Mobile Functionality or Security?Consumers Rank Ease-of-Use and Fraud Protection as Priorities
Today, 50 percent of smart-phone users use mobile banking, says Monahan, managing partner and research director at Javelin. Monahan recently oversaw the development of Javelin's 2011 Mobile Banking Financial Institution Scorecard, which notes that 8 percent of U.S. consumers already own tablets.
"Mobile banking is really becoming ubiquitous," Monahan says in an interview with BankInfoSecurity's Tracy Kitten [transcript below].
But the ways in which consumers engage mobile banking is starting to diverge. Smart-phone users expect quick interfaces for online transactions, while tablet users are more comfortable with transactions that resemble transactions they traditionally conduct on PCs. "When you're on a tablet, it's very comfortable to spend a long time and you want to be able to interact with the program," Monahan says. That means banks need better graphical components for mobile tablet banking than smart-phone mobile banking.
Another element to consider: security. Consumers told Javelin they wanted to know their financial institutions had implemented mobile data encryption, and that they would reimburse their customers and members if fraudulent transactions resulted from mobile interactions.
As institutions roll out more diverse mobile banking and payments offers, Javelin recommends they focus on consumer education. "There's a lot of misinformation out there and consumers are very curious about it," Monahan says. "If you're going to have a mobile-banking offering, you've got to have marketing efforts."
During this interview, Monahan discusses:
- Educational steps that should revolve around mobile banking security and protections;
- How the emergence of P2P payments will open the door for more mobile payments; and
- Why the mobile is expected level the mobile playing field between Microsoft and Apple.
Monahan's banking background includes managerial experience working with growth businesses, strategizing and implementing cross-sectional financial plans to accommodate multiple projective scenarios. As a college educator, Monahan's work focused on current issues in accounting and economics. As a former vice president of commercial banking at Wells Fargo, she marketed and managed tailored financing services to growth companies. Monahan also served as an assistant vice president/manager and loan supervisor during her tenure with Wells.
Mobile Banking Scorecard
TRACY KITTEN: What makes this particular study, the mobile banking scorecard study, different?
MARY MONAHAN: What we try to do is we try to study mobile banking from the perspective of the consumer. We're reviewing each financial institution's mobile banking website to determine if the FI offers mobile banking, and we're using five main criteria: mobile access, their general features and functionality that they offer, their SMS-text banking features, their security and their marketing to score their mobile-banking offering.
KITTEN: Could you give us some highlights from this study such as what stood out?
MONAHAN: Some interesting things came out of this. First of all, let's talk about mobile banking to set the stage. There are three types of mobile banking. You can bank with a downloadable application. You can bank through the mobile web or you can bank with SMS-text banking. If you offer all three types we call that a "triple play" and what we saw is that the "triple play" is rising and that the downloadable app is the number-one offering among banks that we studied. When we look at it over time, we see that downloadable apps have risen. A few years ago in 2009, only about two-thirds of banks had downloadable apps. Now, 96 percent [of banks] have downloadable apps. If you have a smart phone, you can have a downloadable app, but not everybody has a smart phone. Only about 45 percent of consumers have smart phones, so over half of the consumers can't download apps and they can only access banking through SMS text. About 70 percent of banks are offering text banking.
KITTEN: So for this particular survey, how many financial institutions did you review and was the pool limited to domestic institutions?
MONAHAN: What we did is we looked at the top 25 U.S. institutions by deposit size and what we found was that 23 out of the top 25 offered mobile banking, so really a high percentage are offering mobile banking. You can see that it's a must have now. A few years ago, a lot fewer of them were offering [mobile banking]. In fact, in July of 2009 we looked at 40 institutions and we only found 19 of them were offering, so that was about a 48 percent penetration rate, and then this year we found 23 just looking at 25 institutions, so that was a 92 percent penetration rate. You can see that mobile banking is really becoming ubiquitous.
Are Banks Prepared for Mobile Banking?
KITTEN: It really is, and of course we will delve into some of that a little bit here when we talk about the emergence of some of these mobile tablets, but I wanted to ask: how many banks do you feel are adequately prepared for mobile banking and mobile payments?
MONAHAN: What we're seeing is that, basically, they're building out their functionality and they're starting with mobile monitoring, and then they're moving into mobile payments. It's basically a build-out process and I think it's a one, two, three-step process and they're moving from what we call mobile monitoring, just looking at your accounts, into money movement. Finally, money is starting to move on the mobile channel and this year we're seeing about 26 percent of banks are now offering mobile P2P. P2P is a person-to-person payment, where you don't have to know the other person's account number. You can just know a phone number and send it to someone else. It's a fun new service and it's a first step toward mobile payments.
