Mobile Banking App Development: Steps, Challenges, Trends, etc.

There is more to mobile banking app development than the cost it accrues. Below, we have provided all the important information that will help you build an exceptional app including challenges and trends.

With the rapid evolution of the financial landscape, banking app development has become a cornerstone of the fintech industry. Since the first online banking service Wells Fargo in 1995, digital banking solutions have completely transformed the way they manage finances. 

In fact, last year the number of active online banking users was close to 2366.9 million. And, this year the figure is expected to reach 2551.8 million users, making the demand for mobile banking applications imminent. So, to become a considerable part of the industry, it is essential to create a competitive, secure, and user-centric mobile banking app. 

Therefore, in this article, we have tried to provide the steps for development, associated trends, and other nitty-gritty to stand out in this competitive market.

[To inspire your new fintech app project, here are a few best finance apps!]

Initial Steps to Banking App Development

The number of steps or the types of steps taken for building a banking app can vary depending on the firm you hired. However, below are some of the common steps taken by the best online banking app development companies. So, read through to understand the process.

Step 1- Market Research

Market research is an important aspect of creating any service. It helps you understand the customer's needs, preferences, behavior, etc. Furthermore, you will also get data that reflects the importance of mobile banking apps in your target market. 
Some of the key methods, you can employ in banking app market research are:

1. Customer Surveys and Feedback: Gather information by conducting online surveys of user demographics, preferences, and usage habits. Furthermore, you can collect data from customer feedback forms on pain points & experiences + go for NPS (Net Promoter Score) to understand customer loyalty and satisfaction.
2. User Interviews and Focus Groups: Gain insights regarding customer needs, motivations, and challenges through in-depth interviews, explore focus groups, and share opinions on banking apps.
3. Competitor Analysis: Evaluate the features of your competitors, and evaluate user experience and performance. Another important aspect is to perform a gap analysis to identify opportunities. This is crucial because it makes your app stand out in the market and helps you with more adopters.
4. Usability Testing: Identify usability issues and areas of improvement in the apps available in the market. Also, gather overall feedback regarding them.
5. Market Analysis: In this phase, identify the target market segments, analyze trends, and the overall competitive landscape.
6. Social Media Listening: Identify the emerging trends related to banking apps on social media and customer concerns that are generated. The best to do so is to check the user comments below the banking apps’ post.

Step 2- Make a Plan

Now, once you have gathered all the necessary information on building a banking app as per your target customer, it is time to shortlist other details. For example:

• Complexity of the application
• Target operations systems
• Number of features, etc.

Also, several other aspects or stages need to be considered during the banking app development process. These are app designing, coding, and testing. 

Each of these phases will require their separate dedicated hours. So, it becomes radically important for you to cover each of these aspects to understand as many unexpected financial obligations.

Step 3- Design a Prototype and Collect Feedback

The reason why prototypes are important is because they tease the real-world functionalities of your app. In fact, this effort is further polished and turned into an MVP (minimum viable product) that is often pitched to investors. 

It helps them believe the idea and visualize it. And, if you are an entrepreneur looking for funding this is going to be unequivocally a necessary feat to achieve.

To create a prototype and collect data from it, here are the steps followed by an online banking app development company:

1. Define the Purpose: It is important to clearly articulate the data collected from market research. Now, define what problems your banking app is going to solve, and its target audience, and set goals on what to learn from the prototype developed.
2. Create a Low-Fidelity Prototype: Start with sketching a simple hand-drawn design to visualize the layout and flow. After that use digital software for prototyping like Figma, Sketch, Adobe XD, etc., to create interactive prototypes. Doing so, prioritize the essential features for the testing.
3. Conduct User Testing: Now, recruit participants who represent the target audience. Assign them task-based testing to observe the interaction. Once done, encourage users to verbalize thoughts and gather important feedback on usability, user experience, and overall impressions.
4. Analyze and Iterate: Now, look for common themes in user feedback, prioritize changes, and iterate for necessary adjustments.

