mobile device, about 30 of which can be customized by the user. BofA currently has 7.2 million customers receiving customized financial alerts through email and mobile combined, with many of them receiving alerts through both channels, says Dottie Yates, online and mobile channel ePlatforms executive. She describes the adoption rate of financial alerts as “really good.”
Megan Minich, head of product development and channel delivery for Silicon Valley Bank of Santa Clara, Calif., which caters almost entirely to businesses, says her institution began offering text-based alerts in October 2010 as part of its launch of a credit card product. The six types of mobile alerts Silicon Valley Bank is offering initially can inform customers of their card balances, when payments are due, and when the last payment was received.
While banks have generally been slow to market customized alerts, Schwanhausser contends that is changing, citing a commercial from New York’s JPMorgan Chase & Co. featuring a woman in the midst of yoga class reaching over to notice she’s received a low-balance alert from her bank on her cell phone. The woman responds by making a transfer between accounts, all with barely moving from her yoga pose.
Schwanhausser says this concept also plays to an over-arching banking trend: the desire of consumers to gain more control over their finances. “Mobile gives people oversight of their money any time, any place,” he says. Bart Narter, senior vice president of the banking group at Celent LLC of Boston, Mass., says that balance inquiries or low-balance notifications are by far the most widely accepted type of alerts, as tough economic times are forcing people to be more conscientious about their day-to-day accounts.
Yates identifies low-balance threshold notifications as being the most popular with Bank of America’s customers. Aside from customized alerts, the bank sends out an automatic courtesy alert if a balance drops below $25. McClanahan says balance threshold alerts are very popular with Fifth Third’s customers as well.
Meanwhile, banks are broadening the scope of their offerings into security. In April, Silicon Valley Bank plans to launch a new series of fraud-related alerts, according to Minich. And ClairMail Inc. recently launched a new mobile alert product aimed at detecting potential fraud. With ClairMail’s Fraud Solution, a bank can send alerts when a transaction seems “suspect due to unusual behavior or geography,” enabling customers to instantly confirm or deny a transaction’s validity. Chief marketing officer Carl Tsukahara expects at least five national and regional banks to be using ClairMail’s fraud alerts by mid-year.
Upsides & Downsides
As with any new service, banks face the need to earn a return on their investment. Today, they typically don’t charge customers to receive alerts. But fraud reduction is often cited as a benefit; mobile notifications of suspect account access or dubious transactions can tip off customers earlier to limit the damage. “Forty-five percent of fraud is detected by consumers themselves, and this is going to help them detect it more quickly and mean lower losses for the bank,” Schwanhausser says.
Alerts can also deepen the customer’s relationship with the financial provider. As BofA’s Yates puts it, “Text is a personal channel. I don’t text with everyone. It signifies a close relationship.” Anecdotally, McClanahan says he’s seen that the more alerts Fifth Third customers receive, the lower the attrition rate.
And then there’s the lower expense for customer inquiries. Yates says that Bank of America associates are trained to suggest mobile alert services to customers who are making basic inquiries at the branch or the call center.
Unfortunately, the immediacy of the mobile channel, especially for time-sensitive alerts, is belied by the fact that the channel is tied into a back-end system (or often a series of systems) that does not process information as rapidly or smoothly as customers might expect. Many bank systems are still updated only once a day.
“The mobile part is easy; the hard part is integrating into the back-end systems,” Celent’s Narter says. In order to offer alerts in near real-time, he says banks need to upgrade their core systems and build in the “logic” – software or integration technology built on top of their core systems – to be able to synchronize data delivery across all their systems and channels. “Many banks are not offering alerts because they’re not able to dig into their system and get it into a real-time environment,” he adds.
“The back end is always a challenge,” Yates admits. She says the key for BofA has been working on the middleware, or the integration layer, between the back-end systems and the mobile channel. Minich says that Silicon Valley Bank is working on the integration challenge with the bank’s credit card services provider, who handles their back-end processing and is helping the bank improve its systems so that it can be more responsive.
For most banks this means that, for now, some alerts are close to real-time while others are based on information updated once a day. “The technology is too siloed and clunky to necessarily serve up information the way we’d like,” Schwanhausser says. “Alerts that come 12 hours after a transaction takes place have far less value.”
Ms. Hoffman is a freelance writer based in Lawton, Okla.
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