Going Mobile: Institutions of All Sizes Invest in Banking's FutureCustomer Demand, Competitive Necessity, Spur Moves into New Services
This is one of the findings of the recent Banking Confidence Survey, wherein 41% of respondents say their immediate business objectives include investment in new and enhanced services such as mobile banking. Their goals: Expand their customer base, attract younger, tech-savvy users, and stave off competitive advances by banking rivals that are cooking up their own mobile plans.
Even Washington Mutual - the biggest bank failure in history - joined the mobile banking fray this past July, before being acquired by JPMorgan Chase. The Seattle-based bank announced text-messaging to help its customers check account balances and review transactions.
Other big institutions offer mobile banking, including Bank of America, which boasts it has more than 1 million registered customers, and more than 100,000 of them use the service on peak days, according to Tara Burke, BofA's spokesperson. The bank has more than 25 million customers using its online banking.
M&T Bank, based in Buffalo, NY, is amidst a mobile pilot project now. To learn more about that effort, check out How to Launch a Secure & Successful Mobile Banking Platform, a new webinar from Information Security Media Group, publisher of BankInfoSecurity.com and CUinfoSecurity.com.
The early players in the mobile banking market have good reason to offer it, say fraud experts. Mobile phone messages to confirm deposits, withdrawals, transfers and other sensitive actions may help cut fraud, thus reducing cost. The JPMorgan Chase mobile banking television ads recently highlighted a customer in a "James Bond" type setting, ala tuxedoes and evening gowns, with the bank customer thwarting the criminal who was attempting to get money out of his account.
Institutions already offering mobile banking services see checking balances and making simple fund transfers via text message as just the tip of the iceberg, as cell phones are quickly morphing into powerful mini-laptops or home computers. Market research showed earlier skepticism about the security and convenience of mobile banking, but institutions have sidestepped these criticisms by offering simple text message services with easy "Yes or No" answers.
Initial forays into the mobile banking space by banks such as Huntington Bank in the first half of 2008 and Wells Fargo in 2006 found customers interested in only being able to check balances or transaction history. Both banks expected relatively low enrollment numbers, but saw high utilization of the mobile phone services that further helped the drive to detect fraudulent activity on user accounts.
The Demand for Mobile
The adoption of mobile banking by customers, if based on the reaction of larger banks' enrollment numbers, shows that adoption rates are climbing. Javelin Strategy & Research forecasts show an increase from 27 million banking customers to 47 million in 2009.
Currently, there are 87 million adults in the U.S. with access to mobile banking, Javelin says. In 2009 that number is potentially 129 million consumers -- 16 million more than the number who voted in the Presidential election.
Javelin's research shows young consumers are the earliest adopters of mobile banking services, with 82 percent of users between ages 18 and 34 employing text messaging on their phones. They are also the highest adopters of smart phones or phones with advanced email and web browsers.
All this put together makes mobile look like the future of banking, says Jeff Lewis, who heads up Metavante's ePayments division. Metavante, a core services provider for the banking industry, created a mobile banking platform that will be soon launched by two of its banks. Lewis says many other bank customers are in user acceptance testing.
Going Mobile: Tales of Two Institutions
Provident Bank, a regional, Maryland-based bank with $6.5 billion in assets, launched its mobile banking solution to its internet banking customers in March 2008. The bank has 142 locations in Maryland, Virginia, Washington D.C. and southern York County, PA.
Michael Vavreck, Internet Banking Channel Manager of Provident's E-Banking Services, says the bank's initial penetration among its more than 100,000 internet banking customers is about 1.8 percent, a figure that he says is pretty much along the lines of what other banks have seen in their first year of implementation. "We're where we expected to be at the nine-month mark," Vavreck says.
Provident is using the Mshift mobile banking solution. For the first year, the bank decided to offer only the WAP solution, and may later include SMS ability, Vavreck notes. Mshift's bill payment solution is also being eyed by the bank for later inclusion. "But at this time we're waiting to see how the market solves some of the communication and interoperability questions for bill payment at the retailer end," Vavreck says. The future of mobile banking is in the payments area, appears there is a lot of infrastructure yet to be built.
