Connecting the Mobile ChannelMobile Investments Will Improve Channel Integration
"I think investments in mobile and channel integration are going to vary quite a bit from institution to institution. A lot of it will depend on demand," he says. "But I don't think the investments will be exclusive; they will be complementary. And mobile could be the real catalyst for more investments in channel integration."
During this interview (transcript below), Pitts discusses:
- Mobile innovations, improved security and authentication;
- Mobile's role in transactions across other banking channels; and
- Preparing for competition in the mobile arena.
Jim Pitts is project manager for the Financial Services Technology Consortium, the technology solutions division within The Financial Services Roundtable. Pitts recently led a series focused on mobile payments, multiple initiatives targeting improved industry collaboration to fight transaction fraud, and the sharply increasing challenges associated with records management and information governance. Jim is the producer and author of the "Surfing Payment Channels" book series, providing perspectives from various industry experts on the rapidly changing payments ecosystem.
Cross-channel Fraud and MobileTRACY KITTEN: Cross-channel integration and mobile banking: Where will banks and credit unions place the emphasis in 2011? I am here today with Jim Pitts, project manager for the Financial Services Technology Consortium within the Financial Services Roundtable. Jim, mobile is expected to be a channel of big investment for financial institutions in 2011. When we step back and take a look at how the mobile channel fits into the overall financial enterprise, how will that mobile piece be integrated with other banking platforms?
JIM PITTS: Well, Tracy, thanks first of all for having me, and thanks for also starting with an easy question. I think we will see the mobile channel fit with financial services a lot like chocolate fits with peanut butter. It is going to empower individuals like they have never been empowered before, relative to access and convenience. Integration to mobile services with financial platforms will have, I think, a long and healthy developmental future with financial institutions, and I think the good news is financial institutions have already done a lot of heavy lifting, relative to this type of integration, during the evolution of the World Wide Web and the Internet as they rolled out e-commerce and online services. So, a lot of the pioneering they have done in the last decade or so with Web innovation will be a shoehorn, as we slip into our mobile capabilities like a new pair of shoes. The exciting stuff is probably what is different about mobile, though; there will be some opportunities to do things in a much more dynamic and robust way with mobile. You don't have to lug your PC around or your hundred-foot extension cord to take advantage of all of these opportunities. I think we are seeing a lot of that already, and we will see significantly more as mobile capabilities progress.
KITTEN: We often talk so much about the security concerns surrounding mobile, we rarely get to talk about some of the innovations that are going to lead to positive change. But I would like to talk about that security issue, just a little bit; we recently conducted a survey, our Faces of Fraud Survey, which took place in the fall, and we talked quite a bit in that survey about channels and channel integration. One of the things that we took away from the responses that we got was that financial institutions are not investing across the board in channel integration. As more institutions look at adding mobile as an additional channel, how do you see that lack of integration affecting security and fraud detection in the mobile space?
PITTS: Well, I am guessing that your survey covered a much broader base of institutions than I am typically working with, so I can't really address all of those perspectives; but my personal experience with top financial institutions is that they are familiar with, or I should say they are not unfamiliar with, cross-channel fraud issues and opportunities. I know that many of our members are focusing in this area, working to develop and define optimal solutions there. But it is a paradigm shift, and it is still shifting, I would say. It's very complex. It is going to require major renovations reaching across multiple technologies and systems. So, I guess I would ask you to think of the "Extreme Home Makeover: television shows. It is going to be a full renovation. It is a dynamic environment that is constantly changing, so it is probably like remodeling an airplane while it is in flight. Leading financial institutions will prove out the technology, and then they will invest to generate optimal value for their customers as they see fit. It is OK to prioritize, to do first things first and maintain good resource stewardship as they go.
KITTEN: When it comes to the mobile channel, as you have noted before, mobile is something that financial institutions are reviewing. It's, again, that chocolate and peanut butter mix you mentioned. But when we talk about channel integration, how does mobile fall, if banks aren't already moving toward integrated channels? How might that impact mobile down the line?
PITTS: Well, I think it is going to vary quite a bit from institution to institution. I really can't answer for all channels or all institutions, but I think many institutions specialize in different channels or have single channel specialties or limited cross-channel capabilities, so naturally companies will focus on channels where they have a high customer demand or high volume and integrate based on those opportunities probably.