KITTEN: As I noted earlier, the crux of this story revolves around consumer preferences and the emergence of the mobile tablet. In fact, Javelin's research suggests that by 2012, this tablet will be relatively ubiquitous with the release of the Amazon Kindle Fire, which comes out later this month, and then they just announced a release of the Nook tablet. Every consumer will be able to afford one. How has this ubiquity and how will this ubiquity of mobile tablets impact mobile banking, as well as mobile payments?
MONAHAN: Well, 8 percent of consumers already own a tablet, which is a huge amount when you look at how short of a time the tablet has been out. We see that the tablet is going to be a game changer. Smart phones were a game changer a few years ago when they first came out. They allowed the consumer to do a lot more functionality of mobile banking on their phones, and what we see is that when we look at mobile bankers, per say, and we look at what they look like, we see that 50 percent of smart-phone users are mobile banking. We look at people without a smart phone - non-smart phone users - only 14 percent of them are using mobile banking. In the same way, we think a tablet is going to be a game changer. The bigger screen and the higher resolution allow the consumer to do more functionality. This is a mobile-hybrid device. It's a cross between a PC and a smart phone so it's on the fast track to a technology revolution and it's allowing consumers that maybe never had that capability in their hand ... to do advanced capabilities that they were never able to before.
KITTEN: When it comes to consumer preferences, what is it exactly that they're looking for, when it comes to mobile-banking applications specifically? Do these mobile-banking applications differ, the ones they may download for a tablet versus the ones they will download for a smart phone?
MONAHAN: In a tablet they're going to have to have more educational components and deeper dives, because consumers are going to spend longer time on a tablet. When you're on a mobile phone, you want to be able to get on and off, but you're not going to spend hours reading. But when you're on a tablet, it's very comfortable to spend a long time and you want to be able to interact with the program, so you're going to have to have better graphical components. Financial institutions are going to have to be thinking these through. You can add a lot of deeper, educational content and that's going to be very, very key to the tablet.
The other thing that's going be key is speed. If this doesn't work quickly, you're going to lose eyeballs right away. We ask consumers what's going to keep [them] from doing this and they said speed was number one.
KITTEN: According to Javelin's research, only 30 percent of the banks that were polled for this particular survey had tablet-specific applications for mobile banking. How critical is it for institutions to re-gear or maybe re-evaluate the types of offers that they make specific to mobile tablets?
MONAHAN: It's integral to their offering. When we did this a year ago, we were accepting smart-phone apps ported over to the tablet, but you can't really do that. I mean, if you've got a tablet and you look at a smart-phone app ported over to it, it's just clunky. It's going to be key to have a tablet-specific app and banks need to be thinking about that right now, and which tablet to support right now. The iPad is number one. It's got 60-percent market share, but [also] the Kindle Fire's coming out that's based on the Android platform. What's interesting too is that we see that Windows is neck-and-neck in the number-two spot with Android. We're going to have to watch that as a dark horse and see where that goes next year because, remember, it's a cross between a mobile phone and a computer and Windows is pretty hot in that area.
KITTEN: How will financial institutions help to ensure not only their own security, but also the security of their customers as these mobile applications emerge?
MONAHAN: The number-one reason that consumers don't adopt mobile banking is fear about their security, and when Javelin asks consumers what features would make mobile banking more secure, two items top the list: encryption of the data and guarantee of reimbursement for fraudulent transactions. When we looked at the bank websites, about 78 percent of FIs reviewed have security messaging about mobile banking on their website, but that means 20 percent don't. They've got to be educating about mobile banking in what security offerings they have protecting mobile banking.
They should have a mobile-banking security guarantee on the website or link to an online-security guarantee. They should be doing remote deactivation or log-off and they should also be educating about anti-malware on the phone, so using antivirus. Only 17 percent of FIs currently are educating about this right now.
KITTEN: What advice would you offer to organizations, not just financial institutions, as they prepare for these types of payment changes? It sounds like education is basically at the core of it all.
MONAHAN: Yes, education is primary to this channel. I mean, there's a lot of misinformation out there and consumers are very curious about it, and if you're going to have a mobile-banking offering, you've got to have marketing efforts. What we saw is that about 20 percent of banks lack such basics as a permanent link from the homepage. So if the consumer can't find it, they're not going to be able to use it. FIs are going to need to support multiple smart-phone platforms that have significant markets, despite the challenges. Google's open-platform Android operating system has the first place in consumer smart phones and Apple IOS runs a strong second. Blackberry has been dropping and, interestingly enough, Windows is moving up with more consumers owning a smart phone. It's going to be very key for financial institutions to service these so that consumers can access them on their smart phones. In this time of Occupy Wall Street, it's very important that banks look at ways that they can satisfy their consumers. And with mobile banking, the consumer subsection is very hot. Just 3 percent of consumers are dissatisfied with mobile banking.