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Cash, Check, or Cell Phone?

Mobile Banking 2010: The Always-Open, Everywhere Bank

Check your bank balance? Pay your electric bill? Lend a friend some cash? There are apps for that. But actually, an app isn’t even necessary. A text message may be all it takes. As the mobile phone becomes more and more the digital communication hub of modern life, on-the-go banking is becoming more and more the norm.

Mobile 2010: A Leap Year for on-the-go Computing The hype has been building for years. Since the iPhone and Apple’s App Store reached phenom status, since Android’s break into the mainstream with the Droid and Verizon, and now with AT&T’s adoption of more Android and Palm devices — not to mention RIM’s dogged efforts to keep the Blackberry relevant — the age of mobile computing may finally be fully upon us.

Major research firms and future-watchers are nearly unanimous in their anticipation of a tidal shift toward mobile computing. In one of the most talked about and widely quoted reports, renowned Morgan Stanley analyst Mary Meeker — whose prediction of the rise of the Internet in the mid-1990s was spot-on — predicts that, in just five years, more people will connect to the Internet via mobile devices than by personal computers. 1“The Mobile Internet Report,” Morgan Stanley, December 15, 2009

In the U.S., non-phone uses of mobile devices continue their steady climb. In the fourth quarter of 2009, nearly two-thirds of mobile subscribers sent text messages, 27.5 percent used a mobile browser, and nearly one-fifth used a downloaded app, according to comScore. 2comScore, “comScore Reports December 2009 U.S. Mobile Subscriber Market Share,” February 8, 2010 In all areas, usage increased from the third to the fourth quarter for America’s 234 million mobile subscribers.

Taking Mobile to the Bank Brick-and-mortar banks may still adhere to banker’s hours — though in many cases those hours extend later in the day and into the weekend — but consumers have clearly demonstrated their desire to bank at their convenience, not the banker’s. More than 75 percent of surveyed consumers use online banking, according to a 2008 Forrester survey, and more than a quarter were increasing their usage. 3 Consumers have embraced electronic banking, and now they are increasingly doing their electronic banking on the fly.

Mobile banking is still a relatively small subset of the banking universe. The Forrester study indicates 14 percent of consumers use mobile banking, 4ibid and a more recent TowerGroup study estimates 10 million active users in 2009. That same study, however, predicts annual growth of more than 50 percent, with over 53 million active users by 2013. 5Mobile Marketer, “Banking is a seamless fit with mobile: TowerGroup,” by Jordan Crook, May 29, 2009 The most recent survey by the Mobile Marketing Association and Luth Research finds 17 percent of U.S. adults using mobile banking, and projects usage to grow to 22 percent in the next 12 months; more than half of U.S. consumers are interested in accessing banking services through their mobile devices. 6Mobile Marketing Association, “Mobile Marketing Association-Luth Research Survey Finds 17% of All U.S. Adults Use Mobile Banking,” February 2, 2010 (PR Newswire)

One reason current usage numbers are not higher is simply because mobile banking is not ubiquitous among financial institutions. In a poll of U.S. online banking users by CashEdge, over 32 percent said they would use mobile banking if their financial institutions offered it. 7Mobile Marketer, “Consumers want more mobile banking: Study,” by Chris Harnick, August 17, 2009

Mobile Banking Around the World While U.S. mobile banking is expected to experience rapid growth, it is and will likely be a follower rather than a leader in terms of sheer number of users. Juniper Research projects over 150 million mobile banking users worldwide by next year. Japan and South Korea are already out front, and will soon be joined by China to make the Far East the leading region in number of users by 2011 (41%), followed by Western Europe (22%) and North America (12%). 8Juniper Research, “Banking on the Mobile,” whitepaper extracted from “Mobile Banking: Strategies, Applications & Markets 2008-2013”

Three Styles of “Electronic Wallet” Current technology enables three primary methods to access financial data and initiate transactions from a mobile phone: SMS or text messaging, mobile web, and downloadable applications. Each offers advantages and presents challenges for both consumers and bankers.

