When it comes to mobile banking, there’s often a massive gap between the consumer’s experience with a big bank and with a smaller regional operator or credit union. The big banks have embraced mobile as a critical part of their overall delivery experience — with custom mobile banking apps, proprietary mobile wallets, biometric-authentication, cardless ATMs and more. They are, as Karen Webster observed, “very much on top of their game,” because they must be: They serve large consumer populations that demand that level of service.
They also have the budgets and the resources to execute.
But when it comes to the smaller players serving more local populations, the well of mobile innovation can run dry rather quickly and for many reasons. The customer base, for example, may demand it less vocally — and, critically — Urban FT Co-Founder and CEO Richard Steggall told Karen Webster in a recent conversation, and getting started can be a complicated and expensive endeavor that smaller financial institutions (FIs) can’t handle.
“A staggering statistic I came across recently really gave me pause. A full 42 percent of credit unions still don’t have mobile banking apps — and it’s not because they don’t want them or don’t think they need them,” Steggall remarked, “but because they don’t have the ability or the resources to do the technical integrations, and they can’t justify the cost.”
For banks and credit unions sitting out the digital transformation of retail banking, what’s missing, Steggall said, is a solution that can get them into the game efficiently and affordably, something akin to a “plug-and-play” mobile banking solution that effectively bridges the current mobile services gap between the biggest and smallest financial services players.
It’s that thought that drove Urban FT’s acquisition, announced today, of Oregon-based iParse, a mobile technology company that enables native smartphone apps to display content from other websites without the need for technical development or integration to those websites. I-Parse will operate as a separate unit of Urban FT, and current staff will continue working for the expanded company.
A “Cool Tech” for a White Space
The problem with mobile banking solutions for smaller FIs, Steggall observed, is that they become subject to a vicious cycle of project delays and consumer defections. The delay on the part of FIs is being able to justify the investment in upgrading their core banking systems to incorporate mobile banking into the mix, leading to the loss of customers who’d like a mobile banking solution from their local FI but can’t get it. Those customers then move on to find greener mobile banking pastures in larger banks that offer them more “lifestyle services.” Small FI revenues shrink, which makes it even harder for the mobile banking champions to justify investments — even if it is to bring forth increasingly necessary mobile upgrades.
“The customers of these [smaller] FIs are as loyal as anything, but they often have a relationship with a larger FI as well, because they can’t do all the things with their small bank or credit union they want to. It’s a very interesting dynamic,” Steggall said.
Steggall believes the iParse-enabled solution that Urban FT now offers will make it easier for smaller FIs to break that vicious cycle by reducing the costs to less than $10,000 to get signed on — and a business model and fees tied to the use of the app. It’s a solution that will allow these FIs to become more truly competitive, noted Steggall, in a marketplace where there is genuine consumer demand for them to do so.
“This is a mobile banking solution that regional and community operators can fully deploy within 30 days,” Steggall said. In just a matter of hours, he added, smaller FIs can be up and running with a mobile banking solution. From there, it is a matter of testing it and getting it into the app store. The “secret sauce” is the ability for Urban FT’s mobile banking solution to bypass core banking system integration, while delivering a robust mobile banking service.
Collaboration and Not Competition
While Urban FT’s new products with iParse are for smaller FIs, Steggall told Webster the company also sees a profitable future working with existing payments processors in the market today. Steggall said the iParse solution will help those players — including larger processors already offering their own mobile banking services — better serve their smaller bank and credit union partners.
“The smaller clients [of these processors] can’t afford to do the technical work to tap into the mobile banking services they have,” Steggall said.
But, through work Urban FT has already done to prove the concept with CUnify (a division of Fiserv), there’s potential to offer those smaller FIs, which can’t currently tap into their processors’ mobile offerings, access to Urban FT’s solution, Steggall said. Doing so also gives those processors the ability to monetize what’s been unmonetizable until now, and at the same time they’re able to offer their smaller clients an important new service opportunity.
“[Urban FT] is not competing with the processors or any of their existing products, because their products don’t address this white space,” Steggall noted. “It is in the interest of the processor to find tool that help their banks — even if they are tools they don’t currently offer. The more engaged the user base of a particular FI becomes, the more money that processor will make.”
The More Things Change
For all the talk about how pure-play digital banks were going to upend traditional banks — and for all the innovation they brought to the scene — a lot of what that digital-only revolution accomplished was teaching bigger banks what features consumers liked and would work, and which ones wouldn’t.
“At the end of the day, it has been proven that consumers want to leave their money and transactions with traditional banks,” Steggall emphasized, adding that services must be complemented by brick-and-mortar, because it makes the consumer feel safe; by ATMs, for convenience along with the right complement of digital banking services.
Steggall said he feels strongly that one of the few reasons consumers gravitate toward banks that are digital-only, is because they are rejected by the mainstream players. So, making those smaller, community-driven, traditional FIs more digitally competitive is smart business for the future. And it’s a business that Steggall said the addition of the iParse technology positions them well to serve.
“In a sense, this [acquisition] closes the loop for us. [Urban FT] now has a complete set of business solutions that are complemented by several UI and UX solutions that FIs can also use. And it means we are completely capable of moving aggressively into the DDA marketspace, because we can do that without the need to integrate with core banking systems.”