Mobile banking picks up speed in California Wine Country

GARY QUACKENBUSH

FOR THE NORTH BAY BUSINESS JOURNAL

November 22, 2022

U.S. consumers are using mobile digital apps more than any other method to connect with their banks, based on a nationwide online survey.

And North Bay financial institutions are taking advantage of this technology to reach customers who are increasingly not physically visiting their branches.

“The ABA survey shows that consumers overwhelmingly appreciate digital tools that make banking easy. It also shows that Americans recognize how the (banking) industry’s investments in technology are helping to bring millions more unbanked households into the banking system, an acknowledgment of the role technology is playing in promoting financial inclusion,” said Rob Nichols, American Banking Association president and CEO.

Survey results show mobile banking remains the most popular banking access channel for consumers by nearly half (45%) of respondents, followed by online banking (27%) and branch visits (14%).

Nichols said 95% of those surveyed this year rated their bank’s online and mobile app experience as excellent (47%), very good (38%) or good (14%), and 84% said tech improvements make it easier to access financial services. The survey was conducted by Morning Consult on behalf of the association Sept. 16–17 from sample of 2,211 adults.

While electronic digitization of financial operations has been underway since the mid-1980s, mobile “Neo” banking adoption exploded during the pandemic resulting in a marked spike in digital access beginning after 2019 and accelerating as banking customers sheltered in place and stayed away from indoor public gatherings, including the workplace.

Mobile banking apps are becoming multi-generational and universally used. Google found that 5 out of every 10 mobile uses prefer to use them over mobile websites and other platforms to manage their accounts, and approximately 90% of users use mobile banking apps to view are account balances.

The Federal Deposit Insurance Corporation biennial survey found some 43.5% of households saying mobile is their primary method they use to access their accounts, compared with 22% that chose online banking. FDIC based its findings on Census Bureau data gleaned from 30,000 U.S. households in June 2021.

Local bank and credit union outlook

North Bay financial institutions have benefited from mobile app digital conversions that offers the ability to take a photo of a check and digitally deposit in a bank account using a smartphone — also enabling consumers to take advantage of other financial services any time day or night.

“Exchange Bank has seen a 17.5% increase in mobile device logins since January 2020 and a 38.9% increase in mobile app check deposits,” according to Tony De Mattei, digital channels product manager.

According to De Mattei, Exchange Bank last year consolidated its Bennett Valley branch with the Reinking branch in east Santa Rosa shopping center Montgomery Village. Also in 2021, it reopened an ATM across the street from the previous location on Yulupa Avenue in the Bennett Valley community of east Santa Rosa, and consolidated the College Avenue and Coddingtown branches on the west side of the city, but kept the Coddingtown ATM open.

The bank opened a new branch in Sebastopol in 2020 for west Sonoma County customers.

Tony Hildesheim, chief operating officer of Redwood Credit Union, which has 19 North Bay and San Francisco branches, said the Santa Rosa-based institution has focused on convenience and online security.

“Like many others we saw a sharp spike in the use of digital services due to COVID-19,” Hildesheim said. “We’ve always taken a holistic view of our members and have worked hard to offer as many convenient and secure digital banking options as possible.”

About 85% of RCU’s membership uses digital banking channels, averaging 4 million log-ins a month. Of that total, 63% use mobile apps as the primary form of account access, trending upward; 22%, a combination of mobile apps and website-based access, remaining constant; and 15% web only, continually decreasing.

Hildesheim said that for five years mobile app use has exceeded the website as the preferred method for accessing accounts and conducting business. Members are using the app typically every other day to deposit checks, review balances, send money or manage their payment cards, he said.

During the height of the pandemic, all the credit union’s locations remained open.

“Our focus in times of crisis is staying open and serving our members — making sure they have access to their accounts and to the services they need,” Hildesheim said. “We also took the opportunity to introduce those members who did visit our branches to the benefits of saving a trip and convenience of conducting transactions from the safety of their home.”

