They are all the rage, but private banks - with some clear exceptions - are still not embracing these channels effectively, with consequences for their business, a report says.

Despite all the razzmatazz about the digital age, private banks are sluggish in embracing the power of apps, according to MyPrivateBankingResearch, the Swiss organisation tracking such issues. Its report adds to other findings pointing the finger at shortcomings.   

Only a small number of large retail banks have made significant progress in their mobile app offerings since last year’s report, it said. The winners of its 2014 ranking are DBS Bank and BNP Paribas. Runners up are UBS and Westpac. The firm told this publication that fear of the unknown and concerns about how different client segments would react to technology might be holding some firms back from taking a faster route.

Christian Nolterieke, of MyPrivateBanking, was asked by this publication why banks are not making more progress, responded that “no one doubts anymore the importance of opening up to the mobile channels and therefore the willingness to spend money exists”.

“However, also in the light about the intensive discussions  in respect to privacy and secrecy there is indeed some fear about doing the wrong moves such as offering features that are too cutting-edge and not widely known and accepted or apps that might attract one segment of client, but turnoff another client group,” he said.

“In my opinion there will be no way back and I expect to see what happened for instance in the online banking sector 15 years ago: There will be some front-runners (that also can change over time), that are very open for innovation and willing to take risks respectively willing to educate their clients. The best of them will gain market share and later on the majority of the other banks will follow to implement all the features and technologies that were accepted by the majority of customers. A big difference is that I see the mobile field as far more dynamic than the desktop environment dominating years ago,” Nolterieke added.

Not a fad

“Apps are not a gimmick, but a game changer. Banks have to merge the different channels such as mobile media, personal interaction, telephone, and conventional online banking into a unified service platform,” Steffen Binder, head of research at the firm, said in a statement about its report, called Mobile Apps for Banking 2014 – From Multi-Channel to Mobile First. The report ranked more than 170 apps for private customers, offered by the 40 major retail banks worldwide.

The report stated that “as mobile data and app usage is skyrocketing among consumers worldwide, the mobile channel is rising in importance, and in only a few years it will dominate all other channels in retail banking”.

“The majority of banks, however, are not yet prepared for this major change in direction and they show little progress, neglecting their mobile channels,” it said.

“Most banks are stagnating, showing an incomplete app portfolio with limited integration into everyday business processes and still treating their mobile channel as a ‘nice-to-have’,” Binder said. “Banks do not make use of the full potential of mobile applications to engage and better serve their clients, sell their products, strengthen their brands and achieve customer loyalty,” said the research firm's Binder.

This isn’t the first time that MyPrivateBanking has commented on what it sees as slow progress in technology. For example, at the end of 2013, it issued a report entitled No Progress In Wealth Managers’ Social Media Activities. The report also shows how new technologies present a challenge for banks – and clients – that may be used to traditional working methods. In an industry where confidentiality of client data, the loss of which can be disastrous, fears about technology and costs of implementing new products may also hold some players back.

BNP Paribas and DBS Bank, the winners of this year’s app ranking, achieve an overall score of 61 out of 70 points.

“Through its focus on communication with customers and convenient payment options, BNP Paribas wins customers’ hearts. DBS is far ahead of its competitors regarding customer rewards and loyalty programmes, and offers a multitude of innovative features throughout its app portfolio. Société Générale wins in the category of best stand-alone apps with the feature-rich banking app L’appli,” the report said.  

“In the view of MyPrivateBanking, all leading banks succeed in providing more than just basic account information and transaction features. They offer well thought-out, comprehensive app strategies that can keep up with the best app developers in the world. However, many of the other benchmarked banks fall short of providing sufficient content and features on their mobile apps,” it continued.

The following shortcomings are mentioned:

-- apps frequently offer only basic functions, missing out on more advanced features. Investment account overview is limited to 83 per cent of banks and securities trading is still only available for about half of the banks (55 per cent);

-- Banks rarely offer tools to encourage financial self-management and personal financial assessment. Only 19 out of the 40 banks in the report provide their clients with such tools;

-- Security and privacy are weak spots. Only about half of the banks meet today’s strictest standards in access authentication for customer accounts and transactions.

-- Banks provide limited contact features. Increasingly familiar communication channels such as chat and a call-back function are only available in 10 per cent and 38 per cent of the mobile apps respectively;

-- 52 per cent of banks do not link their apps to their social media channels. In addition, there is a widespread lack of social sharing functions, which are provided by only 55 per cent of banks.

“Banking apps are the strategic key for this new platform as they will be the dominant interface at home, in the office, on the move and even in the branch office of the bank. Banks that miss out will lose out,” Binder added.