Some of the other key metrics to track are:

• Task completion rate: The number of users who were successful in completing tasks.
• Time on task: The time required by users to complete the tasks.
• Error rate: The number of mistakes made by users.
• User satisfaction: The overall user satisfaction of the prototype.
• Net Promoter Score (NPS): Overall, measure of user loyalty and advocacy.

Step 4- Pick the Technology Stack

Choosing the right technology stack for the banking app is the work of mobile banking app development companies. However, if you have an in-house team or just want to get an idea of the general process behind selecting a tech stack, here are the steps:

1. Assess the App’s Functionality: It is crucial to understand the functionality of the app for both basic and advanced features. For example, checking account balances, bill payments, or advance requirements like budgeting tools, investment options, fraud detection, etc. Once done, assess the USP (unique selling point) that will differentiate your app from competitors.
2. Assess Security and Compliance Requirements: Ideally, you hire a dedicated firm that has worked in the niche and is well aware of banking app development compliance requirements. However, to further extrapolate, some of the data encryption compliance relates to robust encryptions to protect user data. And, strong authentication mechanisms like biometrics and two-factor authentication are necessary to be compliant.
3. Consider Scalability and Performance: For a business, the most important thing is to cater to customers even if a large number are using the service at the same time. So, choosing the tech stack would factor in user growth and even ensure that the app is still and responsive.
4. Evaluate Development Costs and Time-to-Market: Every entrepreneur who starts anew has budget constraints. Plus, for the development, there is a specific time to market without compromising the quality of features. Both of these factors need to be considered in this stage.
5. Explore Technology Options: The last but the most crucial step is to explore the different technology options available. Let’s explore them:

Front-End:

Front end is the visual and interactive layer of an app that users interact with. Here are some of the popular technologies to pull a UI/UX with inexplicable quality:

• Native development: Swift for iOS, Kotlin/Java for Android (for optimal performance and user experience).
• Cross-platform frameworks: React Native, Flutter (for faster development and code reusability).

Back-End:

Back-end of an app is a server-side component. It is the layer that is hidden and is responsible for handling data, processing logic, and ensuring smooth operations. Below are some of the best possible technologies to use for its development.

• Languages: Java, Python, Node.js, Ruby on Rails (depending on the expertise of the team and project requirements).
• Frameworks: Spring, Django, Express.js, Ruby on Rails (for rapid development and structure).
• Databases: PostgreSQL, MySQL, MongoDB (for data storage and retrieval).

Step 5- Start the Coding Process

Once all the things are finalized for banking app development, it is time to start the coding process. To do so, there are certain things to keep in mind. These are:

Understanding the Scope

Before starting the process of coding, it is important to clearly define the scope of the application and its essential features. For example, user authentication, account payment, fund transfer, etc.

Prioritizing Security

Be it any type of application, security is of paramount importance. Therefore, it is essential to see that way during the coding process. So, here are some of the things to implement:

• Data Encryption: To protect sensitive data using encryption algorithms that are hard to crack.
• Authentication: Multi-factor authentication for added layers of security.
• Authorization: To optimize access control only by associated parties.
• Fraud Prevention: To detect fraud and prevent it from happening.
• Compliance: Adhere to industry regulations (e.g., PCI DSS). 

Core Functionality Development

These are the core features that will be developed during the banking app development process. These can range from user registration to transaction history, and more.

Now, it is time to follow an agile methodology to develop the app. Break down the process into smaller sprints and utilize CI/CD (Continuous Integration/Continuous Deployment). 

This will help automate the building, testing, and deployment of the app. You can also consider API integration, push notifications, and other types of authentication for the app.

Step 6- App Testing

Now, the most important step that mobile app development companies follow is app testing. There are tools for automated app testing as well. For example Selenium, Robustium, Appium, etc. You can use them to speed up the process.

Post-Release Steps for Mobile Banking App Development

After testing and releasing the app into the market, the job isn’t completed. Here are some tasks or steps that will wait for you at the post-release stage of the app development. Let’s check them out:

Step 1- App Maintenance

Even experts can not predict all possible errors that apps face after joining the real world or release. Thus, keep an eye on the feedback shared by users to apply proper maintenance on your app if required. These updates will also attract additional app maintenance costs that you need to plan.