SMS is universal — virtually every cell phone is capable of sending and receiving text messages. It’s easy to use, affordable, requires no special software, and is carrier-independent. Users can text simple commands like BAL, DUE, or COM to have returned their balance, bills due, and a list of available commands. On the downside, user experience is primitive, functionality is limited, and it is the least secure of the three channels. Among other vulnerabilities, data is stored locally on the handset and is at risk if the handset is lost or stolen. There is a technology called Secure SMS that adds a mobile client application to encrypt messages and protect information stored on the phone. However, because it uses a client-side application, it is much more difficult to support across the spectrum of devices and operating systems.

Mobile Web offers greater functionality and security and a better user experience, if the site is optimized for mobile devices — which generally means building a separate WAP site that streamlines interaction and offers only essential transactions. Mobile sites face the challenges of myriad devices, each with its own unique form factor and all with tiny screens. Performance is a critical consideration as well, as mobile page load times are far slower than typical wired Internet speeds.

“Financial institutions need to appreciate that performance on mobile isn’t what would be expected on the Web,” says Keynote Mobile Marketing Manager Tim Murphy. “And yet you have a large base of customers for whom the bar has been set by the Web. Thirty-second downloads are painful, and a user is not going to take the next step to go look at their balance because they’re not going to sit through another thirty-second download. You need a streamlined version that allows them to have performance that’s as close as possible to what somebody could get out of a [wired] Web site.”

The third and most device-friendly access method is via a dedicated mobile application, and many financial institutions and third parties are pursuing this route to serve the rapidly growing smartphone market. A cursory search on the term “banking” in Apple’s iTunes App Store produces 128 results; Forrester Research reports over 1,000 personal finance applications in the App Store, offering everything from bank-specific applications to bill reminders to checkbook registers. 9Forrester Research, “iPhone Apps Fill Mobile Banking Gaps,” by Emmett Higdon & Alexander Hesse, September 15, 2009 (Executive Summary excerpt) Because mobile applications are device- and/or mobile OS-specific, the developer has far greater control over the user experience — what is displayed, how it is displayed, and the overall user interface. That experience is generally more pleasant, given the growing prevalence of smartphones with near device-size screens.

Biggest Banks Leading Mobile Push The biggest U.S. banks, including Citigroup, Wells Fargo, Bank of America, and JPMorgan Chase, and others, have led the way into the mobile channel with a variety of access options and features. Despite the great financial crisis of 2008-2009, consumers have maintained enough confidence in the security of the big banks to readily embrace their mobile offerings. Bank of America introduced its mobile services in 2007, and in the first year attracted more than a million users. All four of the aforementioned banks, plus Suntrust, BB&T, U.S. Bank, 1st Bank, ING Direct, PNC, and a host of others, have dedicated applications in the iPhone App Store.

Early in 2010, Wells Fargo was the first major bank to roll out text banking to all its customers — not just those enrolled in online banking. Customers can check balances, get the status on deposits, check when their credit card bill is due, and more by sending simple commands to Wells Fargo’s short code number. To assure their customers of the safety of text banking, the bank is covering text activities with its Online Security Guarantee. 10Wells Fargo, “Wells Fargo Extends Text Banking to All Customers,” news release, February 4, 2010

Not all mobile banking is about balances and money transfers. JPMorgan Chase, in addition to SMS banking and their “Chase Mobile” iPhone banking app, also offers a Gift Planner app, which helps their customers organize and track their shopping and, hopefully, keep on a budget. Chase has also leveraged the mobile platform for promotions, and has tested mobile coupons.

Security and Other Challenges “The challenge that financial institutions face compared to any other industry when it comes to mobile is getting the trust of the user,” says Nisheeth Mohan, Keynote mobile product manager. “Over here, it’s hard cash. It’s their own cash.”

