Bank of American Mobile Technology

1. What benefits does mobile banking provide to consumers? Why haven't more many consumers adopted mobile banking yet?

Mobile Banking Benefits

Convenience--In 2007, mobile banking extended the features of online banking with added benefits that consumers could access their bank accounts on the move from their cell phones. Individuals could check bank and credit card accounts and complete basic banking transactions.

Efficient payments--Mobile payments substituted for debit and credit cards saving consumers the steps of signing a receipt or punching in a pin number. Mobile payments could be made for goods and services even when the merchant was not located in the physical proximity. Person-to-person (P2P) payments allowed individuals to send money to another person. This allowed individuals to transferred funds to their families nationally and internationally. This transfer of money helped improve the economies and the standard of living for those family members in un- and underdeveloped countries.

Improved standard of living--The most profound impact of mobile banking and payment services is that poor populations around the world who did not have a bank account could have access to modern financial service, giving them tools to improve their living standard. Mobile banking also helped economies become more efficient, and it helped unleash entrepreneurship.

Reasons why more have not adopted Mobile Banking

According to the Harvard Business Case, customers do not use mobile banking for the following reasons: they do not see the value of mobile banking, they have security concerns, they are concerned about the cost of their mobile phone's data plans, costs or hidden fees for using the service, dropped or lost telecommunication connection, and other technology and banking issues. The value of mobile banking, security concerns, and the cost of wireless data plan were the top reasons that consumer did not use mobile banking.

2. What is BofA's motivation to offer mobile banking to its customers? What are the associated costs and risks to the bank?

BofA's motivation to offer Mobile Banking

Build its Brand, increase customer satisfaction and retention rates--With rapid adoption of mobile phones, in 2006, Brown made the following case to BofA senior management.

"He explained: "Mobile banking allows us to provide an unprecedented convenience to consumers so that they can do banking on the move. This rich experience will engage consumers, build our brand and increase customer satisfaction and retention rates. We think mobile banking also has the potential to reduce costs significantly by reducing the number of call to call centers." (Gupta & Norris, 2012).

Reduce transaction cost--Analysts projected that the mobile banking channel would be one of the least costly channels. Mobile banking cost per transaction was $0.10 in 2009, and it was expected to drop to $0.03-$0.04 per transaction, which was similar to on-line banking transaction cost. This is significantly lower than interactive voice response (IVR) and ATM transaction costs, which are $0.13 and $0.16 per transaction respectively and is significantly below retail location transaction cost of $1.34 per transaction.

Market across banking channel--Mobile banking provided a new channel for advertising and promotion. Based on BofA's online banking experience, a balance between customer service and promotion is important and profitable. BofA was able to significantly increase the click through rate with on-line banking compared to email. The on-line banking rate was 5 to 6 time higher than for email.

Bank Costs and Risks

Mobile banking costs include capital and operating costs associated with a banking channel. As stated previous, in 2009, the mobile banking transaction cost was $0.10, and it is expected to decline to $0.03-$0.04 per transaction. In addition, there are opportunity costs associated with reprioritizing IT investments from ATMs and on-line banking.

Risks to the bank include:

* Potential high profile failures that would negatively affect BofA's Brand.

* Slower adoption and market growth rates than forecasted. Currently, the mobile banking market is small; however, it is expected to more than triple from 2009 to 2014. Mobile bank adoption rates depend in part on mobile phone technology and data plan costs. Communication speed needs to increase and data plan cost must decrease to compel consumers to use mobile banking.

* Security breaches that increase consumer security concerns and slow adoption rates.

* Competition (Chase, PNC, Wells Fargo & Citi) innovating and creating a competitive disadvantage for BofA. Competition is intense and currently users do not see value in mobile banking. Therefore, banks must develop useful apps and increase functionality to satisfy and retain customers. Chase, Citi, PNC Well Fargo have added apps that BofA does not have, such as credit cards information and corporate and business consumer's apps. BofA must at a minimum invest in some of these apps or risk losing customers and market position.

3. What lessons can the bank learn from its online banking operations? What are the costs and benefits of having customers migrate to online banking?

Lesson learned, costs, and benefits of on-line banking

BofA used on-line banking as a benchmark for its current mobile banking initiative, and the bank learned the following:

* On-line banking offered customers more convenience and reduced costs by migrating customers from retail banking locations and call centers.

* People are not willing to pay fees for the service. Banks initially tried to charge for on-line banking, however, the bank stopped this practice because consumers would not try the services. This action improved adoption rates.

* Customer satisfaction and retention rate increased. It was stated, "Once a customer has entered all his or her bill pay information and used online banking... s/he is far less likely to leave to go to another bank."

* Transaction costs were reduced. There were significant changes