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Banks are racing to mobile

As chief financial officer for an Amherst mini dental implants laboratory, Kim Wiesmore takes care of depositing customers’ checks.

But instead of going to an ATM or branch, Wiesmore uses a mobile banking app that M&T offers its business customers. From her Shatkin F.I.R.S.T. office, she snaps a photo of the front and back of the check with a smartphone and, voila, the funds are deposited electronically.

That’s pretty handy, especially in inclement weather. During snowstorms, she has even emailed her bank contact saying, “I’m sitting here smiling because I just deposited checks.”

Camille Kane does much of her personal banking electronically, visiting an Evans Bank branch only every now and then. The president of Buffalo X-Ray, an industrial X-ray business, finds mobile service suits her well.

“You can do it all off your smartphone and you’re not looking for a PC to use,” said Kane, who sometimes uses her iPad for the tasks.

Weismore and Kane are part of a surge in mobile banking activity that the industry is rushing to keep pace with. Banks find customers are eager to use smartphones and tablets to handle tasks like transferring funds or reviewing account balances. Customer adoption rates are blowing past projections. And the trend has implications for banks’ branch networks, as more transactions move to the electronic realm.

Banking is yet another industry to catch the mobile wave, said Michael Shryne, senior vice president and manager of alternative banking at M&T Bank. “We’re being influenced more by industries outside banking than we ever have in the past, with consumer electronics in particular,” he said.

As smartphone use has exploded and apps have made devices more user-friendly, a variety of industries have moved to deliver products and services that way. “The general consuming public had an appetite that was pent up,” Shryne said. “They wanted to get much of their financial information via those devices, as well.”

More than 700,000 customers have signed up for M&T’s Bank’s mobile service, and the number continues to grow. About 65 percent of M&T’s online customers have registered for mobile banking.

First Niagara Financial Group got an early signal that its mobile service would be popular. In late 2012, when the bank decided to test the service with an internal pilot program, it had to put a cap on participation after so many employees signed up, said Jay Clark, senior vice president and retail planning director.

First Niagara debuted the service for its customers at the start of 2013, aiming for 80,000 users by the end of the first year. Instead, more than 130,000 users registered for it by the end of 2013. The total has now surpassed 160,000.

It probably shouldn’t be a surprise that mobile banking has caught on so swiftly, given Americans’ affinity for mobile devices. Clark says he likes to ask people how many hours a day their cellphones are more than an arm’s length away. “I would say easily nine out of 10 people say they’re always within arm’s length,” he said.

And customers appear to be progressively comfortable with adopting new forms of banking technology, said Kevin Murphy, Bank of America’s Buffalo market president. He recalled customers took a long time to warm up to ATMs when they first appeared. By comparison, online banking caught on faster, and customers have latched on to mobile banking much more quickly.

Part of that trend is led by a younger generation more adept at using mobile devices, Murphy said. “They grow up with a phone in their hand; with the older generation, it’s learned.”

Murphy said the popularity of mobile check deposits is another example of customers embracing technology. Bank of America says about 165,000 checks per day are deposited across its operations through that function.

Sudhir Suchak, a professor of finance and managerial economics at the University at Buffalo’s School of Management, said banks are finding they can introduce more sophisticated products and services electronically at a lower cost.

The banks also benefit from having access to increasingly advanced technology – in the form of phones and tablets – to connect with customers, Suchak said. “The beauty of the whole thing is we have smarter phones, and in the future they’re only going to get smarter.”

Banks that don’t offer mobile service risk falling behind in the competition to attract and retain customers, he said.

Not surprisingly, smaller banks are jumping into mobile banking, as well. Hamburg-based Evans Bancorp, which ranks sixth in the region in deposit market share, started offering its service in fall 2012. Now 40 percent of its online banking customers are signed up for it, said David J. Nasca, Evans’ president and chief executive officer.

Lake Shore Savings Bank began rolling out its own mobile service this year and plans to build on it. “It creates a better opportunity to interact with our customers,” said Daniel Reininga, president and CEO of the Dunkirk-based bank, which ranks 10th in regional deposit market share.

For banks, there is a cost to making the technology available to customers, to ensure the service is secure and easy to use. M&T recently said it was pouring $20 million into upgrading its Web and mobile banking platforms.

“I think the size of the investment is an indicator of how important we believe the digital channels are becoming to our customer, and we’ll probably continue to spend into the future at an elevated level where we have historically,” M&T’s Shryne said.

Bank officials said they have not encountered security problems with the mobile devices. They build in anti-fraud measures, designed to prevent someone who takes possession of a lost or stolen phone from transferring funds out of the owner’s account.

“We’re always worried about security, and that concern is always ratcheting up,” Nasca said. “And that concern is just diligence. It’s not concern that we can’t handle it.”

Mobile banking’s popularity has given banks something else to think about: their branches.

Bart Roberts, a research assistant professor at the UB Regional Institute, said he and his family still tend to make a Saturday trip to the Evans branch in their neighborhood, but he does a lot of his banking electronically.

“It’s part of the new banking culture,” said Roberts, 33. “It can save you a trip to the bank but also makes it easier for you to manage your finances when you’re on the go.”

The number of branches nationwide continues to drop: SNL Financial reported that U.S. banking companies closed more branches than they opened in the first quarter, continuing a trend from throughout 2013. Even so, banks say branches remain important to their operations, particularly for more complex matters like mortgages.

“There will always be certain transactions, certain needs that are best served in a face-to-face manner, and that quite frankly will vary by customer,” said Murphy, of Bank of America.

Shryne said mobile banking isn’t supplanting branches. “We see all of these channels complementing our relationship with our customer, because we don’t see a customer not wanting to one channel or another as these channels are evolving.”


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