Transactions
Costs
Revenues
Customer Lifetime Value of Segment
Cost savings feed directly back into Re-investment, development costs of apps insignificant by comparison
Introduction
Identifying the Change
- Successful Results
- 4M mobile banking customers
- High adoption rate relative to online banking
- #1 position in mobile banking
- 2007 BofA launches Mobile Banking Platform
- Merrill Lynch acquisition
- Larger than expected 4Q 2008 losses
- Founded as Bank of Italy in 1904 and became Bank of America in 2000 after a merger with NationsBank
- Businesses include:
- Retail banking
- Global wealth management
- Middle market lending
- Large corporate lending
- Global treasury services
- Investment banking
- 6,000 banking centers and 18,000 ATMS across the US with 250,000 employees
- As of 2009, BofA was the number 1 mortgage originator and had a net income of $6.2 billion
- Introduced mobile banking in May 2007
"Dynamic Optimal Mix" Strategy
Step1: Short Term
Step 2: Medium Term:
Step 3: Long Term
Problem Statement
- Satisfy Line-of-Business managers
- Enhance current app to include credit card and mortgage features
- Extends current features of app to minimize complexity
- Extend SMS Text banking
- Serves 100% mobile market
Optimal Mix Resource Allocation:
1:2:3
Mobile App, Online Banking, SMS
- Introduce New Mobile Product Lines
- BofA E-Commerce App
- P2P Payments
- Local Mobile Payments
- Few competitors, i.e. PayPal (9% global market)
- Secure System
- Can regulate and insure funds since it's a bank
- Potential Large Market
- $300 bn funds
Optimal Mix Resource Allocation:
2:2:1
Mobile App, Online Banking, SMS
- Extend to serve international and underbanked
- Mobile app provides virtual banking
- Fully interoperable system within mobile apps
Optimal Mix Resource Allocation:
3:1.5:0.5
Mobile App, Online Banking, SMS
Given the current state of change:
- What is the most profitable alternative for line-of-business managers (credit card/mortgage) asking for increased exposure in the bank's mobile app?
- How does BofA leverage its mobile app(s) for long run profitability?
Proactive Approach to
Value Delivery:
Dependent Variable(s)
- Keep position as number 1 online/mobile bank
- Dynamically Change Marketing Mix Strategy
- Increase Mobile Banking Awareness
- Lead to incremental transactions
- Increased retention rates
- Lock in Effect - Increased Switching Costs
- Similar to original ATMs lock in effect
- Mind Share - all channels synced, all financial transactions through BoA
- Having that said, BofA mobile strategy needs to consider impact on:
- Revenues
- Costs
- Retention Rates - Profitable Customers
Conclusion
Corrective Action Analysis
Causes & Effects
- Mobile Banking is the Next Big Thing
- Reach
- Adoption
- Customer Lifetime Value
Mobile Banking Effects on Transaction Costs
Mobile Technology
Evolution (Revolution) Of Online Banking on BoA
- What's Happening?
- Smart Phone Penetration
- Consumer shift toward Smart Phone technology
- What Does this Mean?
- Tremendous opportunity for growth in via Mobile Banking Solutions
- Dynamic interplay b/t Online Banking, SMS, and Mobile Applications
- Strong, Positive Impact on for BoA
- Average Cost per Transaction = $0.03
Financial Crisis
Competitor Analysis
Evolution (Revolution of Mobile Banking on BoA
Root Cause: Mobile Technology
- Money Movement - $10,000MM
- BofA Market Share 35% - Leader
- 2009 US Mobile Transactions - 500MM
- BofA Transactions - 175MM
- $/Transaction - $57.14
- Adoption Rate FAST!
- 5-8x Online Adoption Rate
ROI will be high
Example
$5MM (cost savings)
/$50000 (app investment)
Bank of America: Mobile Banking