My phone is still smarter than yours

Actionable intelligence that
drives Revenue & Profit in the eChannel…

My Phone is Still Smarter than Yours

Paul McAdam
April 27, 2010

Presented at
NACHA PAYMENTS 2010

© 2010. All rights reserved www.ecomadvisors.com

85% of U.S. adults own a mobile phone,
as do 75% of teenagers

% of Adults and Teens Who Own % of Teen Cell Phones Owners
Cell Phones (by Age, 2004 & 2009)
85%
77% 2004 2009
73% 82% 83%
79%
76%
65% 75% 73%
71%
64%
63% 58% 59%

48%
43%
45%
Teens (age 12 - 17) 34%

Adults
18%

2004 2006 2008 2009 12 13 14 15 16 17

Source: Pew Internet & American Life Project
Age

© 2010. All rights reserved Page 2

The era of mobile financial services started
3 years ago

Apple iPhone Unit Sales
(millions)
On pace to
20.7 sell 35+
17.5
million in
11.6 2010

1.4

2007 2008 2009 2Q 2010

 iPhone introduced June 29, 2007
 Over 51 million iPhones sold to date
 App store launched in July 2008. Over 187,000 apps currently available
 Already 2 billion+ apps downloaded…
Source: Apple website, 10-K’s & 10-Q’s

Research objectives and methodology

NACHA and eCom Advisors partnered with FIS to:
 Repeat eCom Advisors consumer research fielded in March 2009
 Track the pace of consumer use of mobile devices to access online
banking, pay bills and make online purchases
 Deep dive on the impact of Internet-enabled smartphones on mobile
financial services adoption and the customer experience

Research methodology
 54 question, online survey
 1,236 completed surveys
 March 23 – 26, 2010
 Sample obtained from Survey Sampling
International


The survey focused on consumers who own and
use a mobile phone

100% ―Active‖ defined as use
within the past 30 days

71%
66%
55%
42%

Own and Use Active Active Own an Internet- Own a
a Mobile Phone Online Banking Online Bill Pay capable Mobile Smartphone
via Computer via Computer Phone


The survey sample was relatively balanced by
gender, age and income …

Male Female
51% 49%

$125,000 - $150,000 or Under
Mature $149,999 more
(1930-1945) Gen Y $100,000 - $25,000
3% 3%
13% (1976-1992) $124,999 24%
Baby 34% 6%
Boomer $75,000 -
(1946-1959) $99,999
23% 10%

$50,000 -
$74,999 $25,000 -
21% $49,999
Gen X
33%
(1960-1975)
30%


… In addition to mobile carriers

Other
Virgin Mobile 12%
2%
AllTel
2%

Verizon
31%

AT&T
28%

T-Mobile
U.S. Cellular 10% Sprint Nextel
2%
11%

Cellular One
1%
Cricket
Quest 1%
0%


Detailed classification of the types of mobile
phones owned by survey respondents

Newest Touchscreen Smartphones Touchscreen Smartphones

iPhone, Motorola Droid, Google Nexus, Motorola Surf, Samsung Impression, LG
BlackBerry Storm Dare, LG Xenon

Smartphone (Non-touchscreen w/ Older or More-basic Phones
QWERTY Keyboard)

BlackBerry Curve, BlackBerry 8800 Series, Motorola RAZR, Verizon Escapade,
Samsung Gravity, Palm Treo Nokia 2680 Slide, Nokia 1680 Classic


Those that use mobile web predominantly have
newer technology

Internet usage compared to cell phone type

I don't have Internet access I have Internet access and DON'T use it I have Internet access and use it

Newest Touchscreen 2% 4% 93%
Smartphones

Touchscreen Smartphone 20% 21% 59%

Smartphone
(non- 32% 19% 49%
touchscreen/QWERTY…

Older phones 61% 25% 14%


The newer the technology, the more consumers
rely on their mobile phones instead of their
computers to access the Internet

I use the Internet on my computer less now because I use
the Internet on my mobile phone
(% that agree)

