Growth In Mobile Banking Adoption Will Be Driven Mainly By Smartphone Apps

Since banks like Bank of America launched native iPhone apps for Apple’s app store in late 2008, there has been an ongoing discussion about whether the future of mobile banking will be dominated by native apps or browser-based services.

With the adoption of smartphones that let people download mobile apps (like iPhones, Andoid phones, and BlackBerrry devices)  still being small today, banks will need to continue offering browser-based mobile banking services to reach most of their customers. But with smartphone ownership growing fast, I expect that most growth in mobile banking adoption will come from native apps and not from browser-based services in the coming years because:

1) Native mobile apps offer a much more compelling mobile banking user experience:

  • Apps are easier to find. App stores have become an important way for consumers to discover content. To find a mobile app, customers simply need to search for the bank’s brand name in the app store. Furthermore, mobile banking apps often appear in the list of most popular free apps — which creates additional promotion. Banks promote their native apps heavily since it positions the firm as an innovation leader and associates their own brand to other popular brands like Apple. By contrast, it is more difficult for customers to find out about their bank’s mobile banking Web site domain. Initiatives like dotMobi, with specific domains for mobile-dedicated sites still suffer because it is not clear which sites carry the .mobi extension and which don't. Furthermore, — since mobile search is in its infancy —searching via search engines like Google require additional effort.
  • They are easier to setup. Once a customer has downloaded an app, it is automatically bookmarked with an icon on the mobile’s home screen and thus easy to access again in the future. By contrast, customers who access a mobile Web site who want to save the link to the URL for future use need to take an additional step to either bookmark the link in the mobile browser or to create a shortcut on its home screen.  
  • Apps  provide better usability. Since less information needs to travel via the mobile network, most apps load and respond faster than mobile banking Web sites. Furthermore, apps’ are easier to navigate since they have only one level of navigation that is specifically designed for the user goal they are trying to accomplish. By contrast, mobile banking Web sites make use of the mobile browser’s generic navigation plus an additional app-specific navigation.

2) Native mobile apps enable banks to develop functionality that leverage the unique benefits of the mobile channel

  • They integrate more deeply with the handset's hardware. Unlike today’s mobile Web sites, native apps can integrate with the handset’s core functions like GPS and camera. Apps thus enable a wider set of functionality that is unique to the mobile channel like remote check deposits and ATM and branch finders that help to find the way to the nearest ‘free’ ATM or branch. Although more advanced browsers with HTML5 will be able to leverage phone features, it will take several years until they are widespread.
  • Apps let banks create a ‘proactive’ channel that provides actionable information. Apps enable application developers to push notifications to the smarthpone without the app being launched.  For banks, that means that a range of services can be offered that notify the customer proactively. Banks can for example show their customers when a new transaction has taken place or alert them when their account reaches a certain limit to avoid overdraft. By contrast, mobile Web sites are — like general Web sites — a reactive channel that only provides information once customers decide to access it. Apps can thus leverage some unique capabilities of the mobile channel.

I would be very interested in your feedback on this topic!




What about SMS

Interesting post, and I generally agree with your premise. Apps are superior to web-based mobile services in almost every way.

However, you neglected to mention text, or SMS. The ubiquity of data services is still a long way off (mobile operators can't get the extra $30 for data plans from *everybody*), and SMS is still the fastest, easiest, widest reaching mobile access method for an FI to deploy.

My company provides text banking and device apps (iPhone, Android), and text is by far the most heavily used option.

Reaction: What about SMS

Thanks a lot for your comment, Chris.

I didn't mention SMS because most SMS-based mobile banking services that are deployed by European banks are one-way alert services. Users can for instance receive a text alert with their current account balance once a week. But most service don't let them initiate the SMS or react to to it. By contrast, smartphone apps and browser-based services are two-way services and therefore fall under the category transactional mobile banking.

Nevertheless, I totally agree with you that SMS text alerts have the widest reach and current user adoption among the three different mobile banking platforms. They should definitely not be ignored by financial services firms. However, SMS-based services - even if they are two way - provide a less rich user experience than smartphone apps. SMS has limited input and output capabilities and is therefore less suited for more complex banking activities like transfers and bill payments. So in the long run, I still believe in mobile apps since they can provide the most compelling user experience.

With regards to your comment about the "$30 for data plans", we see a big difference in costs for flat data plans between different countries worldwide. In European countries like the Netherlands and Germany, data plans are often €10 or less and often bundled into the voice and smartphone plan.


Hi there Nice blog

Hi there

Nice blog post.

We're a native app provider, but my hunch is mobile-web is the future, or some hybrid mix. I haven't given it tons of thought, just sharing a few ideas :) ...

When it comes to users finding the mobile app, the story could be as simple as a mobile user just visiting their banks home page. The site can detect that a user is viewing on a phone, and offer a choice a mobile-web apps to launch. This solves the "discoverability" issue, users just navigate to the bank site.

Add in some nifty caching, and you can run web apps in offline mode.

Agree that bookmarking is an extra painful step you get for free with native. Native apps do tend to be more usable though, and lower bandwidth.

HTML5 is probably going to get widespread adoption fast, with Android and iOS devices using WebKit browsers already.

App push notifications are pretty cool, in theory you could push a notification and have it launch a url in a web app, as the push mechanism lives outside of the app. So, not a deal maker/breaker.

Again, just throwing some perspectives out there, not dissing your post :)

Reaction: Hi there Nice blog

Hi Tobin

That's a really helpful insight. Thank you for sharing.

I think it is important to differentiate between what we expect to happen in the "mid-term" and the "long term".

In the mid-term (1-2 years) I believe that native apps will prevail because of their clear usability advantages (easier to find, easier to setup, simpler and faster to use).

In the long-term (3-5 years) technologies like HTML5, connections with more bandwith, caching, etc., will improve the mobile web experience substantially and reduce the usability gap.

Again, thanks for sharing your perspectives!



Hi Alexander

Thanks for the note. Yeah, that timeframe makes more sense :)