Tech Talk


Mobile could be the new differentiator with commercial clients

By Katie Kuehner-Hebert

As more small companies use mobile devices to conduct their business, larger banks are launching mobile apps to help them—and community banks should start considering whether to follow suit, some technology experts say.

According to a May survey of more than 1,000 small-business owners by Constant Contact Inc. in Waltham, Mass., 66 percent said they used mobile devices such as smartphones and tablets, or solutions such mobile-optimized websites and text message marketing. Correspondingly, 32 percent of the largest 50 U.S. banks said they offered a corporate mobile banking app, and 8 percent planned to launch such apps by year-end, according to a July Aite Group report. Another 56 percent expected to launch apps for business customers in 2014.

“It can be quite expensive, but it’s an opportunity for community banks to differentiate themselves.”
—Jacob Jegher, Technology Consultant

“It’s even more compelling for community banks to create mobile apps for small businesses than it is for bigger banks, because community banks’ proposition is being closer to their communities and knowing small businesses better,” says Mark La Penta, practice manager and senior consultant for CCG Catalyst Consulting Group in Phoenix.
Because many community bank business customers are sole proprietorships, mobile app launches for them should have a “retail flavor,” with functionalities such as account balances, transfers, bill pay and remote deposit capture, La Penta says. “The challenge is security,” he says. “Many small businesses have several people involved in the books, so banks need to have multiple levels of entitlements to enable multiple people to use the app.”

Community banks should also implement multifactor authentication with a hardware token, or some kind of personal key, La Penta suggests. But most community banks will opt for a mobile app already produced by a third-party vendor because of the steep development cost, says Jacob Jegher, a research director at Celent LLC in Boston. Typically that vendor will also provide the bank’s online banking solution so that the current online functionalities can be leveraged for the mobile channel.

“So far, these product offerings have been basic, but banks can ask to customize apps,” Jegher says. “It can be quite expensive, but it’s an opportunity for community banks to differentiate themselves.”

Wilson Bank and Trust, a $1.7 billion-asset community bank in Lebanon, Tenn., offers a remote deposit capture mobile app to small “mom and pop” business customers, such as landscapers, carpet cleaners, hair stylists and small restaurants, says Christy Norton, the bank’s senior vice president, director of operations. “They only have a few checks, whereas larger commercial customers would have too much volume to deposit checks via a mobile app,” she says. “A lot of smaller businesses don’t have computers on them when they are doing business, so being able to deposit a check via their smartphone or tablet is easier for them.”

Wilson Bank offers the app through its core provider, as the bank doesn’t have the resources to develop apps on its own, Norton says. The vendor also offers a substantial support system, a plus for Wilson Bank’s relatively small information technology team of four people.

Offering mobile apps to small-business customers also enables the bank to process transactions electronically at a lower cost than if its customers were to deposit checks at branches, adds John McDearman, an executive vice president at the bank. “Then our branch employees are able to spend more time getting to know customers’ other needs,” boosting cross-sell success, he says.

Wilson Bank also offers a personal financial management mobile app through another vendor that small businesses can use. It is also considering another vendor’s app that would enable customers to increase their purchase limits on their debit cards when shopping—something small businesses would appreciate as well, Norton says.

But the thinking of some large banks could inform the decisions of community banks. The Hispanic-operated $36 billion-asset Banco Popular Inc., which operates throughout the Caribbean and in the United States as Popular Community Bank, last year launched a mobile app that leverages its Business Online Banking, or BOB platform, and in August it launched an iPad app specifically for business customers using remote deposit capture, says Manuel Chinea, the bank’s chief operating officer. “This is good for small businesses that believe it’s not worth the investment of a full scanner, because they might have just one check a day or week they need to deposit,” Chinea says.

With Popular Community Bank’s mobile app, small businesses also have the ability to transfer money to and from their bank accounts to external accounts, such as credit card accounts. Within the next year, the bank also plans to launch a treasury management “positive pay” app for larger commercial customers.

Popular Community Bank’s mobile apps help the bank better compete with bigger banks, Chinea says. “When you’re a smaller bank, one of the biggest disadvantages is that your footprint is smaller, whereas the larger banks have hundreds of branches and density,” he says. “But customers using mobile apps don’t need to go to branches as much, so a large branch network becomes less critical. Branches are still important, but mobile apps reduce their relevance and levels the playing field.”

Katie Kuehner-Hebert is a writer in California.