As consumers manage more of their lives via smart phones and iPads, financial services companies are trying to ensure that they don't get lost in the electronic shuffle
As consumers manage more of their lives via smart phones and iPads, financial services companies are trying to ensure that they don't get lost in the electronic shuffle.
“The industry right now is app crazy,” said James McGovern, vice president for consulting services at Corporate Insight, a firm that monitors the ways that financial companies communicate with customers.
“We're just going where the customers are,” said Christopher Larkin, E*Trade Financial Corp.'s senior vice president for active trading.
Bank of America Corp.'s online brokerage firm, Merrill Edge, is even exploring the idea of face-to-face teleconferencing between clients and financial advisers through the mobile apps that it unveiled March 9, said Alok Prasad, the division's head.
Forrester Research Inc. estimates that more than 10 million Americans use mobile-banking technology and that the number could rise to 50 million by 2015. Members of Generation X and Y make up about 75% of Forrester's estimate of 10 million.
Although many of those consumers are comfortable using mobile apps to check their balances, companies need to work themselves more deeply into a mobile customer's financial life or the work that goes into developing all these mobile apps may wind up being “another cost center,” said Gartner Inc. analyst Stessa Cohen.
TRACKING SPENDING
The “real potential” for mobile personal-finance apps may come from linking investments and savings with spending in real time, said Ron Shevlin, senior analyst at research firm Aite Group LLC. Apps could track consumers' spending and investments while offering “personal-finance management” by maintaining budgets and helping consumers “make smart decisions about how to finance a purchase,” he said.
To do that, financial outfits have to get in on the front end of spending decisions. Such companies as Bank of America and Wells Fargo & Co. have been testing mobile-payment systems using smart phones in a small number of cities across the country.
In December, Wells Fargo started a pilot study with 200 employees in San Francisco. After a similar employee study last year, BofA on March 28 will launch a mobile-payment test with customers in Atlanta, New York and San Francisco.
Just as they would swipe a credit card, shoppers hold phones up to special readers to complete purchases. In addition to offering a convenient way to pay through credit or debit accounts, mobile phones could deliver instant coupons and other promotions to shoppers, said Arah Erickson, head of Wells Fargo's retail-mobile-banking division.
If closer connections with financial providers make it easier for consumers to see where their money goes, that could be a big positive, said Santa Clara University finance professor Meir Statman, who is an expert on behavioral finance. Such knowledge “really bolsters their self-control” when out shopping, he said.
Another outcome could be less positive, though.
“People are more likely to trade more if it's made easier,” Mr. Statman said. “What we know from studies is the more you trade, the more you are likely to lag behind people who buy and hold investments.”
Thus far, 11% of investors use their brokerages' mobile offerings, and about a quarter of those users trade through mobile platforms, according to Forrester.
E*Trade said that about 3% to 4% of its trades are placed through mobile devices, and it soon will add trading of futures and mutual funds to its lineup of stocks and options.
TD Ameritrade Holding Corp. has seen increased trading activity due to its mobile app, particularly in options trading, said Nicole Sherrod, managing director of the company's trader group. Nevertheless, the main goal isn't to boost trading immediately but to attract customers and position the firm for growth, she said.
TD Ameritrade will launch its second iPad app late next month, with this one aimed at long-term investors rather than traders, Ms. Sherrod said.
Forrester analyst Bill Doyle said he doubts that mobile offerings will stimulate much extra trading overall, but he does expect customers to shift holdings to companies with better mobile offerings.
“Mobile devices are changing consumers' perceptions of how convenient financial transactions should be,” Mr. Erickson said. “Today, convenience means the PC is across the room, and I don't feel like booting it up.”
