My phone is still smarter than yours

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One of the biggest industry misconceptions is that 20-somethings will be the primary users of mobile banking and payments. But this isn’t necessarily the case according to primary research conducted …

One of the biggest industry misconceptions is that 20-somethings will be the primary users of mobile banking and payments. But this isn’t necessarily the case according to primary research conducted by eCom Advisors in 2009 revealing that consumer propensity for mobile banking and payments is far more correlated with the sophistication of their mobile device than their age. Consumers equipped with touch-screen smart phones (such as iPhone) were far more likely to use mobile financial services than those with ordinary cell phones or even devices with full keyboards, regardless of their age. The 2009 study revealed that 41% of owners of the latest smart phone technology used the device to access mobile banking and 21% for paying bills online. In 2010, FIS has partnered with NACHA and eCom Advisors to expand and repeat the study. This presentation will reveal findings from a March 2010 research survey of 1,000 consumers and include:

• An update on mobile banking adoption and mobile web purchasing by device type, generation, income, WAP vs. App vs. SMS and other characteristics

• Mobile bill payment adoption and the propensity to pay for mobile web purchases via credit card, debit card, P2P and mobile phone account

• Data and insights on the keys to targeting various segments of mobile adopters

• Insights to keep your institution competitive in the rapidly changing mobile marketplace

