Friday, August 29, 2008

Market segmentation for mobile banking

It is absolutely true that mobile banking is experienced different from one market to another. It is often the source of a lot of confusion when different people discuss mobile banking from different contexts. Before we discuss mobile banking it is therefore important to first define the markets that one target swhen deploying mobile banking.

The most obvious first segmentation of the market for mobile banking is to look at those consumers with a strong, existing relationship with banks, and those that do not have a relationship with a bank. This segmentation should range from some-one without any banking relationship (some-one that does not have a bank-account and also never had one), to (on the extreme right) a sophisticated user of banking services. This would typically be some-one with a relationship with more than one bank, have multiple bank accounts and/or credit cards.). Another dimension should be an indication of the degree in which a consumer is connected to other consumers. Some consumers because of their work or role in society have a bigger need to interact with a more diverse group of consumers, others are much more localised in their interaction.


In looking at the different segmentations, one would be able to identify an individual that are typically employed in a low income position or survives off grants, pensions or money sent from family working in the city or abroad. Life’s routine is predictable for this individual with activities organised around the work and family. The rural citizen would typically live in a low cost abode. Credit worthiness is low with access to expensive micro lending as a source of lending only. All transactions are in cash and almost no savings exist. This is an individual that either living in a village in some rural area or in slums in or around cities. These people are the masses that turn the economy with their labour. Their need for banking services is limited to small savings, money remittance and some electronic payments. They usually get access to these financial services in a very expensive way, often with high risks as all of their transactions are in cash. They are often referred to as the bottom of the pyramid, but yet they are active in the economy and represent a large portion of the population in many countries and can be reached by mobile banking with the right product or service.


Another segment would consist of individuals that ar emuch more affluent. They are the people that always has the latest gadgets and are more expansive in their exposure to financial products. They typically have the latest phones, have more than one bank relationship and travel extensively for work and pleasure. Their assets include stocks and bonds and they use the Internet extensively to transact electronically. They are often aware of transactional risks associated with card transactions and the Internet and are often uncomfortable about their exposure to fraudulent activities. In addition to providing more control and improved security, mobile banking also delivers an alternative mechanism for the Power User to pay. Transactions not usually available can now be performed. Some of the transactions that the Power User requires and now becomes available are person to person payments, proximity payments, enhanced security for “card-not-present” transactions to name a few. All of these features are available in some format or another.


It is clear that different market segments would require vastly different mobile banking offerings.

1 comment:

Anupam Varghese said...

Hannes,

Would agree with that. Another important factor is that a 'sophisticated' user has a lot more options (that are usually a lot more convenient) than mobile banking. Such a user could use the Internet or even have door-step banking.

Relevance of mobile banking is where it perhaps might be the only option that the customer could afford/ access. Not that a premium customer would have anything against mobile banking, but more than a 'must-have' it could be a 'might-as-well-try-it' for him/ her. It would be interesting to know how many of such premium customers might list mobile banking as their primary channel?