In the past, large banks had a competitive advantage because of the “convenience” factor of their large ATM networks—which were clearly marked and easy to find regionally, nationally and even internationally. Community and regional banks responded by hooking up with surcharge-free ATM networks of their own. But this approach had a problem. Customers were often challenged trying to find the location of a network ATM when they needed one. Today, by offering an ATM locator application for smart phones, community banks can cope with the ATM convenience issue and also get their foot in the door for a future of full-blown mobile banking. Indeed, ATM locators are the first “killer app” of mobile banking.
Bank technology today
Let’s start this discussion of ATM locators by taking an overview of the current technology situation in the financial services industry:
• National banks such as Bank of America and Wells Fargo & Co. have leveraged technology to make their customer relationships somewhat stickier—though cross-sell opportunities have suffered due to less personal interaction and contact between the consumer and the bank.
• Niche players such as PayPal, ING Direct and Fidelity have systematically siphoned off some of the most attractive consumers (i.e., high net worth, diverse holdings and so forth) with superior online access and lower rates and fees—but remain constrained by the lack of physical locations to complement their offerings.
• Regional and local banks continue to resist the timely implementation of new technologies while focusing on keeping fees low and service levels high for their target customers.
So while one could argue that the above scenario offers consumers a wealth of choices as to how they would prefer to be served, the reality is that in spite of all these wonderful advances and choices, many consumers are more frustrated than ever. The reason is that consumers want and expect it all: reasonable rates and fees; hasslefree access to their banking information anywhere, anytime; superior personal service and so forth. While each of the above institution types has made claims to being able to deliver all of these, the truth is that no one has really succeeded.
With the rise of affordable outsourced technology options, the landscape is changing and the opportunity is there for community banks to eliminate their big-bank competitors’ primary advantage: convenience.
The changing notion of convenience
For decades the most important factor driving consumers to choose a banking relationship has been convenience. Convenience used to mean “a branch close to where I work or live.” Now, however, it means more. For online banking, it is not enough if you can check your balance, transfer funds, and pay your bills; the interface must be intuitive, customer service must be easily accessible, and security must be top-notch to combat the surge in (and fear of) identity theft. For ATMs it is no longer enough to have some: There needs to be thousands, they need to be everywhere, they need to be surcharge-free and they need to be easy-to-locate.
Interestingly, while many community banks have addressed the online banking convenience issue, many also wrongly believe that they have adequately addressed the ATM convenience issue. That is, many community banks think that since they belong to a large, shared ATM network that they offer ATM convenience equal to or better than their big-bank rivals. These banks promise their customers access to tens of thousands of surcharge-free ATMs nationwide … but their customers are expected to know that at the back of the 7-Eleven on Main Street there’s a strangely branded ATM that has a sticker on the side that declares that it is part of the same ATM network as the customer’s primary bank. And the customer should also know that when traveling to Springfield center that all three Springfield Savings’ ATMs are part of the same ATM Network as their primary bank. Or maybe, as one ATM network suggested in its Tip of the Day, “To avoid surcharges, search for … Network ATMs [online] before taking a trip.” If any of these tactics strike you as “convenient” then the battle has truly already been lost.
Alternatively, some community bankers have taken another approach. Rather than join an ATM network with the idealized promise of surcharge-free convenience, these institutions have chosen simply to reimburse customers for their use of out-of-network ATMs.
Typically, this means allowing customers to use any ATM with the promise of fee reimbursement. Community banks vary in their offerings: Some offer unlimited reimbursement per month while others put either a monetary (up to $15/ month) or transaction cap (up to five) in place. Depending on the institution and/ or the account type, the reimbursement may occur at the end of the month or the same day the ATM fee has incurred. Many community banks go even further and require that their customers have a minimum balance in their account or that rewards requirements are met before reimbursement takes place. While this method is convenient to a point, it certainly is not cost-effective or consistent across institutions. Consumers are required to do their due diligence to find convenience.
