Sunday 22, July 2018 by Bloomberg

Banks freed from branches use mobile apps to go after customers

 

Banks are going even more mobile.

US Bancorp this week was the latest to say it will build a nationally available checking-account product as lenders introduce mobile offerings that let consumers do their full banking without a branch. The move follows similar announcements by some of the country’s largest banks including JPMorgan Chase & Co., Citigroup Inc. and PNC Financial Services Group Inc.

“All banks are in a push to monetise their digital capabilities,” said Bryce VanDiver, a consultant to financial institutions with CapCo. “Mobile channels provide a lower cost of acquisition while providing customers with a straightforward origination process.”

While lenders have long offered apps as a supplement to branches, they are increasingly looking to mobile-only offerings to boost their presence in new cities or grab market share among younger, lower-income consumers. Rising interest rates and the proliferation of online-only banks from the likes of Ally Financial Inc. and Goldman Sachs Group Inc. pressured the country’s biggest firms to gather low-cost deposits.

Some of the largest banks acknowledged in earnings reports this week that growth in the number of active mobile users has slowed. Using the mobile application to originate business can help improve the profitability of what had been considered a cost-centre, VanDiver said.

This year, Minneapolis-based US Bancorp will use a mobile app to expand outside its 25-state footprint. It will start by pitching checking accounts to loan customers, and later will add wealth-management services.

Technology improvements allow the bank to finally sell its most basic product—a checking account –through a mobile or online channel, Chief Financial Officer Terry Dolan said in a telephone interview this week. Nearly three-fourths of US Bancorp’s service transactions—like checking a balance or depositing a check—are done digitally, compared with only 14 per cent to 15 per cent of sales, Dolan said.

“Five to 10 years ago, without these digital capabilities, you were bound by your geography and you were bound by where you have offices,” Dolan said. “This gives you the opportunity to expand your reach, and we’re choosing to expand.”

JPMorgan’s mobile offering, Finn by Chase, seeks to attract more millennial customers. Finn lets customers open accounts, send money and make deposits, all on the phone. In November, Wells Fargo & Co. debuted its mobile bank product, Greenhouse.

Others, such as PNC, are leading with mobile but an expanded branch network won’t be far behind. Karen Larrimer, head of retail banking at PNC, said the Pittsburgh-based bank will push its digital wallet in Kansas City and Dallas before following up with a light branch presence in both cities.

“They will not be a typical branch,” Larrimer said in a phone interview. “You’re not going to walk in and find a teller line there. We want people to feel comfortable coming in and we will have it staffed with people who can help navigate the digital world.”

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