Tuesday, March 10, 2009

Mobile Banking – What is Next?

There are many dots2connect with over 3.3 billion people worldwide carry a mobile phone. And so it is time I write my viewpoints about mobile as well as my predictions.

“Does your phone come with mobile banking?” – This was the title of my presentation when we were introducing fully functional mobile banking services to the US market.

I remember the excitement when, in 2006, our Wachovia internet group launched the next generation of mobile banking for Blackberries and Palm Treos. Back then (and not so long ago) the iPhone only existed in Apple’s R&D labs. Although the service was in a beta, it allowed users to check account balances, transfer money between accounts and provide feedback.

I got the first interview with American Banker to announce the product launch and at the time many of the industry analysts were full of doubts about the consumer market readiness to adopt mobile banking. While others at a rountable with Banking Strategies believed that mobile banking was real.

Nonetheless, vendors were calling all the time and every day new companies were jumping to the mobile banking train. Clairmail, mFoundry and Firethorn were the top picks among the large number of other vendors. Of course, Monitise, m-Com, and Yodlee were also on the list.

A year later, we launched a mobile application in partnership with AT&T in November of 2007 and Verizon a month later using the Firethorn application (Firethorn was acquired by Qualcomm). The new service enabled mobile banking and bill-pay services and transfer features.

The question is not about the stage of the mobile technology or the ability of banks to provide mobile banking services. After all, 2008 was the year for all large US banks to introduce mobile services and the coexistence of the three delivery methods (browser, SMS, and downloadable applications) for mobile banking services became common practice.

Today, the question is about the ability for building a critical mass of users - and this takes time. While early adopters are ready to try every new gadget, it typically takes much longer for the average consumer base to get comfortable with new technology, or new ways to utilize it. To maximize the rate of adoption, the service needs to fulfill most, if not all, of the dimensions from the 2x2 matrix.

But, true mobile commerce is still in its very early stages. Mobile Payments continue to be at the top of the agenda. Even after the efforts of PayPal and Google Mobile with the Android, mobile payments have not yet seen the green light in the US market. For one, any payment guru will tell you that for a new payment method to be widely accepted, it will need to somehow improve upon the methods that already exist. Thus, mobile payments will need to be better in some way than plastic cards, or possibly just fuse the two.

Many questions loom about how to reach the next generation of the m-Wallet and enabling payments:
• On what applications will contactless operate?
• How will the current applications evolve to support multiple payment accounts at different institutions?
• What are the implications of the competing mobile platforms on this development? And what role will carriers play? Is there a need for a new payment network?
• As carriers open their networks to be device agnostic and allow applications, how will this affect the competitive environment for financial services?
• What is the profit model? Will banks and carries share the profit? What about the risk?

And finally the question about “Invention versus Innovation”: What is the decisive mobile payment service that will enable U.S. banks to bring convenience to their customers’ daily life?

What is your prediction? I will tell you my mobile predictions in my next blog.

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