Who benefits most from the financial services apps flooding mobile devices?
Many observers of online banking initially believed that it was consumers because they could shift assets with greater ease. This has been particularly important in serving younger consumers who are more likely to use mobile devices for managing their finances than older customers.
However, financial services organizations are seeing an equal advantage because they have been able to gather intelligence on customers. Based on information mainly about how, when and where consumers are using their mobile devices, the companies have been able to pinpoint their marketing initiatives to the most receptive consumers.
The question has become more relevant as the use of apps among banks and insurers increases dramatically. For example, more than 60 percent of insurers were projected to add new mobile capabilities for policyholders and agents, according to a 2013 report by the New York-based financial services consultancy Novarica.
Feeding the data warehouse
Vanguard’s app allows you to buy and sell shares from your investment account. It also provides users with news feeds and analysis, just in case you feel trigger-happy and want to “buy on the rumor and sell on the news.”
To be sure, the app will not let you open an account at Vanguard, and you can’t execute as many functions as you would on your desktop, the investment company freely admits.
But for most customers, the Vanguard app offers more than any consumer will ever need.
Still, there’s a trade-off.
Apps, whether for a consumer or a financial advisor selling to a consumer, are constantly feeding Vanguard’s data warehouses. Someone, somewhere, even if it’s another computer, is poring over data in hopes of selling you more of what they offer.
“The analytics and the apps — the link can be significant,” says Robert McIsaac, an analyst with Novarica. “Apps, when they are used, where they are used, can tell you a lot about how people are using things.”
Even seemingly innocuous data points like date and time stamps, and location information, will tell a skilled analyst what might tilt the odds in the institution’s favor.
“Certainly, if you notice that people sign up for a certain product at a certain time from a desktop or a mobile device, it tells you a lot about them,” says Kevin Skow, a principal at the actuarial consulting firm Milliman Inc., which recently announced upgrades to its mobile app.
McIsaac, a former banking chief information officer, says that when it comes to financial services, there’s “a line you can draw,” regarding innovation and adoption of apps by different industry channels: retail banks, commercial banks, consumer property-casualty insurers, commercial property-casualty carriers, annuity carriers, retirement companies and life insurers. Some channels are more suited for communicating via mobile devices.
Some types of financial services organizations have traditionally been more comfortable introducing new product and services features. This may reflect the types of products and services they provide.
Drivers looking for automobile coverage can find coverage from Progressive or Geico in 24 hours, and get their accident claim resolved within 30 days. Auto accident claim volume is generally high, given the number of accidents that occur.
Issuing life insurance for a family of four can take as long as three months, and the claim against the policy isn’t likely to be filed for another 10 or 20 years. Claim volume is generally low, McIsaac says.
Retail banks, which launched apps years ago, are typically early adopters of technology, followed by commercial banks, consumer property-casualty insurance and commercial property-casualty. Annuities, life and retirement institutions usually lag.
Apps have forced banks, insurance companies, broker-dealers and mutual funds to rethink what is important to consumers. Skow notes that not everyone is comfortable with making it so easy.
McIsaac says apps have done wonders for reducing website clutter, and engaging customers and potential clients. He says that institutions that haven’t built apps need to get on board — fast — particularly if they are to connect with younger generations.
“The current process of selling life insurance worked for me, but for my children they would laugh out loud,” McIsaac says.
If financial transactions don’t take place on a smartphone or tablet, young consumers are simply not going to shop for your product, let alone buy it, he says.Tags: Business Management,Technology