Among the many investments banks have to make, mobile banking is one of the most difficult to quantify in terms of return on investment. Most retail banks acknowledge mobile and digital banking services as a necessary cost of doing business, but the value these tools represent is nebulous and difficult to measure.
It's a problem that Jamie Armistead, head of digital channels at San Francisco-based Bank of the West, set out to tackle.
"I wanted to find out, what's all this stuff worth? What value is brought back through digital?" explained Armistead. To find out he developed a longitudinal two-year study of Bank of the West customers, the results of which he presented at American Banker's Digital Banking 2016 conference on June 21.
The central aim of the study was to determine if mobile/digital banking adoption positively correlates with higher incremental adoption of revenue-generating products like credit cards and personal loans.
Armistead partnered with the bank's core processor, Fiserv Inc., to track behavior and banking activity of approximately 430,000 Bank of the West customers between August 2013 and August 2015. Only one variable changed during the two-year period; half of the customers adopted digital/mobile banking in the first year of the study, the other half did not.
"The longitudinal portion of the study proves that customers become more valuable post digital enrollment," according to Armistead. "As customers are engaging and spending more time on digital, they're adopting more incremental bank products."
Results of the study show that customers who enrolled in digital banking increased their average product holding (credit cards, personal loans, mortgage refinancing, etc.) 58.4% relative to pre-enrollment and had an average 1.1 more products.
Furthermore, customers who adopted digital banking generated 10.7% more in annualized revenue post-digital enrollment, relative to incremental growth of 4.5% among branch-only customers. The study also show digital engagement mitigates account closure, with digital bank users exhibiting 5% lower attrition rates than branch-only users.Bank of the West, a subsidiary of BNP Paribas SA, is rolling out several initiatives designed to drive customers to its mobile and digital platforms. The bank is launching a "digital ambassador program" that deploys digital subject matter experts to branches to explain features and functionality of digital products to staff and customers.
The bank has also played around with incentives between $10 and $25 for customers who adopt online bill pay, but these haven't yet proved to be a game changer.
"If you can sell digital, other product sales will follow," according to Armistead. It's a strategy that Bank of the West is aggressively pursuing. "Driving digital engagement is what keeps me up at night," he said.