44%

15% 15%
4%
Newest Touchscreen Smartphones (non- Older phones
touchscreen smartphones touchscreen /
smartphones QWERTY keyboard)


42% of the sample owned a smartphone, including
67% of Gen Y consumers

Types of mobile phones owned by Types of phones owned by generation
survey respondents
8% 4% 5%
Newest 18% 12% 11%
touchscreen
smartphones 23% 5% 3%
10%
Touchscreen 33%
10% 10%
smartphones

Older phones
16% 79% 81%
58% Smartphone
(non- 59%
22% touchscreen/
QWERTY
keyboard 34%

Gen Y Gen X Baby Boomer Mature


Among owners of Internet-capable phones,
27% use them to access online banking

% of consumers with Internet- Frequency of mobile online banking use
capable mobile phones who used within the past 30 days
them to access online banking (2010 data)
within the past 30 days 2 - 4 times Daily, 7% Only once,
per week, 28%
19%
27%
22%

Once a
week, 21%

Once
every 2
2009 2010 47% at least weeks,
25%
weekly


But only 60% of active mobile banking users are
satisfied with the experience

AVERAGE SATISFACTION

10
Overall satisfaction when their bank Very Satisfied
account was accessed via their 9
mobile phone
8 Satisfied
Very Satisfied Satisfied Neutral Dissatisfied
7

6
13% Neutral
28% 5

27% 4

= 60% 3
32%
satisfied
(7 or higher) 2 Dissatisfied

1

0


Most use the mobile browser to access online
banking, but satisfaction with that method lags

Methods used to access online Customer satisfaction with
banking* mobile banking
54% Satisfied Very Satisfied
79%
69%
34%
58%
35%
25% 30%
40%
28%
11%
44% 30%
39%
30%
10%
Mobile Mobile SMS / Text I don't know
Internet banking app message Mobile Mobile SMS / Text I don't know
browser Internet banking app message
* Note: Respondents allowed to select all methods that applied browser
within the past 30 days


86% of active mobile banking users are
smartphone owners

Phone ownership of active mobile Customer satisfaction with mobile
banking users banking, by phone type

Satisfied Very Satisfied

Older 64% 66%
phones
14%
50% 48%
Newest 27% 32%
touchscreen
Smartphone smartphones 23%
(non-touchscreen 43% 28%
QWERTY
keyboard)
27% 37% 34%
27%
20%
Touchscreen
smartphones
16% Newest Touchscreen Smartphones Older phones
touchscreen smartphones (non-touchscreen
smartphones / QWERTY
keyboard)


88% of active mobile banking users are
Gen Y and X

Active mobile banking users, Customer satisfaction with
by generation mobile banking, by generation

Mature,
Baby Satisfied Very Satisfied
4%
Boomer,
8% 67%
59%

27%
40%
31%
Gen X,
25% 20%
Gen Y,
63% 40%
28%
20%

Gen Y Gen X Baby Boomer


63% of mobile banking users have owned their
device for less than 1 year

Mobile banking adopters -- length of time owned their current
mobile device

More than
2 years,
14% Less than 6
months,
34%
1 - 2 years,
23%

6 months - 1
year,
29%


“Inertia / don’t see the need” and “costs too
much” are key factors that hinder mobile adoption

Why you did not access your bank account with your mobile phone

I would rather access my accounts online with my computer 35%

I just haven't bothered to try mobile banking yet 18%

There is no charge to use my computer 16%

There is no value to banking with my mobile phone 14%
Inertia or don’t see
I don’t think it is secure 14% the need
It costs too much to use the data plan on my mobile phone 12% Costs too much
My mobile phone screen is too small 7%

My FI does not offer mobile banking 4% Security

I’ve tried it in the past, but was dissatisfied 2%
Technical issues
My FI charges a fee for mobile banking 1%