Step 2- App Updates

Keep releasing timely security and compatibility updates for your app to ensure it remains friendly with the evolving technology.

Benefits of Mobile Banking Application - Users and Business

One of the primary reasons why so many banks, digital banks, and credit unions, are running towards mobile banking application development, is its plethora of benefits. Benefits that make these apps convenient and efficient for customers who want to manage their finances, on-the-go. So, here are some of the key benefits of mobile banking applications in a table both from the perspective of businesses and users.

Why Are Customers Switching to a Mobile Banking App?

A 2024 Statista report states that around 63% of users processed their banking matters on a smartphone or tablet. So, it becomes radically important for stakeholders to focus on mobile application development for banking. Furthermore, these apps provide convenience, personalization, and enhanced security.

These mobile apps are capable of offering seamless transactions, quick transfers, and real-time modifications making banking easier tenfolds comparing traditional banking. 

Other features, like biometric identification, multi-factor authentication, and AI-drive insights provide a better user experience and safety. Furthermore, customers get the benefit of additional services like virtual card payments, financial goal setting, and more.

Types of Banking Using Smartphones

Before thinking about approaching a banking application development company, it is essential to understand the types of banking. It can be important in understanding your competitors which can cut down your audience. Currently, there are three primary types of mobile banking. Let’s explore

1. App-Based Banking

This is the most common type of banking done through smartphones. It usually involves iOS and Android banking app development. 
Many banks create their dedicated apps and release them on different app stores where Apple App Store and Google Play Store remain primary. These apps provide a platform for many banking services available and allow users to manage their finances from home. Some of the important features, you can find are:

• Checking account balances
• Transferring funds
• Paying bills
• Investing
• Applying for loans
• Locating ATMs and branches
• Customer support

Some real-world examples of app-based banking are Chase, Bank of America, Wells Fargo, etc. Also, this is the kind of banking service that you can get developed from a mobile banking app development company.

2. SMS Banking

SMS banking allows the user to perform basic banking transactions using text messages. It is often considered less feature-rich but is useful for people without smartphones or limited plans. Some common functionalities that this type of banking provides are checking account balances, mini-statements, fund transfers, etc. 

Several banks from India and Africa provide this kind of banking. Examples of such banks are State Bank of India, Zenith Bank, GTBank, ICICI Bank, etc.

3. USSD Banking

USSD (Unstructured Supplementary Service Data) banking is a service accessed through simple mobile phones. These phones have their own embedded operating system which is much inferior in terms of functionality, if compared to OSs like Android and iOS. Some of the features include mobile recharges, bill payments, account inquiries, etc.

Essential Features for Mobile Banking Application Development

Moving forward, it is crucial to understand a few basic features that most fintech apps offer. 

1. Account Monitoring and Alerts

This is the most crucial feature of any mobile banking software or app. This provides users with the independence to open separate websites and check their balances, statements, etc. 
To ensure your best banking app is useful for customers even in the long run, accompany these features with other perks. For instance, the ability to track spending, smart spending plans, investment tips, etc.

2. Multi-Factor Authentication

Ensuring the enhanced security of the user and financial data is something that no mobile banking app can compromise. Multiple-factor authentication protocols combine various security layers such as one-time passwords, PINs, biometric verifications, etc. 

3. Branch or ATM Locator

Various mobile apps in banking provide an in-built map to display information such as branch and ATM locations. Users can just use the app and find the nearest branch or ATM where they can get their tasks done.

4. Payment Processing

The finance application that you are building will be more useful if users can directly make transactions through the app. Many banking apps are offering features such as unique payment addresses, QR payments, etc. Customers can use these features to send or receive money with the help of the internet.

5. Customer Support

To provide faster customer service, apps are expected to have an in-built customer support feature. In fact, right now many banks are also using AI-supported chatbots to provide users with faster responses for queries that AI can solve on its own. 

Apart from that, customer support can also include a direct contact number, chatbox, or email address that can connect users with customer support specialists at any point in time.

Mobile Banking App Development Cost

As mentioned above, the app development cost might vary depending on various factors. So, let’s throw some light on a few factors that influence app development.

