The longer we spend researching mobile banking, the more convinced I become that mobile banking is the most important innovation, or cluster of innovations, in retail banking in years, arguably in a century. Here’s why I think mobile banking is a much bigger deal than cash machines (ATMs), credit cards or home-based online banking:
In developing economies that lack a dense infrastructure of branches, ATMs and fixed-line telecoms, mobile banking and payments are bringing millions of people into the formal banking system for the first time.
In developed economies mobile banking will become the primary way many, perhaps most, customers interact with their banks. Banks need mobile banking to provide a platform for mobile payments and to protect their retail payments businesses from digital disruption as mobile payments start to replace card payments in shops.
Over the last three months I’ve presented at 4 different European events on the subject of Mobile Commerce in retail, and in every other speech I’m called on to do, mobile is increasingly at the heart of what I talk about when I discuss the key trends impacting European eCommerce. Its unavoidable.
The growth assumptions are based on the existing Forrester Research Online Retail Forecast, 2011 To 2016 (Western Europe), with simplified category groupings to reflect mobile characteristics. Mobile purchasing behavior and mobile Technographics sophistication are overlaid onto the country-by-country eCommerce growth forecasts to reflect the way in which mobile commerce will grow differently from online commerce across Europe. What this gives us is a picture of how we believe that mobile commerce will evolve for some of the key European markets.
So what are we forecasting?
· Mobile Growth Will Be Rapid, But Adoption Will Be Niche For Some Time Yet. Mobile commerce will represent 6.8% of all online eCommerce sales across Europe by 2017 (mobile only – we exclude Tablets from this figure). This is a significant portion of online sales, with the most rapid growth in the south of Europe.
Haven't we seen this show before? Like last year? Once again, Europe wrestles with and is again losing against its debt crisis. Once again, after some promising growth in late 2011, the US economy is showing signs of losing steam. Once again, China and India are flashing distress signals. And once again, John Boehner and the Congressional Republicans are threatening to refuse to raise the US debt ceiling unless US Federal spending is cut sharply.
Last year, the mid-year economic troubles did take their toll on tech purchases in the third and four quarters of 2011, but a last-minute resolution to the US debt ceiling issue, the European Central Bank's aggressive lending to banks so they could buy Italian and Spanish government debt, and some strength in US consumer spending, Germany's surprisingly strong growth, and continued growth in China revived global economic growth in Q4 2011 and into Q1 2012. Much depends on whether this pattern of slump and revival will recur again in 2012. My bet is that we will in fact see the same pattern.
So, let's look at the economic evidence, and then the tech market evidence.
US economy slows but continues to grow. In the US, the US Bureau of Economic Analysis on May 31 revised down Q1 2o12 real GDP growth to 1.9% from 2.1% in the preliminary report, and on June 1 the US Bureau of Labor Statistics reported that a disappointing 69,000 increase in payroll employment in May, the second month of sub-100,000 job growth. On a more positive note, US retailers and auto makers reported good sales growth in May, while gas prices at the pump continued to fall from peaks earlier. My take is that we will see real GDP growth in the 1.5% to 2% range in the remainder of 2012, down from my earlier assumption of 2% to 2.5% growth.
These are worrying times for people across Europe as the euro lurches towards another crisis, with leaders talking openly about the possibility of Greece leaving the euro and reports of customers starting to withdraw deposits from banks in Greece and Bankia in Spain.
It's easy to feel powerless in the face of such powerful forces, but fundamentally the repeated euro crises are about two things: debt and confidence. Lots of individuals, small companies, banks and governments across Europe have a large amount of debt, and lenders -- depositors, investors and other banks -- aren't completely confident that all of them will be able to pay it back. It's critical to avoid a vicious spiral of declining confidence that will harm Europe's economic prospects and the livelihoods of its peoples.
What can bank eBusiness executives do about it? Remember that you control two of your bank's critical communication channels: the website and email. Use them to reassure customers. How?
Help customers understand what the crisis is about. Banks aren't just about products. Your purpose is to help customers manage their money. Help your customers understand the causes of the crisis and the reality of the hard choices facing Europe. Nobody likes realizing that they are poorer than they thought they were. Without getting political, help customers understand the situation and what it means to them.
Spell out why your firm is safe. My bank emailed me on Thursday to remind me that it's covered by the British government's Financial Services Compenstation Scheme, covering up to £85,000. Put a similar message on your home page and onto the secure site, where online banking customers are most likely to see it.
