Banking's attempt at disruption with mobile card services

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For most consumers, a debit card is the closest connection they'll ever have to a financial institution. While they might also have auto loans, a mortgage or an investment account with a bank, the on-demand account tied to their debit card is the one they use day to day — the one they most rely on for safe and convenient payment transactions and the management of personal finances.

It's also the link to a primary FI that is most susceptible to disruption and disintermediation.

A March 26 webinar hosted by ATM Marketplace and sponsored by Elan Financial Services examined the challenges and opportunities confronting FIs in a mobile world where new banking alternatives seem to appear daily out of thin air, and where the next generation of adult consumers — millennials — are also the first generation in modern times to see a relationship with a brick-and-mortar bank as optional.

More and more consumers today consider the smartphone their most-favored means of interaction with their primary financial provider. Guest speaker Paul Provenzano, vice president of strategic partnership at Monitise, cited an Accenture survey conducted in 2014 that found 1 in 4 mobile-only bank customers would be willing to use a digital branchless bank. The same study revealed that more than 71 percent of consumers consider the relationship with their current banking services provider to be merely transactional, which indicates how easily the the traditional consumer-banker bond may be broken today.

"It's this evolution in how consumers are beginning to see the relationship with a financial institution," Provenzano said. "What once was the checkbook now is becoming the debit card," he said. "What once may have been a bank — a branch — is now becoming more the mobile device. And it's about beginning to think in the way of the consumer and identify how do we begin to connect the way they see and feel and the way they want to be served."

One tool FIs can use to reinforce the link between a debit card-holding customer and their issuing financial institution is the mobile app. Offering consumers control over their debit card and connected account on a mobile device can increase customer satisfaction and loyalty, Provenzano said.

He offered the experience of Lone Star National Bank as case in point. In 2013, Lone Star began to offer its customers a mobile app that allowed them to switch their debit card on and off; set parameters for spending alerts received via text message; and block use of the card for particular transaction types and locations. Having empowered customers with debit card control, the FI saw a 13 percent increase in its card base within six months; a 54 percent increase in frequency of card use; and a 60 percent decrease in fraud.

Steve Taylor, senior product manager at Elan Financial Services, offered a look at the core value propositions of mobile card services to financial institutions as well as consumers.

"On the financial institution side, I think first and foremost one of the key points you get is cardholder engagement ... and being able to cast a wider net with an audience having that digital access to anybody that has a card. That provides real value."

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The mobile card app itself doesn't facilitate NFC payments at the POS from a mobile wallet — à la Apple Pay or Google Wallet. However, it can serve as an important adjunct to those systems in that it allows the consumer to control the use of a debit card for those types of payments.

And, Taylor pointed out, it can pave the way to mobile payments for consumers who want to be able to make mobile payments — but have some trepidation about card security in a mobile POS environment.

"And that pathway to commerce — as we're in this transitional period — bringing together more of a comfort level between the card and the environment really does help in what we're progressing toward, what we know we're migrating toward already, which is mobile commerce and being able to conduct payments within the mobile environment," Taylor said.

"Why should the accountholder care? Providing that confidence, that control and that convenience for cardholders really speaks volumes and it goes a long way for FIs being able to provide those services ... because if they don't provide them, certainly accountholders will go elsewhere to some of the disruptors who are offering those types of services today."