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Bank of America – Mobile Banking
Kilian Dreher
Student-ID: 110495-3537
Nicolai Englyst Pedersen
Student-ID: 210491-2195
Mathias hrberg Goul
Student-ID: 191289-2243
Kasper Kristensen
Student-ID: 110790-1503
December 01, 2017
Copenhagen Business School
KAN-CIEBU1001U
Strategic and Tactical Tools for E-Business
Home Assignment
Supervised by Qiqi Jang
Contents
1 Introduction
2 What is BofA’s motivation to oer mobile banking to its customers?
What are the associated costs and risks to the bank?
3 What lessons can the bank learn from its online banking operations?
What are the costs and benets of having customers migrate to online
banking?
4 How is mobile technology likely to inuence the banking industry in the
future?
5 How should McDonald and Brown respond to the LOB managers’ request
to include more functions in the bank’s mobile app?
1 Introduction
The case ‘Bank of America: Mobile Banking’ displays the situation of Bank of America back
in January 2010, when Jen McDonald, head of Bank of America Corporation’s (BofA),
Douglas Brown, senior vice president, Mobile Product Development, and David Carrel,
senior vice president, Strategy and Analysis at Starcom, discussed the future of Bank of
America’s future mobile strategy. How does the banking industry currently operate? How is
Bank of America currently positioned in the market? How should they adapt to innovative
mobile technologies?
2 What is BofA’s motivation to oer mobile banking to its
customers? What are the associated costs and risks to the
bank?
During May 2007 Bank of America launched their mobile banking application and customer
access through the mobile web on their phones browsers. They did this in cooperation with
several agencies that supported the banks digital eorts. The motivation behind the eort
was found in the possibilities new technology hold. Many banks saw it as yet another
channel to dierentiate themselves from competitors and engage customers?one that could
potentially lead to both higher income and increased customer retention. This means it
was an opportunity for BofA to dierentiate themselves but it was also a threat because
at that point in time they could not know if their approach would be preferred by the
consumers or if it would be some of the competitions. Though, they were aware that the
use of this new technology would be of importance in the future. They expected the mobile
banking to allow them to provide an unprecedented convenience to their consumers so that
they could do banking on the move. This rich experience would engage their consumers,
build their brand, and increase customer satisfaction and therefor enhance their position
in the share of customers. Several analysts noted that the smarter rms would jump on
this opportunity to poach disgruntled customers away by focusing on convenience, fees and
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customer service, which are the ways that consumers choose a provider in the rst place.
Herein lies further motivation to implement mobile banking. Another reason of motivation
lay in the costs. The mobile banking was projected to be one of the least costly banking
channels when it was up and running. To get to this point would on the other hand imply
signicant development cost for BofA. The many combinations of devices, operating systems
and networks would demand several dierent apps to be developed and could range from
$40.000 to several hundred thousand dollars. In these app developments lay some risks.
Once again it was an opportunity to dierentiate themselves but at the time it was a risk.
BofA risked taking the wrong decisions compared to their competitors. Both in design and
content. If the competitors design of the app made theirs easier to use it would probably
aect which bank the users would choose since it was a brand-new concept. Also, the
complexity could slow down the app and negatively aect user experience. Therefore, BofA
needed extensive testing and thorough analyzing to ensure the best result and not risking
losing market shares to their competitors.
3 What lessons can the bank learn from its online banking
operations? What are the costs and benets of having
customers migrate to online banking?
In the late 1990’s Bank of America introduced online banking to their customers. I was
both a way of making banking services more convenient for their customers, but also a
way of reducing costs in other parts of the company, for example reducing the need for call
centers. It was a new and exciting way of doing your private banking, but it was not purely
well received among the consumers. The online banking system came with some features
and costs for the consumers, which made the transaction from normal banking methods
to online banking more or less unsuccessful. Bank of Americas general idea behind this
new way of baking was o course to make their services more convenient for the everyday
user, but in the beginning of this new service came with a monthly fee which did not
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sit well at the customers. Another aspect of the customers reluctance towards the online
baking systems were the security issue. It is always dicult to make people try new things,
and especially when these new things were concerning the customers private economy and
private information. They simply did not feel secure when typing in their information in
this new system. As mentioned earlier this new service came with a monthly fee of 5.95
dollars, and this of course played a big part in reluctance to try out this new service. In 2002
however, Bank of America changed their online banking service, and made it completely
free. This helped a great deal in the customers adoption of it. They also made changes
towards a more comfortable use of the system, so that the customer did not have to write
in all their information each time of use. All of these eorts payed of, and by the end
of 2009, the number of users reached 30 million on a global scale. This success in online
baking was very benecial for Bank of America, because these users, who on a daily basis
used these systems and therefore had gotten used to this way of doing your banking, was a
lot less likely to take their business to other banks. So this way they had a hold on their
customers. So this transaction was not easy or quick, and Bank of America have denitely
learned a couple of lessons in this process. There is a lesson to be learned in the customers
reluctance. Adoption of new systems or services does not happen overnight, it is a long a
costly aair, in which every company should priorities a smoother transaction. This process
has also been costly in other areas, for example the development of this new system, and the
increasing necessity of customer service. But when fully adopted, the benets a plentiful. As
mentioned earlier, the customers who eventually found this system useful and convenient,
were also more loyal to this particular bank, and therefore less likely to leave the Bank of
America for another bank. And in Time Bank of America will also be able to cut costs on
existing options at there disposal, because they have grown more or less obsolete, this is for
example options like call center and IVR.