Personalizing customer experiences

At Santa Rosa-based Summit State Bank, still the norm are personalized cross-channel contacts, including the institution’s web-based services, according to Genie Del Secco, executive vice president and chief operating officer.

“We are a commercial bank, and online banking is still the dominant channel our business customers use to access Summit’s services,” Del Secco said.

But she acknowledged that the bank’s mobile app engagement is increasing.

“While there has been a gradual rise in mobile access, we have also heard reports about other financial institutions nationwide that have closed branches due to declining face-to-face customer branch visits during the pandemic,” Del Secco said. “We develop loyal, long-term partnerships with members of the business community and have not seen a decrease in lobby traffic.”

Branch closures and suspensions

Bank branches do close over time. This can be a blow for small businesses that chiefly rely on close relationships with banks that retain their “presence” by providing variety of essential services beyond online access, 24/7 ATMs or drop boxes.

Despite the nationwide decline in in-bank customer visits due to rising costs and less foot traffic, financial institutions are striving to maintain customer-facing practices, while others are suspending operations or closing branches and small in-grocery store bank outlets replacing some with ATMs and kiosks.

U.S. bank retail branch closures were up 38% in 2021 during the pandemic breaking the record set in 2020 as more people banked online, according to the National Community Reinvestment Coalition. Banks eliminated 11,820 branches nationwide in the 10 years before COVID and closed more than 4,000 branches from March 2020 to October 2021.

In the pandemic, Bank of America nationwide shuttered a few branches temporarily. In the North Bay, Wells Fargo and Citibank closed branches in Sonoma County in 2021, and Mechanics Bank closed two branches in Napa Valley, the Business Journal reported.

Hot market for digital platforms

Meeting rising demand for mobile app services has stimulated the market for digital platforms as well as smartphones.

Allied Market Research estimated the global banking market’s value at $715.3 million in 2018 and expected it to reach $1.82 billion by 2026.

The banking-as-a-service strategy is gaining traction around the globe, due to the increasing adoption of smartphones, contributing to the growth of the digital banking platforms market. According to a 2020 report on the mobile economy by GSM Association, a trade group of mobile network operators, there will be 7.1 billion smartphone connections by 2025, up from 5.2 billion in 2019. That would increase the adoption rate to 80% in the next three years, from 65% pre-pandemic.

Trends toward easy access to financial services

People mostly bank through their smartphones. In 2019, 34% of households said mobile banking was their primary channel. In 2021, this figure had risen to 43.3% following more than a decade of broad-based digitization of financial services and mass adoption of smartphones — driving down costs and increasing access to fairly-priced financial products — especially for low-and moderate-income consumers.

“Unbanked” households turn to online payment services for core needs. Survey results showed almost half (44.4%) of these households that don’t have traditional bank accounts reported using online payment services in 2021 such as PayPal, Venmo and Cash App.

Technology has created a “unique bankable moment.” The number of households in which no one has a checking or savings account at a traditional financial institution is falling to record lows. The pandemic helped drive some of this improvement, as well as advances in mobile and online account opening technologies.

Some predatory financial services may be supplanted by financial tech alternatives. Check Cashing and some consumer credit products — payday, pawn shop loans, tax refund anticipation and auto title loans — have declined 40% in usage among consumers over the past decade with a burgeoning supply of online and mobile alternatives.

By 2021 the share of households that used money orders and non-bank check cashing in the past year was half of what it was in 2011. Consumers are turning more to buy now, pay later services.

Gaps in the “banked” rate persist, and fintechs are working work to fill them. Population disparities are improving. The unbanked rate in households of less than $15,000 in income has steadily fallen from 25.7% in 2017 to 23.3% in 2019 to 19.8% in 2021.

For examples, the unbanked rate for American Indian and Alaska natives saw the sharpest drop between 2019 and 2021 among all households. Black and Hispanic households saw improvements of 2.5 and 2.9 percentage points respectively.

Sources: “5 tech trends helping the unbanked access financial services,” American Banker, Oct. 31; Federal Deposit Insurance Corporation’s 2021 National Survey of Unbanked and Underbanked Households.