Words: 1497 (Excl. Exhibits)
Bank of America (BofA) is the largest bank holding company in the United States, by assets, and the second largest bank by market capitalization. As a global Finance Service Institution, BofA serves clients in more than 150 countries and has a relationship with 99% of the U.S. The bank's 2008 acquisition of Merrill Lynch made Bank of America the world's largest wealth manager and a major player in the investment banking industry. BofA launched mobile banking in May 2007. Mobile Banking lets customers easily and securely access balance information, pay bills with optional Bill Pay service, transfer funds, and find nearby ATMs and banking centers through a mobile application on their smartphones, and through mobile web on their phone browser. Douglas, SVP of Mobile Product Development was quoted, “In less than 3 years we have four million mobile banking customers. That’s an adoption rate almost five to eight times that of our online banking several years ago.” Line-of-business managers are looking for leveraged mobile platforms with functionalities that can meet different needs and the different target groups such as: Merrill Lynch brokerage, mortgages, credit cards, consumer payments, etc… The capabilities of mobile banking through the use of smartphones or mobile web have become popular with today’s bank customers. There are increasing overall growth in mobile banking in the financial services industry. In addition, the transaction cost1 of mobile banking and internet banking is much lower than the traditional channel (e.g. Branch, Call Center, ATMS and IVR). Due to the economic downturn, banks are looking for extend the service channels and aim to increase the profit via tradition core banking service, such as transaction fees. The system automation can reduce the operation cost; increase the transaction turnaround time and accuracy. With the popularity of smartphones and mobile data services, mobile banking can be the booming tools for banking industry profit engine. However, investing in the enhancement of the mobile banking is costly and will directly affecting the bank’s revenue and brand images. The worse scenarios, may encounter customer complain and regulatory comments and punishments. Therefore, the management of BofA have to decide how can they effectively utilize this technology as a new media to make banking services easier, faster and more convenient for customer, at the same time, how can the app can help for BofA marketing the banks new products, service and increase the customer loyalty. In the short run, what do BofA tell the line-of-business managers – should the app increase functionality, build new app or refuses to add complexity to the current app? In the long run, how do BofA position the bank in this fast changing industry?
Mobile banking (app) is not a mandatory product (or say channel) for bank’s customer. It’s just an optional channel, based on the product itself, let’s analysis base on Porter’s 5 forces analysis. 1. New entrants are HIGH. There will not be any new large mass-market players or niche players bursting on the scene, but there will be new independent players like PayPal that will provide some similar functions app in the market. 2. Power of suppliers are from MEDIUM to LOW. The majority of the suppliers of mobile banking should be those technologies partners, technology consultants, outsource software house and marketing partners as alliance in some promotion campaigns. Bank has stronger power than those outsource software house in most situations. 3. Bargaining power of buyers is HIGH. Given the mobile banking is only an optional channel for customer. Customers still have other options to complete their transaction thru the bank and able to say NO to mobile banking. The switching cost of changing the channel is low but the switching cost of BANK may from...
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