Mobile Banking’s Missed Opportunities [Updated]

Banks are currently shifting their online services to mobile ones in a way that fails to take advantage of the unique elements that new technologies offer. At the same time, new initiatives such as crowdfunding or peer-to-peer lending are emerging and growing faster, fostered by digital interactions. According to Prof. Evgeny Káganer this is only the beginning. Banks will have to rethink their strategies and the services they offer if they are to succeed in this new scenario.

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Today we’re talking a lot about how this process of rapid digitalization of society, or what we often call the increasing digital density, how it’s reshaping industries and spaces of business activity. Financial services and banking, retail banking in particular, clearly are prime candidates for such a reshaping. What banks will have to do is to transition online banking into mobile banking.

The problem is that this is precisely how the look at it. They look at in a way, “let’s take what we do in online banking and let’s replicate the same kind of experiences, the same kind of processes in mobile banking”. That’s fine. The problem with this is we’re not really taking advantage of any of the unique features and characteristics that the mobile environment has to offer us.

It creates connections among individuals and it allows these individuals to interact with each other through those connections very, very easily. So one potential consequence then of that would be this intermediation. If we can connect directly to each other, what is it that we can do directly with each other? And if you look at the area of peer-to-peer lending for example, it’s really booming and it has been booming for the last several years. Firms like Prosper, firms like Lending Club in the United States, Zopa in Europe. They’re really growing at a very significant pace.

I think they exceeded 1 billion in lending volume mid last year, 2012, and they continue to grow. And this is just the beginning. With digital, the number of possible transactions or other possible interactions is really indefinite. And what will define a good bank in the future or a successful bank in the digital world in the future is the ability to develop the vision for what kind of interactions through this digital access point the bank will foster with its customers, and what kind of interactions it will need in a way (incomprensible).

Clearly banks need to start paying attention or more attention to what’s going on in peer-to peer lending, what’s going on in crowdfunding even though it might seem that it’s on the far periphery of the industry. In the past we’ve had a lot of examples of services that started out in the far periphery of the industry and then moved into the core very, very quickly. So banks need to start thinking how they can leverage elements of peer-to-peer lending, elements of crowdfunding  as part of their broader portfolio of services.

About Evgeny Kaganer

Evgeny Kaganer is an Associate Professor at IESE Business School where he teaches MBA and executive courses in digital business, IT strategy, and virtual enterprise. His research focuses on social and mobile technologies and their impact on individuals, organizations, and business models. His recent work traces the evolution of crowdsourcing and its growing impact on business.