You Can Bank On Mobile

Over the last decade, banks in the developed world have seen a huge adoption of internet banking services, but mobile banking (mBanking) take-up has, to date, proved to be poor by comparison. But I believe the outlook for mBanking is now far more positive.

Merita bank in Finland (now part of Nordea) is credited as one of the first banks to offer WAP (Wireless Application Protocol), representing the first generation, browser-based banking service. But neither the speed of data transfer nor the size of the screen of most phones was conducive to a rich customer experience, and WAP was consigned to history.

Some banks, including Midland Bank (now HSBC Bank plc) in the UK, created proprietary services incorporating buttons on customers’ handsets to make it easy to connect and conduct balance and other basic enquiries. But the moment for dedicated hardware was short.

Changing landscape
But the landscape is changing. Today, consumers are choosing more sophisticated handsets to access a wide range of media and services. Increased network speeds and reduced latency have dramatically improved the potential for a rich customer experience. Touchscreen devices make it easier to use more sophisticated apps and browser-based services. Tablets and netbooks, close cousins of the smartphone, add to the number of 'always on' devices available.

Although use of smartphones put pressure on mobile network capacity, mobile operators are working on Long Term Evolution (LTE) strategy and 4G standards and technologies to take the strain, and to commercially exploit consumer and business appetite for data services.

Today, the mobile handset has evolved into far more than a simple voice and text communications device. Consumers commonly use their handset for a multitude of functions, such as games, music, GPS and email, and to access social media sites. Consumers have become mobile-savvy, and their expectations have evolved, driving a change in handset selection.

Among the analyst Juniper Research’s 2011 predictions was the following: "Mobile banking will become a 'must have' when opening a new bank account" and: "Mobile devices will begin to replace credit cards", a conclusion based on the increased inclusion of Near Field Communication (NFC) chips in phones.
mBanking services already successfully introduced by banks include convenient customer alerts via SMS messaging technology and, according to Juniper Research, the number of these will rise substantially.

However, most mBanking services have, to date, been basic in design, commonly offering limited transactional data eg. balance; last few debits/credits; and an ability to transfer funds between accounts with the same bank. Such limited functionality is not aligned with the needs of today’s customers, who want to conduct all their banking business through a single channel in a single transaction.

Sophisticated users
The next generation of banking customers are already sophisticated users of mobile. Recent research by Temenos, surveying financial attitudes and behaviours of 16 - 18 year-olds in the UK, Brazil and China, identified that over 62 per cent use their mobile handset for internet browsing. Retailers have been quick to note that their customers use mobile as part of their shopping experience. For example, shoppers browse in one shop while comparing prices online and, via text and instant messaging, with friends in other shops.

Consumers today are quickly becoming used to buying and downloading apps, video and music through and to their handset device. According to Juniper Research, mobile payments for physical goods will treble within three years, as sites such as eBay Mobile and Amazon Mobile are used increasingly, and are commonly preloaded to mobile handsets. Analysts expect wide adoption of contactless payment via mobile phone, instigated by the ticketing and transport sectors.

Banks can take centre stage for a new generation of customers who want ease of access to their finances and demand high levels of security. Mobile is not automatically a highly secure channel, but with the right technology, it is capable of delivering higher levels of security than the internet-based equivalent, and banks can exploit this and provide the safest and most convenient way for customers to access and manage their accounts. 

Secure application
This security can do away with the need for extensive password and personal data checking, which is necessary on a browser on a computer. It’s not straightforward to ensure security when using a laptop to access the internet via wi-fi, whereas a mobile phone with a highly secure application communicating over an untrusted network still doesn't expose the content during the transmission.

Apps can securely store personal details, removing the need for users to repeatedly enter information, thus enabling a truly ‘mobile’ experience; i.e. available now, quickly conducted, no hassle. Encryption technology protects this data should the handset be lost.

Based on this secure link between bank and customer, banks could further improve their services by allowing customers additional functionality and services such as to check and approve bills (a friendlier equivalent of direct debit), or report and disable a lost or stolen card.

Banks can play a crucial role as mCommerce becomes part of the mainstream, by enabling retail customers to make secure payments with their phone as they do now with their debit card and chip and pin. The 'always on' user expects transactions to take place immediately, and mBanking may be a driver towards faster payment clearing.

Banks must be conscious of the longer term evolution of mobile technology to appreciate the importance this channel holds. Consumer behaviour is changing at a rapid pace; banks need to re-evaluate their mobile strategies today, to protect their place in the market tomorrow.  

Phil Sorrell is product director, ARC Mobile, at Temenos