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4 How is mobile technology likely to inuence the banking
industry in the future?
The combination of the arrival of credit/debit cards and mobile payments options with the
likes of Apple Pay1 and Mobile Pay2 is slowly eliminating the use of physical money. This
is also a product of smartphone banking, where it?s possible to check your account almost
anywhere with a few clicks – eliminating another important feature of the ATM. For the
banks smartphone banking is a lose/lose situation. Over half of the asked BofA customers
expressed that smartphone banking was extremely/somewhat important when choosing a
bank. That was 10 years ago, this development has more than likely increased with the
continuing spreading of smartphones and apps. So, the banks need a good smartphone app
to detain and gain customers, but as they improve their mobile product, they also lower
their chances on cashing in on fees. The three biggest American banks BofA, Wells Fargo
and J.P. Morgan Chase earned $6.4 billion on overdraft and ATM fees in 2016 alone3. In
theory, the smartphone could possibly eliminate, or at least heavily lower these fees by
the already mentioned limited use of cash, while smartphone banking apps that warns the
customer when nearing the exceeding limit on their account. Another mobile technology
that eliminates the banks is PayPal4. It makes it easy to transfer money internationally
between people and business, thereby removing the banks transfer fees.
From a security point-of-view, mobile devices are a more vulnerable target than com-
puters. Smartphones and tablets does not have traditional rewalls and anti-virus software
that we know from computers. Users are especially vulnerable to catch malware from ‘inap-
propriate sites’5. The potential outcome from having your phone hacked, could give hackers
access to your bank account. This is something that banks need to focus on in the future,
1https://www.apple.com/apple-pay/, accessed November 15st , 2017
2http://mobilepay.dk/, accessed November 15st , 2017
3http://money.cnn.com/2017/02/22/investing/atm-overdraft-fees-rise/index.html, accessed November
15st , 2017
4https://www.paypal.com, accessed November 17st , 2017
5https://www.wandera.com/blog/inappropriate-mobile-activity/, accessed November 17st , 2017
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since every feature of banking is very sensitive information, and a breach of that security
could have nancial consequences.
The biggest opportunity for the banks is the untapped non-banking areas, especially in
Africa. With spreading of internet access to these areas, it is possible to gain customers
without having a physical branch present.
The mayor threat come from online banking, with the likes of Ikano bank6, that cut
cost by only being present online. Another huge threat, that’s maybe more of a general
technology, but still used in practise as a mobile technology is Bitcoin7 and other cryptocur-
rencies. These online currencies do not involve the traditional banking world, and thereby
eliminates them and the whole foundation the economy is built on.
5 How should McDonald and Brown respond to the LOB
managers’ request to include more functions in the bank’s
mobile app?
After we have seen that mobile technology will oer immense opportunities and fast-paced
developments in the future of the banking industry, we will now discuss how Jen McDonald,
head of Bank of America Corporation’s (BofA) and Douglas Brown, senior vice president,
Mobile Product Development should respond to the line-of-business managers’ request to
include more functions in the bank’s mobile app. The case of Bank of America displays
three potential outcomes:
Refuse to add complexity to BofA’s app
Build new apps
Increase functionality of BofA’s app
6https://ikanobank.com/, accessed November 17st , 2017
7https://www.bitcoin.com/, accessed November 17st , 2017
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With regard to the possibilities mobile technology oers and trends shifting customers
attention more and more to mobile devices, refusing to add complexity to BofA’s app could
seriously harm their business. As banking customers always carry around their mobile
devices, they also require accessing their bank account, making transactions or managing
their portfolio independently from the branch bank. For instance, research from PWC has
shown that almost 70% of Gen Y are currently using mobile banking services8. Therefore,
we consider a refusal of more functions as the last choice of Bank of America. The second
case suggests to build new apps with dierent functions for dierent target groups in order
to provide a more customized solution to users. But how many apps do we already have
installed on our mobile devices? And deinstalled it one week after? As digital solutions
expand rapidly many users seem to drown in an increasingly high supply of new applications
which all state to be the perfect value proposition. Thus, a variation of apps could confuse
customer rather than simplifying their banking needs with customized solutions. As a
conclusion, we recommend to bundle all needs of BofA’s users in one app and hereby
increase its functionality. We have seen that user numbers of smartphones are still rapidly
increasing and people are getting more and more condent with mobile banking. It is
obvious that the future of banking will shift to our mobile devices. Moreover, fast-paced
FinTechs acquire new markets and could harm the business of major corporations if they do
not adapt to innovative, disruptive technologies. Consequently, major corporations should
use their established position in the market and their nancial resources to adapt to such
technical changes. For example, Bank of America could invest in outstanding developers to
compensate complexity within the app with a user-friendly interface.
8https://www.pwc.com/gx/en/banking-capital-markets/publications/assets/pdf/pwc-new-digital-
tipping-point.pdf, accessed November 21st , 2017
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