10% of mobile phone owners are receiving
banking alerts on their mobile phones

Types of alerts currently received on mobile phone
Low balance alert 51%
Available balance 47%
Account has insufficient funds 34%
Direct Deposit posted 33%
Account
Transaction alert for debit, ATM, or… 33% balance
Payment due(mortgage,credit card,… 31%
Payments
Irregular debit card activity 30%
Changes to your online banking profile 28% Security /
Fraud
Irregular credit card activity 23%
Credit card balance approaching limit 23%


“Inertia / don’t see the need” are the primary
factors hindering mobile alerts adoption

Reasons why respondents do not use mobile alerts

I don’t see any value or don’t have any need to receive alerts 39%

I just haven't bothered to try mobile banking alerts 21%
The text messaging capability on my mobile phone costs too
8%
much Inertia or don’t see
My FI does not offer mobile banking alerts 7% the need

I don’t have text messaging capability on my mobile phone 7% Costs too much
Alerts are not secure 6%

My mobile phone screen is too small 4% Technical issues

My FI charges a fee for mobile banking alerts 3%
Security
I’ve tried them before, but was dissatisfied 1%


Among owners of phones with Internet access,
20% have used them to pay bills

% of consumers with Internet- Portion of bills paid using mobile bill pay
capable mobile phones who used within the past 30 days
them to pay bills online within the (2010 data)
past 30 days
All of my
At least one bills, 14%
of my bills, Almost all
20% 31% of my bills,
19%

11%
Half of my
bills, 18%

A small
portion of
2009 2010 my bills, 50% at least
19% half of bills


62% of respondents prefer to pay bills at
merchant websites

When paying bills with mobile phone, website used most often

I went directly to each biller's
website to pay my bills
7%

31% 49% I did a combination of the above,
with more at biller website

I went to my financial institution's
13% bill payment website to

I did a combination of the above,
with more at my financial


The more sophisticated the mobile phone
technology, the more likely consumers are to use
mobile banking and bill pay

Consumers that accessed online banking and bill payment using
mobile phones within the past 30 days, by type of phone owned

Newest touchscreen 65%
smartphones 40%

30%
Touchscreen smartphones
16%
Mobile online banking

Smartphones (non-touchsreen / 27% Mobile bill pay
QWERTY keyboard 22%

9%
Older phones
13%

* Note: Among consumers who own Internet–capable mobile phones.


The younger the consumer, the more likely they
are to use mobile banking and bill pay

Consumers that accessed online banking and bill payment using
mobile phones within the past 30 days, by generation*

39%
Gen Y
27%

21%
Gen X
20%
Mobile online banking

11% Mobile bill pay
Baby Boomer
10%

Only 4% of adopters in the mature segment.
Mature Sample size too small to report.

* Note: Among consumers who own Internet–capable mobile phones.


Mobile banking adopters use branch and
telephone channels significantly less

Consumers that conducted these interactions within the past 30 days

Went inside a bank branch to transfer 18%
money, make deposits, cash a check,
withdraw money, etc. 43%

Used the automated telephone 14% Active mobile banking
system to check account balance, see
if check cleared, transfer money, etc. 20% consumers

Consumers that are not
active mobile banking
Spoke with a representative at the 12%
bank's customer service center by
phone 21%


Those with the newest Smartphone's are more
likely to make purchases via their mobile phones

Items purchased on respondents mobile phone compared with phone type

Older or more basic phones
Touchscreen Smartphone
Smartphone (non-touch screen w/QWERTY keyboard)
Newest touchscreen Smartphones
28%

52%

38%
34% 25% 21%

20%
27%

8% 9% 20% 18%
5%
5% 14% 8%
11% 11% 11% 3%
8% 7% 5% 5%
7% 5%
4% 2% 4% 4% 3%
3% 3% 2% 1% 2%
App Audio/song Game Ringtone Online store Picture/image Food Movie ticket Video/movie
purchase


Consumers with newer mobile devices are more
likely to pay for apps they like and….

