Bank of America Mobile Banking

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Table of Contents

Introduction
Analysis
Key Issues
Course of Action
Evaluating the Course of Action
Recommendations
Reference

Introduction

The top management at Bank of America (BoA) is considering adding more functionality to the bank’s mobile application in order to accommodate other lines of business. The bank initiated the mobile application in 2007 and since then the product has attracted over three million consumers.

This immense success is the driving force behind the need to increase the mobile application’s functionalities. Other line-of-business managers are hoping to benefit from the already acquired customers and that is why they prefer using the existing platform instead of creating a new one. The head of BoA’s Digital Marketing Jen McDonald is working with the bank’s senior vice president Douglas Brown to decide how to best utilize the mobile banking application.

The two managers have to find a way of opening up the mobile platform to other lines of business including mortgages and credit cards. Moreover, incorporation of new features into the app should not make it undesirable to customers. This case study investigates the complexities surrounding the decision to open up the mobile banking application to other lines of business. In addition, the study offers recommendations based on the findings of the analysis.

Analysis

BoA is one of America’s biggest financial institutions in terms of population coverage and asset base. The bank launched a mobile banking application in May of 2007. The mobile application/app enabled the bank’s customers to access banking services through a mobile phone software application or a mobile phone browser. In a period of less than three years, the product had been embraced by over four million customers.

The application was also one of the best performing products among the ones launched in that period. This accomplishment led other product-managers to request that some of their products be incorporated into the mobile application. The other line-of-business managers are hoping to increase the profitability of their products using the mobile banking application.

The financial services industry has been experiencing some major problems in the recent past that were caused by the mortgage and real estate markets. The crisis affected the retail banking across the country and most banks had to contend with an unstable market.

However, since that time most banks have been working hard to regain their customers’ confidence. This restructuring involves coming up with retail business products that help the customers feel more secure. Adding more functions to the mobile banking applications could either increase or decrease the trust BoA customers have in this product.

BoA’s decision to accept government bailout money in 2008 did a lot of damage to the bank’s image. The bank’s shareholders and customers lacked confidence in the institution. Other events surrounding the banking industry at the time also led to a sharp decrease in the number of customers seeking BoA’s services. The advent of mobile banking in the United States ushered in a new era of low-cost banking.

The market size of mobile banking applications is quite encouraging. For instance, the number of mobile-banking consumers in 2009 was 10 million. However, this number is expected to reach 37 million users by 2014. The amount of money transacted through mobile banking annually was set to increase from 180 million in 2008 to 2.4 billion in 2014.

After BoA introduced online banking, customers were reluctant to adopt this new product for various reasons. Most customers were suspicious of the platform’s security and the rigorous registration process involved. Control was also a major issue because most customers thought that transacting online would deny them control over their money.

However, when the bank eliminated registration and maintenance fees for online banking, the customer-interest in this product spiked. The bank also increased product awareness in mobile banking and the consumers were eventually comfortable with online banking.

Although the future of mobile banking looks bright, McDonald acknowledges that there are some challenges expected in this business. For instance, only 15% of BoA’s customers have smart phones while the rest have regular phones.

Therefore, it is not possible to operate the application on a single platform without using SMS services. Using SMS is costly because the bank has to pay mobile phone operators for their services. In addition, it is not easy to monitor customers through the SMS service when they move from one network to another.

Key Issues

Brown’s main concern is that incorporating other products into the existing platform carries a big risk. It is feared that the suggested products will not resonate with the needs of the application’s users. Moreover, the added functionalities could make the application more bulky and complex.

This could have a bad effect on the users’ experience. The existence of similar products in the market could help BoA’s management in making the decision. The trends associated with mobile banking within the leading banks in the United States could also help in forecasting the performance of an all-inclusive mobile banking platform. Some of the banks that have been able to incorporate other lines of business to their mobile banking platforms include Citi Bank and Wells Fargo.

Following the recent collapse of the banking industry, most institutions have had to contend with increased scrutiny from the government, shareholders, and customers. The decision to interfere with mobile banking and risk tampering with its profitability is likely to be met with opposition.

Therefore, the management at BoA needs to make sure that the packaging of the new app does not jeopardize the gains achieved by the existing product. In addition, most customers no longer trust banks and view them as institutions of greed. The new product would be shunned by customers if they viewed it as greed-driven. Mortgage and credit card services are more likely to be associated with corporate greed than other financial products.

The Bank of America has enough experience when it comes to launching and repackaging of mobile-banking products. Therefore, the bank can make this decision without relying too much on external research.

The main reason why the managers of other products are interested in the existing product is because it saves them the hustle of creating, marketing, and launching an entirely new product. Although the success of this integration would be mutually beneficial, the risks would mostly affect the products that are already included in the mobile banking.

Course of Action

Given that the main reason for adding mortgage and credit card services to online banking is to have these products available online, it is possible to test their performance without interfering with the existing app. For instance, the bank can give customers the option of adding these new products to their app-catalogue at their own volition. This involves making these products available only through ‘voluntary’ app updates. Customers who do not wish to add the new products to their apps can continue using them in their current state.

The other alternative is to launch a separate app for these two products using the same guidelines that were used when launching the first app. This strategy would eliminate the possibility of losing the gains that have been achieved by the current product.

In addition, this strategy will ensure that various products maintain independence in their operations (Kotler & Keller, 2012). By using this strategy, it is possible to merge these apps in future if that becomes necessary. However, merging of the apps depends on how many customers want to have all functions in a single app.

Evaluating the Course of Action

Although the decision use separate apps is ‘safe’, its cost will be high. However, the resources used to develop an app could be less than the amount of loss that could be suffered if the current app is degraded. The decision to make the new functions optional to customers is both cost cutting and risk-free.

However, the new updates still have the potential of making the app undesirable to its users. The only consolation is that most users would not mind the added complexities if they are in dire need the extra features. Moreover, most people are able to deal with voluntary choices better than involuntary ones.

Recommendations

The risk involved in changing the existing app is not good for the bank’s financial prospects. If the decision backfires, it is likely to arouse bad memories among shareholders and customers. Although the cost of getting an app running is relatively low, the cost of maintaining two SMS services can be a financial burden to the bank. Therefore, the best course of action is to adopt the optional app updates for the customers. Nevertheless, this decision should involve both customers and shareholders before it is implemented.

Reference

Kotler, P. & Keller, K. L. (2012). Framework for marketing management. New York, NY: Pearson Prentice Hall.

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