Regarding mobile, some institutions will have a big demand and some will have little or none, potentially, depending on their market base. Certainly you will see institutions with high demand accelerate their integration of mobility and mobile-related services into their existing systems, and they will probably follow the trailblazers, relative to delivery of online services that they have had in the last decade or two. So, the effective leaders in online will probably be the folks that you will see being effective leaders with mobile.
Fraud Detection and MobileKITTEN: When we talk about integration and fraud detection, how do you think that might impact the mobile channel from a security perspective?
PITTS: Certainly there are a lot of concerns around security. I do think that there are a lot of issues, some big issues, around unregulated providers flooding the market with application du jour, so to speak. As adoption increases, I think we will see fraud increase; but I also think there is good news in that the mobile channel is very conducive to raising the bar on fraud prevention. All kinds of things are available that we haven't used in other channels, like real-time alerts, device-augmented multifactor authentication, chips in the devices, SIM cards and other types of chips. I think out-of-band authentication and verification are going to rise with mobile, and certainly there is built-in PIN input capability and even biometric capabilities. I think all of those things are going to be positives as mobile integrates into the more traditional services.
KITTEN: And do you see investments in mobile and channel integration being exclusive? (i.e., Will banks invest in mobile rather than investing in channel integration?)
PITTS: No, I don't really think it is going to be exclusive so much; I really see it more as complementary. The mobile channel may very well be a catalyst for improving multichannel integration because of the nature of the technology. Again, it will be up to the individual financial institutions based on their customer and service needs, I think.
Endless Mobile?KITTEN: When we talk about mobile, that brings a lot into the picture; it could be mobile banking; it could be mobile payments; it could be loyalty programs that are facilitated through the mobile channel. So when we talk about investments in mobile, we are not only talking about financial institutions but also merchants. When you step back and think about the merchants being brought into this mobile fold, what is the outlook and what are some of the security concerns for financial institutions?
PITTS: To start, I would say that mobile adoption is happening fast, but it is not going to be a flip of a switch or overnight step. I wouldn't overestimate the demand on the system too quickly. The U.S. has a very healthy array of payment channels that work very well; I think things in mobile will move at a nice pace, but it is not going to be overwhelming. I do believe that consumer education is going to be important. Consumers need to be very leery of the free download, what I would call "Ready. Fire. Aim" application development." It is not going to be very helpful as we roll out this new channel. Anytime you are talking about finances and financial services, it is important to think about safe application development cycles and working with reputable, trusted providers who stand behind their services with financial strength.
The Online ConnectionKITTEN: You touched on this earlier, talking about the connection between mobile security and online security: Do you see most banks looking to their online security measures and/or standards as examples for standards for the mobile channel?
PITTS: I can't necessarily say most banks, but logically, sure. I think a lot of the stuff that is working in today's online environment will also work for mobile. There is no reason to throw it away if it is good stuff. We can learn a lot from what works now and apply new learnings as we evolve mobile capabilities.
KITTEN: In closing, Jim, what final thoughts would you like to share with our audience about investments they should be making in security and integration, whether that be around a mobile channel or just banking channels generally in the next year?
PITTS: Well, first of I think everybody needs to keep in mind what is appropriate for their institution, and that is going to vary from institution to institution. Our members are driving us to be more engaged, relative to mobile technology. Just last year we completed a multiyear project series on mobile payments, and this next year we are going to be continuing to invest in research as we host a special interest group to help our members stay on top of the evolving mobile channel. And we are also going to be investing in some more research and development in the form of a project around mobile security, which we see as a top priority.
There is a lot to be learned and I think there is a lot to still be uncovered. The other thing I'll just say one more time is that top financial institutions are already experts in fraud mitigation and security. They have got a great history of managing complex and secure processes and migration of new services and transaction channels, including the recent history of online banking and commerce, which is going to be extremely helpful. I think it is important to invest in what you have, as well as to invest in improving. If you take all of this and couple it with the financial strength of mature institutions, I think we can assume that they will continue to evolve and develop as they go.