Mobile banking and ATM locator app
In the past, smaller institutions didn’t have to compete on technology. They were able to differentiate themselves with personal and friendly service that other, larger providers could not or would not offer. And because those seeking technology were generally younger and typically less profitable, there was no real need for community banks to get involved in the technology revolution in any significant way.
The world today, however, looks different than it did 10 years ago. Technology adoption is ubiquitous among consumers in their 40s and 50s, while those in their 60s and 70s are also showing interest in online banking and bill pay. The community banks that have targeted the technology-laggards are now finding themselves with a shrinking customer base. And without the pipeline, brand positioning and tools needed to attract new customers, their credibility as someone who can play in this space is questioned.
For smaller banks jumping on the technology train, developing and leveraging a linked ATM network (i.e., Allpoint, NYCE or PULSE), superior online banking platform, and mobile banking application can help them regain at least some of the footing they have lost over the past decade and potentially fulfill the promise consumers seek.
Whereas big-bank ATMs have had an advantage in the past because they were clearly marked and easy to find, community and regional institutions now have access to surcharge-free ATM networks with thousands of locations. This takes a disadvantage and turns it into a positive selling point.
For small banks to succeed they need to get involved in the technology race to meet the needs of their evolving customer base. More specifically, they need to have an ATM locator application for smart phones. The extensive surcharge-free networks are in place, so this technology can deliver on the promise. Using mobile technology, devices can recognize where a person is and easily direct him or her to the nearest location whether it be in a convenience store, a city block or a local branch.
Bank of America, seen as the best in-class and as a forward-thinker in mobile banking, launched its mobile banking initiative in 2007 with a Web site dedicated to informing consumers and businesses about their mobile banking capabilities. It was the first to launch an iPhone banking application where customers were able to pay bills on their own time, monitor their accounts, transfer funds, and locate the nearest ATM or banking center by entering their zip code, all while on the go. Among their competitors, Bank of America is known to have the highest adoption rate of mobile banking usage.
More recently, to combat their competitors who are closing in, Bank of America revised its mobile application to make it even easier to find the nearest ATM. The bank uses the GPS technology already present in most smart phones and allows consumers the ability to find the nearest ATM without even entering their address or zip code. This application is available on iPhone, Blackberry and Android and provides Bank of American customers access to over 18,000 ATMs in the United States alone.
Bank of America, along with many of its closest competitors such as Chase and Sovereign, have also joined independent ATM locator apps such as myATM that allow consumers to find the nearest ATM for their bank. They have the ability to connect customers to over 250,000 ATMs. It highlights their banking institution’s ATM in green, but also displays other ATMs that may be closer and identifies them with their logo. Banks that do not participate in this application are simply represented by a “$” sign. They utilize fast and easyto- use maps to illustrate the location and tell you whether it is in a nearby retail location.
Strengths of myATM locator include its broad range of participating banks, the ability to distinguish your bank from other banks, and the mapping capabilities. Potential weaknesses may be that this app does not contain the most up-to-date information as it could if it was run by Bank of America itself. Also, participating banks have to be comfortable with the fact that myATM may direct their customers to another banking institution if it is closer.
Similar to the myATM app and Bank of America’s mobile banking capabilities, the Allpoint Network has its own mobile banking and ATM locator capabilities. It currently has 37,000 surcharge-free ATMs worldwide; this translates to roughly one out of every 12 ATMs in America. The ATMs themselves are located in areas that prove to be most convenient to consumers such as Target, Walgreens and ExxonMobil. Community banks join the Allpoint network to compete with the big banks; it helps them attract more customers, gain a competitive advantage in the market, and find a cost-effective way to meet their customer’s needs without creating their own branded ATMs everywhere.