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  • 1. Actionable intelligence that drives Revenue & Profit in the eChannel… My Phone is Still Smarter than Yours Paul McAdam April 27, 2010 Presented at NACHA PAYMENTS 2010 © 2010. All rights reserved www.ecomadvisors.com
  • 2. 85% of U.S. adults own a mobile phone, as do 75% of teenagers % of Adults and Teens Who Own % of Teen Cell Phones Owners Cell Phones (by Age, 2004 & 2009) 85% 77% 2004 2009 73% 82% 83% 79% 76% 65% 75% 73% 71% 64% 63% 58% 59% 48% 43% 45% Teens (age 12 - 17) 34% Adults 18% 2004 2006 2008 2009 12 13 14 15 16 17 Source: Pew Internet & American Life Project Age © 2010. All rights reserved Page 2
  • 3. The era of mobile financial services started 3 years ago Apple iPhone Unit Sales (millions) On pace to 20.7 sell 35+ 17.5 million in 11.6 2010 1.4 2007 2008 2009 2Q 2010  iPhone introduced June 29, 2007  Over 51 million iPhones sold to date  App store launched in July 2008. Over 187,000 apps currently available  Already 2 billion+ apps downloaded… Source: Apple website, 10-K’s & 10-Q’s © 2010. All rights reserved Page 3
  • 4. Research objectives and methodology NACHA and eCom Advisors partnered with FIS to:  Repeat eCom Advisors consumer research fielded in March 2009  Track the pace of consumer use of mobile devices to access online banking, pay bills and make online purchases  Deep dive on the impact of Internet-enabled smartphones on mobile financial services adoption and the customer experience Research methodology  54 question, online survey  1,236 completed surveys  March 23 – 26, 2010  Sample obtained from Survey Sampling International © 2010. All rights reserved Page 4
  • 5. The survey focused on consumers who own and use a mobile phone 100% ―Active‖ defined as use within the past 30 days 71% 66% 55% 42% Own and Use Active Active Own an Internet- Own a a Mobile Phone Online Banking Online Bill Pay capable Mobile Smartphone via Computer via Computer Phone © 2010. All rights reserved Page 5
  • 6. The survey sample was relatively balanced by gender, age and income … Male Female 51% 49% $125,000 - $150,000 or Under Mature $149,999 more (1930-1945) Gen Y $100,000 - $25,000 3% 3% 13% (1976-1992) $124,999 24% Baby 34% 6% Boomer $75,000 - (1946-1959) $99,999 23% 10% $50,000 - $74,999 $25,000 - 21% $49,999 Gen X 33% (1960-1975) 30% © 2010. All rights reserved Page 6
  • 7. … In addition to mobile carriers Other Virgin Mobile 12% 2% AllTel 2% Verizon 31% AT&T 28% T-Mobile U.S. Cellular 10% Sprint Nextel 2% 11% Cellular One 1% Cricket Quest 1% 0% © 2010. All rights reserved Page 7
  • 8. Detailed classification of the types of mobile phones owned by survey respondents Newest Touchscreen Smartphones Touchscreen Smartphones iPhone, Motorola Droid, Google Nexus, Motorola Surf, Samsung Impression, LG BlackBerry Storm Dare, LG Xenon Smartphone (Non-touchscreen w/ Older or More-basic Phones QWERTY Keyboard) BlackBerry Curve, BlackBerry 8800 Series, Motorola RAZR, Verizon Escapade, Samsung Gravity, Palm Treo Nokia 2680 Slide, Nokia 1680 Classic © 2010. All rights reserved Page 8
  • 9. Those that use mobile web predominantly have newer technology Internet usage compared to cell phone type I don't have Internet access I have Internet access and DON'T use it I have Internet access and use it Newest Touchscreen 2% 4% 93% Smartphones Touchscreen Smartphone 20% 21% 59% Smartphone (non- 32% 19% 49% touchscreen/QWERTY… Older phones 61% 25% 14% © 2010. All rights reserved Page 9
  • 10. The newer the technology, the more consumers rely on their mobile phones instead of their computers to access the Internet I use the Internet on my computer less now because I use the Internet on my mobile phone (% that agree) 44% 15% 15% 4% Newest Touchscreen Smartphones (non- Older phones touchscreen smartphones touchscreen / smartphones QWERTY keyboard) © 2010. All rights reserved Page 10
  • 11. 42% of the sample owned a smartphone, including 67% of Gen Y consumers Types of mobile phones owned by Types of phones owned by generation survey respondents 8% 4% 5% Newest 18% 12% 11% touchscreen smartphones 23% 5% 3% 10% Touchscreen 33% 10% 10% smartphones Older phones 16% 79% 81% 58% Smartphone (non- 59% 22% touchscreen/ QWERTY keyboard 34% Gen Y Gen X Baby Boomer Mature © 2010. All rights reserved Page 11
  • 12. Among owners of Internet-capable phones, 27% use them to access online banking % of consumers with Internet- Frequency of mobile online banking use capable mobile phones who used within the past 30 days them to access online banking (2010 data) within the past 30 days 2 - 4 times Daily, 7% Only once, per week, 28% 19% 27% 22% Once a week, 21% Once every 2 2009 2010 47% at least weeks, 25% weekly © 2010. All rights reserved Page 12
  • 13. But only 60% of active mobile banking users are satisfied with the experience AVERAGE SATISFACTION 10 Overall satisfaction when their bank Very Satisfied account was accessed via their 9 mobile phone 8 Satisfied Very Satisfied Satisfied Neutral Dissatisfied 7 6 13% Neutral 28% 5 27% 4 = 60% 3 32% satisfied (7 or higher) 2 Dissatisfied 1 0 © 2010. All rights reserved Page 13
