RENO, Nev. — Mobile banking is ubiquitous in today's technology-driven world, but adding mobile banking to their suite of product offerings poses some unique challenges for regional financial institutions that lack the deep IT development and support teams found at national banks.
While some regional banks opt for “off-the-shelf” mobile banking apps, others choose products designed in-house or by third-party vendors in order to easily control upgrades and new feature launches.
That's the route Nevada State Bank is taking, says Jason Brock, executive director of digital banking with Zions Bancorporation/Nevada State Bank.
But it started out with an off-the-shelf product designed by one of the few major institutional players that handle most banks' transaction processes. These products are easily integrated into current versions of online banking and offer a seamless digital banking experience.
Nevada State Bank brought its mobile banking app online several years ago, Brock says, but it found that oftentimes there were separate layers of software for mobile and online banking. That's one reason why NSB is moving to a singular platform developed by a third party.
In the past, Brock says, only the largest banks had the scale and funding to justify building their own mobile banking app. But Nevada State Bank/Zions Bancorporation has a deeper pool of IT support and can pursue a different strategy.
“Customers see the mobile app and online banking, but they don't see the dozens of systems that come together to safeguard those systems and the accounts underneath,” Brock says. “That's part of the technical complexity that smaller banks typically aren't equipped to handle.”
By using off-the-shelf vended solutions, banks rely on software vendors to do all the heavy lifting. Nevada State Bank, however, is migrating toward a digital platform with a third-party startup that offers an open technology and architecture so NBS's IT experts can build additional features on top of the platform and adopt new mobile features more quickly.
The bank does have to take a leap of faith with its technology partner since the underlying core software is being developed by a third party, Brock says. However, that can be beneficial, since newer companies typically are laser-focused on providing the most modern technologies.
“With the off-the-shelf products, you are kind of a slave to that software vendor to keep (their app) up to date with market features (such as thumbprint authentication and facial recognition). We have faith in our IT staff to build robust features on top of the platform. We really are not that reliant on the platform provider. We are doing more of the work than the third party now, and we are taking control of our own destiny.”
Smaller regional financial institutions may be tied to a vendor's product roadmap, but for some banks, that's quite alright. Steve Carrick, senior vice president and branch operations administrator with Heritage Bank, says that while Heritage Bank offers mobile banking, penetration among customers remains thin.
That's an offshoot of Heritage's business model, though. Heritage Bank has embraced mobile banking, Carrick says, but Heritage Bank's primary customer base seeks a more personal banking experience.
“A bank like ours is never going to be cutting edge or the tip of the sword,” Carrick says. “But once a product gains enough traction we take a good look at it, and mobile was one of those products. We attract customers who want a personal touch. They are not high-technology users, but they like to know (mobile banking) is available if they want it.”
“Mobile and online banking drive customers out of your branches, and our specialty is touching customers,” Carrick adds. “Big banks see (mobile) as a way to save money because customers are now self-service, but we offer it as a convenience and still encourage contact with customers.”
There are some challenges that come with using third-party mobile banking solutions, he notes. There could be finger-pointing rather than problem-solving between the core processor and the developer if the app or certain functions don't work, and you also have to factor in regulatory and security aspects, Carrick says. These are the primary reasons why Heritage opted to use a solution provided by its core processor — security was vetted and the app was easily integrated into an existing system.
Paul Parrish, President and CEO of One Nevada Credit Union, meanwhile, says more than 70 percent of the credit union's nearly 80,000 members routinely use One Nevada's mobile banking app and online banking platform. One Nevada made the decision more than a decade ago to team up with key FinTech experts and form its own development company in order to be at the forefront of new trends in digital banking.
“If you are going to compete in the financial institution industry, you have to have a competitive remote mobile offering for your membership base,” Parrish says. “Strategically speaking, we started pivoting toward member automation on routine transactions back in the late 1990s. One Nevada is at the point now where we are pretty much teller-less, which is a position both banks and credit unions are struggling to get to.”
“The quality of our automated services has been a key to our success,” he adds. “We are very proud of what we have built, and our members have responded very well — we are pretty much at the top of the mountain in terms of active user penetration (in digital banking).”
The challenge, Parrish adds, is keeping pace with new trends in digital banking that have yet to be revealed. It's a fast-moving space, but it also provides banks and credit unions with increased opportunities to better service their members, he says.
“It's well worth running the race. You have to have everything everyone else does in order to be competitive. Change is inevitable, and the challenge is keeping up with market expectations. But One Nevada has done very well in that area.”
Rob Sabo is a Reno-based freelance writer and a former reporter for the Northern Nevada Business View.