The past five years have been awful for most European retail banks. The financial crisis, and the resulting recessions in most of Europe's economies, nearly destroyed some banks and crushed the profitability of many of the remainder. Worse than that, it was a problem that was partly or largely of (some) banks' own making. Banks are being forced to shrink their balance sheets, sell off non-core businesses and cut costs (i.e. fire employees) just to survive. And Europe's ongoing financial crises are far from over as banks' fortunes are closely entwined with those of their indebted governments.
There's one small silver lining among these dark clouds. Over the past 15 years, eBusiness has evolved from providing an electronic brochure to become a fundamental strategic function within retail banks. One of the effects of the financial crisis has been to force most European banks to focus on how to generate profits in their core retail banking operations by serving customers efficiently. Digital banking is a big part of the answer. So, despite the bleak economic outlook, most retail banking boards know that they must continue investing in digital channels. Digital strategy is an increasingly important component in overall strategy.
I'm still surprised when I find heads of eBusiness who remain marginalized within their firms, reporting into IT or marketing rather than a centralized distribution channels function alongside branches. The leading banks no longer make that mistake. That has greatly increased the power and influence of digital banking executives, but also their responsibility for the overall success of their businesses.
Here's our view of the top five priorities for eBusiness and channel strategy executives at European retail banks:
Online retailers are rapidly adding emerging markets to their list of new global opportunities to explore, as these markets are set to take a growing percentage of global eCommerce sales going forward. However, it’s important to remember that Europe still ranks as at the most popular region outside of North America for US online retailers expanding internationally. The market is set to grow at a healthy pace over the next five years: Clients can read my colleague Martin Gill’s recently published forecast of online retail sales in key markets across Europe.
Some takeaways from recent conversations with online retailers expanding into and within Europe:
Recently I bought myself a tablet, a Samsung Galaxy Tab 8.9 to be precise, and since I brought it home my three children regularly “borrow” it to play games. Games like Bunny Shooter, Shoot the Apple, and World of Goo are among their favorites. But when possible (and allowed), they prefer playing games on the PC. Second choice is the Nintendo Wii, at the moment they mainly play Skylanders and Just Dance. The only game device that hasn't been touched for a while now is the Nintendo DS.
Although uptake of tablets is growing in Europe, the installed base is still much lower than for PCs, Wii, PlayStation, or Xbox. Forrester's Technographics® data shows that about one-third of European online adults use a PC to play games or own an Xbox 360, a Sony PlayStation3, or a Nintendo Wii.
We recently ran a poll on Forrester's Facebook page: “Which market do you think has a higher percentage of sales coming from online channels — US or UK?"
While most respondents thought the US leads in online retail sales, the answer is actually the UK. Per Forrester's ForecastView latest estimates from the Forrester Research Online Retail Forecast, 2011 To 2016 (US) & (Western Europe), online retail sales in the US will top $200 billion, representing close to 7% of total retail sales of $3 trillion in 2011. Online retail sales in the UK will be £30.2 billion, representing 10% of total retail sales of £297 billion (per the Economist Intelligent Unit- EIU) in 2011.
The UK continues to have larger online channel share because:
The online buying population as a percentage of total population is higher in the UK.
UK online buyers’ average spend levels are slightly higher than those of US online buyers.
The UK population is more deal-sensitive and more prone to buying online.
Thanks to Tesco, online food (grocery) sales are a large contributor to online retail sales in the UK.
For those of you who aren’t familiar with Finovate, it’s a fast-paced format with seven-minute live demos and pitches from 35 financial technology vendors. It’s produced by Online Financial Innovations, the people behind the excellent NetBanker blog.
I was lucky enough to go along to the show in London today. Unlike last year, when four or five themes dominated the day, this year’s exhibitors were more diverse. Among them were:
“While significant media and investor interest in daily deals has fueled the hype around this business model, data from consumers indicates that daily deals are significantly challenged models.”
The daily deals concept is receiving just as much press coverage in Europe as it is in the US, so with that in mind we have taken a similar look at the state of the market of deals, flash sales and coupons and found that while there is a great deal in common, there are some notable differences.
Much of the differences stem from a combination of the local players and the geographical complexity of operating across Europe. Many of the big players like Grouponand Living Socialare present in Europe, with significant market presence in many countries, though a range of other national companies like DailyDeal.deand SecretSales.comoperate in only one country. So while at a national level the situation is reasonably easy to understand, eBusiness executives operating in a pan-European company have a maze of different options to navigate through.