  • 14. Most use the mobile browser to access online banking, but satisfaction with that method lags Methods used to access online Customer satisfaction with banking* mobile banking 54% Satisfied Very Satisfied 79% 69% 34% 58% 35% 25% 30% 40% 28% 11% 44% 30% 39% 30% 10% Mobile Mobile SMS / Text I don't know Internet banking app message Mobile Mobile SMS / Text I don't know browser Internet banking app message * Note: Respondents allowed to select all methods that applied browser within the past 30 days © 2010. All rights reserved Page 14
  • 15. 86% of active mobile banking users are smartphone owners Phone ownership of active mobile Customer satisfaction with mobile banking users banking, by phone type Satisfied Very Satisfied Older 64% 66% phones 14% 50% 48% Newest 27% 32% touchscreen Smartphone smartphones 23% (non-touchscreen 43% 28% QWERTY keyboard) 27% 37% 34% 27% 20% Touchscreen smartphones 16% Newest Touchscreen Smartphones Older phones touchscreen smartphones (non-touchscreen smartphones / QWERTY keyboard) © 2010. All rights reserved Page 15
  • 16. 88% of active mobile banking users are Gen Y and X Active mobile banking users, Customer satisfaction with by generation mobile banking, by generation Mature, Baby Satisfied Very Satisfied 4% Boomer, 8% 67% 59% 27% 40% 31% Gen X, 25% 20% Gen Y, 63% 40% 28% 20% Gen Y Gen X Baby Boomer © 2010. All rights reserved Page 16
  • 17. 63% of mobile banking users have owned their device for less than 1 year Mobile banking adopters -- length of time owned their current mobile device More than 2 years, 14% Less than 6 months, 34% 1 - 2 years, 23% 6 months - 1 year, 29% © 2010. All rights reserved Page 17
  • 18. “Inertia / don’t see the need” and “costs too much” are key factors that hinder mobile adoption Why you did not access your bank account with your mobile phone I would rather access my accounts online with my computer 35% I just haven't bothered to try mobile banking yet 18% There is no charge to use my computer 16% There is no value to banking with my mobile phone 14% Inertia or don’t see I don’t think it is secure 14% the need It costs too much to use the data plan on my mobile phone 12% Costs too much My mobile phone screen is too small 7% My FI does not offer mobile banking 4% Security I’ve tried it in the past, but was dissatisfied 2% Technical issues My FI charges a fee for mobile banking 1% © 2010. All rights reserved Page 18
  • 19. 10% of mobile phone owners are receiving banking alerts on their mobile phones Types of alerts currently received on mobile phone Low balance alert 51% Available balance 47% Account has insufficient funds 34% Direct Deposit posted 33% Account Transaction alert for debit, ATM, or… 33% balance Payment due(mortgage,credit card,… 31% Payments Irregular debit card activity 30% Changes to your online banking profile 28% Security / Fraud Irregular credit card activity 23% Credit card balance approaching limit 23% © 2010. All rights reserved Page 19
  • 20. “Inertia / don’t see the need” are the primary factors hindering mobile alerts adoption Reasons why respondents do not use mobile alerts I don’t see any value or don’t have any need to receive alerts 39% I just haven't bothered to try mobile banking alerts 21% The text messaging capability on my mobile phone costs too 8% much Inertia or don’t see My FI does not offer mobile banking alerts 7% the need I don’t have text messaging capability on my mobile phone 7% Costs too much Alerts are not secure 6% My mobile phone screen is too small 4% Technical issues My FI charges a fee for mobile banking alerts 3% Security I’ve tried them before, but was dissatisfied 1% © 2010. All rights reserved Page 20
  • 21. Among owners of phones with Internet access, 20% have used them to pay bills % of consumers with Internet- Portion of bills paid using mobile bill pay capable mobile phones who used within the past 30 days them to pay bills online within the (2010 data) past 30 days All of my At least one bills, 14% of my bills, Almost all 20% 31% of my bills, 19% 11% Half of my bills, 18% A small portion of 2009 2010 my bills, 50% at least 19% half of bills © 2010. All rights reserved Page 21
  • 22. 62% of respondents prefer to pay bills at merchant websites When paying bills with mobile phone, website used most often I went directly to each biller's website to pay my bills 7% 31% 49% I did a combination of the above, with more at biller website I went to my financial institution's 13% bill payment website to I did a combination of the above, with more at my financial © 2010. All rights reserved Page 22
  • 23. The more sophisticated the mobile phone technology, the more likely consumers are to use mobile banking and bill pay Consumers that accessed online banking and bill payment using mobile phones within the past 30 days, by type of phone owned Newest touchscreen 65% smartphones 40% 30% Touchscreen smartphones 16% Mobile online banking Smartphones (non-touchsreen / 27% Mobile bill pay QWERTY keyboard 22% 9% Older phones 13% * Note: Among consumers who own Internet–capable mobile phones. © 2010. All rights reserved Page 23
  • 24. The younger the consumer, the more likely they are to use mobile banking and bill pay Consumers that accessed online banking and bill payment using mobile phones within the past 30 days, by generation* 39% Gen Y 27% 21% Gen X 20% Mobile online banking 11% Mobile bill pay Baby Boomer 10% Only 4% of adopters in the mature segment. Mature Sample size too small to report. * Note: Among consumers who own Internet–capable mobile phones. © 2010. All rights reserved Page 24
