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Friday, August 14, 2009

Mobile Banking: Pete Daffern of Clairmail

Today, I'm excited to share the details of my recent interview with Pete Daffern (CEO - Clairmail). To learn more about Pete to visit Clairmail.com.

Q: What’s your differentiator? What sets your mobile banking solution apart from the competition?

A: Ultimately, Clairmail has a mobile banking platform that will give you more adoption and a higher volume and depth of engagement than any other vendor. Our platform allows clients to proactively interact with their customers rather than just waiting for the customer to reach out to the bank.

What’s in it for the bank?
Bankers are continually looking to improve the cost structure of the interaction while improving the level of service; and, this is particularly true for high volume/low value requests such as balance and history. Banks need to deepen the relationship to reduce churn, and multi-level alerts can help accomplish this task.

Here are a few low balance alert examples:
• Informational Alert: "Your checking account balance has fallen below $100."

• Actionable Alert: "Your checking account balance has fallen below $100. Would you like to transfer funds from Savings? Reply ‘T’ to move $100.”

• Conversational Alerts: "Your checking account balance has fallen below $100. Would you like to transfer funds from Savings? Reply ‘T’ to move $100.” The customer replies “T”, and receives a subsequent text message: “Thank you. $100 has been transferred from Savings to Checking. To learn more about our overdraft protection service, reply ‘O’.”

Clairmail has built a great management team and we do a better job of getting users and delivering value to those users. Some vendors are positioning themselves for a “quick flip” but Clairmail is building a business. We are focused on the customer, and we ask ourselves everyday, “What should we do for the client?”
We are working to:
• Driving adoption
• Make implementation quick and easy
• Create value at both the business and technology level
• Make the product scalable

Q: Who are your key clients?

A: We have over 40 mobile banking customers and we of course consider all of them as key. They include BB&T, PNC, Bank of Stockton and various others including 6 of the top 10 banks.

Q: Who are you key partners?

A: Diebold, Fidelity, and Telus (Canadian Carrier) just to name a few.

Q: Budget season is just around the corner, and the #1 question bankers want to ask is – What’s it going to cost me?

A: The cost of a mobile banking solution is a few hundred thousand dollars, and as long as the FI is sensible with their contract and implements the correct way it should break even in 6 months—for some it has been much faster.

Q: What components of your ROI model have begun to materialize?

A: We have witnessed meaningful expense reductions by eliminating calls to the call center. In fact, the 6 month break even I mentioned previously only takes into consideration the call reduction component. However, there are additional benefits from asset retention, cross-sell and up-sell potential.

The best, most efficient and engaging way to proactively reach the client is with multi-level alerts. Customers no longer respond to email, snail-mail, or phone calls.

Q: How many active users do you have across all FI’s?

A: The ClairMail mobile banking solution, has experienced a 700 percent year-over-year increase in monthly mobile banking transactions, and a 200 percent year-over-year revenue increase for the second quarter of 2009.

Q: What’s your highest client adoption %

A: Bank of Stockton is at 10% of their total customer base and growing very quickly. Other vendors tend to report adoption numbers as a percentage of online banking customers, not all customers. That is misleading and doesn't take into account that mobile banking adoption is growing independently of online banking (as it should be) and will quickly eclipse its marketshare. We have various customers on their way toward 60% or more adoption and eventually we expect to see these numbers to be closer to 100%.

Q: What’s your lowest client adoption %

A: There are banks that have experienced a change in leadership and/or focus and there adoption has not been as successful. Mobile banking can be very valuable, but it should not be a check-box solution. In 2009 we’re really starting to see an uptick that will grow exponentially over the next few years.

Q: What do the demographics of your users look like?

A: For the young generations that send thousands of messages per month mobile banking is required. For the 35-55 demographic - it’s expected. They need access to multiple cards, accounts, loans, and lines of credit. Yet, it’s not completely driven by age. For instance, Bank of Stockton has a slightly older demographic but due to the nature of their client base they have the highest adoption.

Smartphones are also pushing growth and adoption. Initially, usage was focused on the East and West coast, but now it’s spreading nation wide. At Clairmail, we focus on a suite of offerings that allow banks to bring their customers valuable mobile banking services regardless of their handset type. Our opinion is that SMS is the most important with mobile browser as second and the third most popular channel is the app. The application is a key growth offering for the future, but really has to be delivered in a smart way that takes into account the customers needs.

Q: What do the usage patterns look like? Balance, History, Transfers, BP, Locator?

A: Mobile 1.0 was all the simple stuff like: balances, account history and transfers. Now that banks have a better understanding of the possibilities they’re looking to provide more value in the form of multi-level alerts, payments, fraud prevention, and NFC.

Q: What security elements are incorporated into your application?

A: If someone losses their credit card it takes 3 days to notice, but losing a cell phone only requires 10 minutes. Plus, new services now allow you to call and remotely wipe a device with the touch of a button.

Q: How likely are biometrics to become a component?

A: We have a long way to go before they would be main-stream in the U.S.

Q: How has the iPhone changed your approach to the business?

A: The operating system makes stuff easier and can be performed in less time, but the iPhone hasn’t really changed our approach. It has become a showcase for the current and future possibilities of how applications can work on all handsets. The key thing to remember is that on an iPhone or any other handset alerts/text messaging is the #1 interaction.

Q: What has been your biggest surprise/lesson-learned over the last couple of years?

A: I’ve been the CEO of Clairmail for 6-7 months and there haven’t been any big surprises. However, I am gratified by the industry’s hearty appetite for the addition of mobile banking services even when budgets are tight and new project initiatives are scrutinized closely.

Q: What big industry development should we expect within the next 12 months?

A: I expect there will be more activity around mobile payments. It’s a great story and focused on moving dollars around at the bank. As for NFC, there are only 3 devices in the U.S. that can support the service, and nothing will happen overnight. We need lots of standards and they will evolve very slowly over time.

Q: What can banks do a better job of to facilitate adoption?

A: Our customers are experiencing strong adoption. However, banks that do receive low adoption simply need to do more to facilitate enrollment throughout their business.

There are really two keys:
1) Banks need to see mobile banking as a “game-changing” channel. Smartphones are evolving quickly and the opportunity is larger than online banking.
2) Vendors need to do a better job of teaching bankers how to drive adoption.

This article is the third in a series of eight interviews I conducted with CEOs/Directors of the most popular mobile banking vendors in the U.S. Click either of these links to view the previous articles on Scott Moeller (MShift) or Adam Clark (MCOM).

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