Willingness to pay for apps compared with phone type
Disagree Neutral Agree

Newest touchscreen Smartphones 17% 11% 72%

Touchscreen Smartphone 40% 16% 44%

Smartphone (non-touch 37% 25% 38%
w/QWERTY keyboard)
Willingness to pay for apps and generation
Older more basic phones 55% 26% 19%
Disagree Neutral Agree

35% 19% 47%
…the younger the Gen Y

consumer the more
Gen X 45% 23% 32%
willing they are to
purchase apps they 55% 30% 15%
Baby Boomer
like
Mature 62% 21% 17%


Consumers use different mix of payment methods
for purchases made from mobile phones

Purchases made
with App store and
Payment methods used for mobile and
mobile phone
computer purchases online account contribute to
Computer Mobile fewer card and
28 pct. PayPal purchases
57% point gap
13 pct. made with mobile
48% point gap phone
23 pct.
39% point gap
35%
29% 28%

16% 15% 13%
7% 7% 5%
4%
N/A

Credit card Debit card PayPal Gift card Electronic App store Mobile phone
check account account

Note: Respondents were allowed to select multiple payment types

Mobile is accelerating the migration of
banking and payments to eChannels

 Latest ―touch screen smart phones‖ and mobile web browsers are an
―enabling technology‖ for banking, payments and shopping
 iPhone web interface and connectivity makes mobile web (mobile browser +
Apps + SMS) nearly equivalent to functionality of wired web – but with full
portability
 We’re in midst of an inflection point in U.S. banking delivery channels,
much like the introduction of ATMs and the widespread availability of
broadband in homes…
— ATMs extended the bank beyond the branch and ―banker’s hours‖
— Web banking and broadband connectivity extended the bank into the
consumer’s home, in batch
— Mobile web/app/sms and fast mobile wireless connectivity extends the
bank onto the consumer’s person, in real-time


Mobile functionality must be aligned with the
next generation of DDA packages

Tech Savvy, Emerging Retirement Income
Young, Tech Savvy
Affluent Account Account
Account
~ 15% of population ~ 10% of population
~ 25% of population

Self Directed Mass Affluent

Upwardly Mobile
Income / Wealth

Gen X & Y Mature Bank
Saving Families
Loyalists Mass Market, Loyalty
Account
~ 40% of population
Students &
Borrowing Families
Gen Y

Survivors

Age
Prepaid Debit Account
~ 10% of population


The table stakes requirements to compete in
mobile will evolve very quickly

2010 – 2011 2011 - 2012 2013 +

Information Transactions Engagement
mBanking mPayments mCommerce

Generate awareness and Enhanced customer loyalty ―Always with me‖ for better
adoption. Cost savings and payments revenue control of personal
 Notifications  Mobile P2P transfers finances

 Alerts  ATM withdrawals  Loyalty programs with
affiliate merchants
 Check balances  Inter-bank funds transfers
 Time dependant offers
 Push SMS  Mobile wallet
 Location-based
 Mini-statement  NFC transactions marketing
 ATM & branch finder  Home deposit capture  Couponing
 ATM receipts  Top ups
 Intra-bank funds transfer  Text receipts for mobile
 Bill pay payments


Contact information

eCom Advisors provides executive consulting services to banks, billers, vendors and investors in
financial services technology and online banking, billing and payments. Our consultants possess
175+ years of direct operating experience, and are considered leading experts in the industry. We
help executives make their most crucial ecommerce management decisions.

Boston office
Chicago office

95 Washington St.
Canton, MA 02021
781.784.1663
Paul McAdam
eCom Advisors 1 Westbrook Corp. Cntr.
One Westbrook Corporate Center, Suite 300 Westchester, IL 60154
Westchester, IL 60154 630.865.3135

Atlanta office

paul@ecomadvisors.com Columbus office
708.449.7743(office)
630.865.3135 (cell)

3340 Peachtree Rd. NE
5650 Blazer Parkway Atlanta, GA 30326
Dublin, Ohio 43017 404.848.7709
614.734.8372


My phone is still smarter than yours

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My phone is still smarter than yours