  • 25. Mobile banking adopters use branch and telephone channels significantly less Consumers that conducted these interactions within the past 30 days Went inside a bank branch to transfer 18% money, make deposits, cash a check, withdraw money, etc. 43% Used the automated telephone 14% Active mobile banking system to check account balance, see if check cleared, transfer money, etc. 20% consumers Consumers that are not active mobile banking Spoke with a representative at the 12% bank's customer service center by phone 21% © 2010. All rights reserved Page 25
  • 26. Those with the newest Smartphone's are more likely to make purchases via their mobile phones Items purchased on respondents mobile phone compared with phone type Older or more basic phones Touchscreen Smartphone Smartphone (non-touch screen w/QWERTY keyboard) Newest touchscreen Smartphones 28% 52% 38% 34% 25% 21% 20% 27% 8% 9% 20% 18% 5% 5% 14% 8% 11% 11% 11% 3% 8% 7% 5% 5% 7% 5% 4% 2% 4% 4% 3% 3% 3% 2% 1% 2% App Audio/song Game Ringtone Online store Picture/image Food Movie ticket Video/movie purchase © 2010. All rights reserved Page 26
  • 27. Consumers with newer mobile devices are more likely to pay for apps they like and…. Willingness to pay for apps compared with phone type Disagree Neutral Agree Newest touchscreen Smartphones 17% 11% 72% Touchscreen Smartphone 40% 16% 44% Smartphone (non-touch 37% 25% 38% w/QWERTY keyboard) Willingness to pay for apps and generation Older more basic phones 55% 26% 19% Disagree Neutral Agree 35% 19% 47% …the younger the Gen Y consumer the more Gen X 45% 23% 32% willing they are to purchase apps they 55% 30% 15% Baby Boomer like Mature 62% 21% 17% © 2010. All rights reserved Page 27
  • 28. Consumers use different mix of payment methods for purchases made from mobile phones Purchases made with App store and Payment methods used for mobile and mobile phone computer purchases online account contribute to Computer Mobile fewer card and 28 pct. PayPal purchases 57% point gap 13 pct. made with mobile 48% point gap phone 23 pct. 39% point gap 35% 29% 28% 16% 15% 13% 7% 7% 5% 4% N/A Credit card Debit card PayPal Gift card Electronic App store Mobile phone check account account Note: Respondents were allowed to select multiple payment types © 2010. All rights reserved Page 28
  • 29. Mobile is accelerating the migration of banking and payments to eChannels  Latest ―touch screen smart phones‖ and mobile web browsers are an ―enabling technology‖ for banking, payments and shopping  iPhone web interface and connectivity makes mobile web (mobile browser + Apps + SMS) nearly equivalent to functionality of wired web – but with full portability  We’re in midst of an inflection point in U.S. banking delivery channels, much like the introduction of ATMs and the widespread availability of broadband in homes… — ATMs extended the bank beyond the branch and ―banker’s hours‖ — Web banking and broadband connectivity extended the bank into the consumer’s home, in batch — Mobile web/app/sms and fast mobile wireless connectivity extends the bank onto the consumer’s person, in real-time © 2010. All rights reserved Page 29
  • 30. Mobile functionality must be aligned with the next generation of DDA packages Tech Savvy, Emerging Retirement Income Young, Tech Savvy Affluent Account Account Account ~ 15% of population ~ 10% of population ~ 25% of population Self Directed Mass Affluent Upwardly Mobile Income / Wealth Gen X & Y Mature Bank Saving Families Loyalists Mass Market, Loyalty Account ~ 40% of population Students & Borrowing Families Gen Y Survivors Age Prepaid Debit Account ~ 10% of population © 2010. All rights reserved Page 30
  • 31. The table stakes requirements to compete in mobile will evolve very quickly 2010 – 2011 2011 - 2012 2013 + Information Transactions Engagement mBanking mPayments mCommerce Generate awareness and Enhanced customer loyalty ―Always with me‖ for better adoption. Cost savings and payments revenue control of personal  Notifications  Mobile P2P transfers finances  Alerts  ATM withdrawals  Loyalty programs with affiliate merchants  Check balances  Inter-bank funds transfers  Time dependant offers  Push SMS  Mobile wallet  Location-based  Mini-statement  NFC transactions marketing  ATM & branch finder  Home deposit capture  Couponing  ATM receipts  Top ups  Intra-bank funds transfer  Text receipts for mobile  Bill pay payments © 2010. All rights reserved Page 31
  • 32. Contact information eCom Advisors provides executive consulting services to banks, billers, vendors and investors in financial services technology and online banking, billing and payments. Our consultants possess 175+ years of direct operating experience, and are considered leading experts in the industry. We help executives make their most crucial ecommerce management decisions. Boston office Chicago office 95 Washington St. Canton, MA 02021 781.784.1663 Paul McAdam eCom Advisors 1 Westbrook Corp. Cntr. One Westbrook Corporate Center, Suite 300 Westchester, IL 60154 Westchester, IL 60154 630.865.3135 Atlanta office paul@ecomadvisors.com Columbus office 708.449.7743(office) 630.865.3135 (cell) 3340 Peachtree Rd. NE 5650 Blazer Parkway Atlanta, GA 30326 Dublin, Ohio 43017 404.848.7709 614.734.8372 © 2010. All rights reserved Page 32