Vavreck says the acceptance of mobile banking by the bank's customers is "across the board, but the greatest concentration of customers using it is among the younger segment of users." A demographic breakdown of the bank's mobile users looks like this:
(The other 13 percent of users are spread evenly over ages 55 and above and 17 and below.)
What really surprises Vavreck is the 45-54-year-olds' acceptance level. "I wasn't really expecting to see this level of acceptance." One of the reasons Provident came out with its mobile banking solution was to attract the younger generation, he says. Moving into 2009, he sees the acceptance rates among banking customers to continue upward, "at least 100 percent more than where they are today."
By the end of the first quarter 2009. Altura Credit Union's Glen Chzras, VP of Technology, says the $990 million credit union will have its mobile solution ready to pilot to members. It is actually ready to go now, but Chzras says the Riverside, CA-based credit union is looking at two different approaches to implementing a mobile banking offering to its more than 100,000 members. One -- go with an outside vendor for the product - or build it from scratch, he says.
Chzras says Altura's technology abilities are run on vendor Jack Henry's Symitar program, and he's looking at a mobile banking solution that would run on the existing platform.
"We've also looked at creating a solution ourselves, and run it through our online authentication program to ensure strong security," he says. But one snag to doing it through the credit union's own solution is that the credit union's website is in undergoing redesign to make it more compatible with the mobile phone screens. "Making it more readable for a member who is on their mobile phone and maybe only offering them a certain number of features will be the way we solve this question," Chzras says.
The Mobile Imperative
Metavante's Lewis gives his frank assessment of why any institution should consider mobile banking now.
"If you don't offer mobile banking, you don't survive," he says. "The fraud reduction aspect is the first reason to offer it. But I've seen also in talking to those banks and credit unions that haven't offered it that they have already seen attrition in customers to those institutions that are offering mobile banking."
The flood gates are beginning to open, Lewis says. "The younger generation is ready for it, and they are demanding it. The younger generation doesn't have the loyalty that an older consumer would have, and it's not hard for them to disengage and move from one bank to another," Lewis notes.
Lewis recently spoke with a rural bank in Iowa that was looking for something to attract their customers' children. "Why? Because they were already seeing that those kids once they went to college, they switched banks and they weren't coming back," he says.
Banks and credit unions ask Lewis "How do we retain these young ones as customers?" There are multiple factors driving the next generation of customers away from community banks, and he cautions that community banks need to work out a strategy now. "Pick products that, regardless of where the customer resides, they can still be their bank. I think mobile banking is a key factor in retaining the younger generation as your customer. In fact, mobile banking is the key to the future for community banks," Lewis adds. Community banks that think they can wait five years to implement this technology, he says "don't realize they're already losing customers yesterday, and they don't understand why they're experiencing this churn."
Aite Research's senior analyst Nancy Atkinson also sees mobile banking technology "catching fire" in both the U.S. and in Europe, though she sees some bumps in the road to full acceptance.
"There are definite challenges -- the devices are owned by the wireless providers, not the banks," Atkinson says. "The wireless phone providers are operating the infrastructure, and it's up to them how secure it is, and what capabilities are offered."
More Big Moves in Mobile Space
For those banks and institutions not already at least mulling the idea of a mobile bank offering, in late October both Visa in San Francisco and New York-based Citi's Mobile Money Ventures (MMV) announced rollouts of initiatives designed to enhance the banking functionalities of people's mobile phones.
Visa's pilot in Canada, in cooperation with the Royal Bank of Canada (RBC) and Rogers Wireless, will enable users to pay for items at the point of sale using their mobile phones. This is the first pilot of its kind in Canada, according to Visa Canada. Visa held similar pilots with Wells Fargo in the U.S. and Maybank in Malaysia. The user's phone will hold a secure chip and antenna to transmit information from the phone to the merchant's point of sale terminal. After that, the buyer's transaction will be processed in the same way as a regular credit card payment.
Citibank's pilot in Hong Kong will have mobile banking and stock trades made using the new platform form MMV, a joint venture between Citibank and Korean telecom company SK Telecom.
With these big moves by VISA and Citibank, Lewis predicts, "Mobile banking's future is nearer than we all think. Those that get in now or are already in have a better chance of surviving than those that sit on the sidelines and wait."