To calculate the tentative cost of building a banking app, you just need to follow these steps-

• Finalize the maximum number of hours that will involve the entire app development project
• Multiply it by the hourly costs of developers
• Add additional expenses such as licensing fee

The total that you get from this calculation will be your tentative banking app development cost. For further help, here is an estimation of a real-life app:

Estimated Cost of Creating Chime:

Currently, the cost associated with the mobile banking application development process of Chime would cost millions. So, to give you a better picture, we estimated the cost based on its essential features and the time required to develop them.

Note: The actual cost of developing Chime is not publicly available. So, the figures mentioned below are simply an estimation based on industry standards.

Some of the Assumptions made are:

• Basic Chime-like app with core functionalities.
• Development team of a minimum of 5 people (Project Manager, 2 Developers, Designer, QA).
• The average hourly rate of $50 per developer/designer.
• No external dependencies or integrations.
• Focus on development hours, excluding additional costs like infrastructure, legal, compliance, etc.

Estimation Table of Chime’s Development Cost:

Challenges of Banking Application Development 

Even with all the knowledge required to build a banking app, it isn’t really a straight road. Instead, it requires careful planning and the understanding of different challenges that you need to tackle. So, here they are:

• Robust Security: Magecart Attacks, Equifax Data Breach, Bangladesh’s 2016 Bank Heist, etc., are some examples that demand safeguarding financial data against cybercrime threats. For that, the banking app development process needs to involve advanced encryption and authentication measures.
• Regulatory Compliance: Government and authorities have compliance and regulations like TILA (Truth in Lending Act), BSA (Bank Secrecy Act, PCI DSS (Payment Card Industry Data Security Standard, etc. These regulations help protect users against cyber crimes and other data security threats. So, the development team needs to adhere to these compliances for releasing the app.
• Scalability: The app should be able to handle the increase in user loads and transaction volumes without compromising the performance.
• Integration with Legacy Systems: The majority of banking institutions still use legacy systems as a part of their infrastructure. So, integrating the app with the existing infrastructure is complex and requires time.
• Platform Compatibility: Ensuring optimal performance across multiple operating systems and devices with different resolutions is a pertinent issue.

Key Mobile Banking Trends to Adopt

There are several mobile banking trends that one can integrate into their mobile banking application development process to elevate its quality. These will help you provide a much better experience to your customers and help in the retention of existing customers. So, let’s discover them:

• Real-Time Services: Customers today expect to manage their finances in real-time, make payments, and more. This has been an ongoing trend that many app banking apps from banks like HSBC, Citibank, Bank of America, etc., follow.
• AI and ML: AI and ML stands for artificial intelligence and machine learning. These technologies allow more sophisticated features like predictive analytics, AI chatbots, etc. Therefore, many banks like JPMorgan Chase, Capital One, Bank of America, etc., have used it to enhance their app’s banking experience.
• Hyper-personalization: Banks like Common Wealth of Australia, Up Bank, Capitol One, etc., use AI and data analytics to offer financial products and services.
• Mobile Wallet Integration: Mobile banking apps now provide wallets. These wallets utilize NFC technology and third-party services to enhance payment accessibility.
• Blockchain: There are several banks like JPMorgan Chase, Wells Fargo, HSBC, etc., that use blockchain technology to improve transaction speed, security, and transparency.
• Internet of Things (IoT): Banks use the technology “Internet of Things” to optimize ATM branches, wearable tech, smart contracts, etc. 
• Banking as a Service (BaaS): It is a significant trend in today’s time. Here the banks offer their banking services through APIs to third-party businesses. Using these services, financial institutions can integrate their services into the platform without building their own infrastructure.
• Voice-Activated Banking: This is another latest trend in which apps leverage voice recognition technology for customers to perform a variety of tasks. 

Wrapping Up

Banks play a significant role in our day-to-day lives. And with the rise of banking apps, transactions ranging from online shopping to in-store shopping and more, can be done with ease. It is no surprise that we are witnessing an empirical interest in banking app development. Since, these apps put the power of managing our finances in our hand. And, if you are a bank who wants to begin its app development journey or an entrepreneur with a new banking idea, the market is ripe if your idea stands the test of its customers.