The Allpoint Network’s ATM locator app, the Go-Everywhere with Allpoint Network, works with most smart phones and allows Allpoint cardholders to locate the nearest surcharge-free ATM. Like myATM, this app allows customers to find the nearest ATM in the network either through their address or phone’s GPS. Allowing both these options when searching for the nearest ATM is important because, as we all know, WiFi service is not yet available everywhere. With this mobile app, community banks that belong are able to point their customers to this app as many of them do not have the interface and resources to create an app of their own. This puts them ahead of their competitors who are not a part of the Allpoint Network.
For financial services institutions to really differentiate themselves they can look at the example of Technology Credit Union, a California financial services provider located in Silicon Valley. Although a member of the Allpoint Network, this credit union took it one step further when it launched its own ATM locator app by partnering with LocatorSearch, a location aggregation provider. This app allows its customers access to over 60,000 surchargefree ATMs (both a part of the Allpoint Network and CO-OP Network) by using the GPS technology on smart phones.
In addition to the branded ATM locator app, the credit union also has vast mobile banking capabilities that allow customers to pay bills, view and cancel payments, send e-mails, view transaction history, learn auto and personal loan rates, and transfer funds—all of this from a regional credit union. The mobile app offers the ability to view recurring and future transfers, view current rates, and cancel payments. Customers can also stay up to date on the latest promotional news from the credit union. The app has received positive feedback from users.
Mobile banking is likely going to take the same adoption trajectory as online banking did. Which means for the most part, people will use it for simple functionality like balancing checks and confirming bill payments in the near future. In fact, only recently have people started truly transacting online (transferring funds and so forth) and that is still a small percentage of the population. The difference here is that the big banks are no longer the only players in this space; smaller banks are now embracing this new technology and aggressively marketing it to consumers.
As we look towards the future, consumers will eventually seek true transaction banking from their mobile devices and use their “virtual wallet” to make purchases. The big question slowing adoption is that of security.Will consumers trust banks, providers like PayPal, cell phone companies, or someone we have not even heard of yet to manage this functionality? What other security problems will arise that we are not aware of yet?
What other apps will financial institutions introduce to offer more convenience? Just last year, ING released an ATM locator mobile application for Google Android in the Netherlands that gives consumers three ways to see the nearest ATM: in a list based on your location, plotted on a map, or through the camera already on your phone! (Customers position their camera at an area around them and the app overlays the location of the nearest ATM.) When it comes to mobile banking, ATM locators are the first step to allowing customers to better access and manage their funds from virtually anywhere. Although adopted by most national banks to meet their customer demands, community banks are acting fast to keep up. Now, not only are these smaller banks offering the technology (online, ATM locator, mobile and so forth) to their consumers in line with larger banks, they are emphasizing their unique advantages.
The race is on ….
In the US, custom market research firm Chadwick Martin Bailey (CMB) has appointed Kathy Ofsthun and Susan Lilly as Senior Project Managers in its Retail and Financial Services practices.
The Boston-based company, which was founded in 1984 by John Martin and Anne Bailey Berman, has corporate headquarters in Boston, Massachusetts, serving clients in more than 30 countries around the globe.
Ofsthun joins with a background in both qual and quant research methodologies. For the past 15 years she has run her own agency, Focus on Research, which provided shopper insights through the use of qual tools and analysis, and specialized in focus group moderation, idea generation and ethnography. Before this, she specialized in shopper insights work at Stop & Shop, and held a business development role at NutraSweet.
Lilly worked most recently at marketing technology firm Affinnova, where her research focused on product optimization for consumer packaged goods companies. Before this, she was the Manager of Qualitative Research at educational publisher Houghton Mifflin Harcourt, and worked as Associate VP at Research International. During her career, Lilly has conducted research across the financial services, IT, healthcare and publishing sectors.
‘We continue to look for the best and brightest talent to expand our teams because we know it’s our people that set us apart from other companies,’ comments President Anne Bailey Berman. ‘It is an exciting time for our company as we continue to grow and gain more expertise in each of our practices.’