To know where you are going, it’s good to reflect upon where you’ve come from.
The first banks date back to around 2000 BC in Assyria and Babylonia and consisted of merchants that made loans to farmers and traders that carried goods between cities. The real beginnings of what we know as the modern banking model can be traced to early Renaissance Italy, where the Bardi and Peruzzi families established a presence that slowly spread to many other parts of Europe.
Social contagion was at the core of how these new and diverse banking services spread. Word of mouth was a huge component in driving demand for new financial services and it remains so today.
A true illustration of the power of word of mouth can be seen in how rapidly distrust in banking’s household names has spread, driving more demand for financial services offered by credit unions. But how can credit unions meet this rise in demand and also stay on top of what services customers want in a specific market? The social contagion phenomenon offers some clues.
It would be easy to get excited about big trends like mobile services, especially with some dizzying headline figures adding plenty of hype to the market. A recent study by eMarketer estimated that the number of U.S. consumers that own a smartphone will more than double from 93.1 million at the end of 2011 to 192.4 million by 2016. These figures are certainly worth taking note of, especially when you consider that consumers are conducting more personal business on smartphones such as banking.
According to comScore’s recent state of online banking report, mobile banking also continues to grow – in Q2 2011, 16% of the total U.S. mobile audience of 234 million users conducted some type of financial-related activity from their mobile devices. Yet, the eye watering averages do not reflect the real situation in a given locale, meaning that credit unions could over invest in a service offering that is less likely to be successful in the markets they are in.
An exploration of the spatial dimension of customer behavior provides insight into the geographic dispersion of remote banking. How consumers learn about and adopt remote channels is heavily influenced by their local community and its characteristics, a process known as social contagion. Location intelligence is an excellent tool for exploring and interpreting this behavior and provides insights that are missed through other analytical techniques.
By using geospatial information, financial institutions can better market customers across multiple channels. For example, by diving into members’ demographics, credit unions can determine where to promote mobile banking options the most based on where there is a high usage of online services, or a heavy presence of smartphones.
These learnings can be mapped out and overlaid against factors like competitor presence to establish the likely adoption of a new service in a given area. For example, is it worth promoting mobile services in a given area or are their too few candidates likely to use them? Credit unions should also take into consideration the competitive presence in a certain area.
A high number of competitor branches in a certain area can justify not opening an additional physical location and the best bet could be to promote mobile or online banking channels heavily. If there are not enough partner ATMs in a specific location, it can also provide justification to promote mobile channels to customers in that area.
Right Place, Right Time
The banking system certainly has come a long way since the Florentine Renaissance. First, the Internet, and now the smartphone revolution have provided credit unions with new opportunities to compete with bigger, more established competitors. Mobile options seem to be the future, but it would be reckless to expect the uptake of these services to happen overnight. Change certainly happens more quickly in today’s technology rich world, but it is worth remembering that human behavior change and adoption of new channels and services still does not happen in the blink of an eye. It is more evolutionary than revolutionary.
Credit unions ought to carefully analyze each individual market their members are in or are looking to enter and use predictive modeling and location intelligence to identify what services members in those particular markets want and will use. That’s the way to put your credit union’s mobile services on the map.
Bill Simmons is director of the Financial Services Practice at Pitney Bowes Software.
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