Indeed, security experts see mobile phones as the next prime target for phishers, hackers, and scammers, and mobile banking is a gateway to what they want most: money. One of the first routes being targeted are downloaded applications that should, in theory at least, offer the greatest security. Fraudsters are trying to get at users’ phones through the app stores, offering fictitious apps that claim to provide banking access, or apps that appropriate data from the user’s phone so hackers can gain access to accounts. Late in 2009, Google pulled scores of apps from its Android Market store based on suspicion that they might be malicious. All were posted by the same developer, and it is believed that fewer than 1,000 consumers downloaded them before they were pulled. 11Wall Street Journal, “’Phishing’ Scams Cast Net on Mobile Banking,” by Aleksandra Todorova, January 30, 2010

At this juncture, conventional wisdom has it that Android apps are more vulnerable, since Google Market applications are less rigorously vetted and controlled than those coming from Apple’s app store. The safest route is for consumers to access and download apps directly from their financial institution’s web site.

Aside from the threat posed by nefarious activities, banks have to gain the confidence of consumers that the mobile banking system actually works, and that the transactions they initiate are actually completed.

“I’m fairly confident that for many people, if you don’t get a confirmation code back in a certain amount of time, not necessarily because the money didn’t go through but because the text message failed, you’re highly likely to pick up the phone and start asking questions,” Murphy says. “It’s not good enough if the text response comes back 20 minutes later.”

“If you make a payment or send money to someone and you don’t get that confirmation soon, people are going to be apprehensive,” Mohan adds. “If you try to make a transfer three times and after three times it doesn’t go through, chances are you won’t do it the fourth time. In any other segment, the user may be a lot more tolerant of failures or reliability issues. On the financial side, that tolerance is a lot, lot lower. They have just a few opportunities to get that user to use mobile as a channel.”

On the flip side, a robust text messaging system can actually be a security plus for banking consumers. With an alert system that sends SMS notification of account activity, a user can be made aware immediately of fraudulent or suspicious activity on their account — from any channel — and take action to prevent or correct it.

Performance You Can Bank on Mobile performance is one of the toughest measurement challenges. It’s not a simple, bifurcated, “I’m a Mac/I’m a PC” problem. With numerous carriers, scores of devices with unique form factors, competing operating systems and competing digital network technology, the monitoring and measurement task can be monumental. Is it the carrier that’s causing an issue? The handset? The application? The back-end data server? Even with all the variables, however, there are viable, cost effective solutions. It all starts with understanding what users are doing.

“It’s important to identify what key tasks people perform on mobile,” Mohan explains. “Track what users are doing in real life, and once you have a better understanding of what kind of transactions people are doing on mobile, start monitoring them so that you’re aware of what users experience.”

With mobile banking, it’s not always a simple A to B transaction. Often it’s a series of transactions across multiple channels or technologies. Keynote has systems and technology that can track and measure these composite transactions.

“We have the ability to monitor a transaction that is initiated by a Web site and triggers an SMS, or an SMS that triggers an automated voice response — so if you’re expecting a call back confirmation on a transaction, which some customers do, we can make sure that’s working properly.”

As with any kind of performance measurement, the best and most accurate methodology is to get as close to the actual experience of users in their environment as possible, including the same networks, the same devices, the same use cases. For SMS or Web site measurement, Keynote’s Mobile Application Perspective is a solution that can emulate scores of mobile devices on different carriers, across the U.S. and around the world. For measurement on an actual, specific device — to monitor downloaded iPhone or Android applications, for example — Keynote’s Mobile Device Perspective gives a completely accurate view of the user’s experience on any particular phone.

“We’re going to see more device and OS proliferation in the coming year,” Murphy predicts. “So it becomes more important that the services are working well on a greater cross-section of devices than in the past. When you’re a national brand and you’re only hitting a certain section of the market — maybe excluding all your customers who aren’t on the AT&T network or aren’t using a specific device — that doesn’t sit well with your whole customer base. It’s more about opening up to the masses. That means taking the extra step and making sure the services and applications work well on the greatest variety of devices and carriers out there.”

Soon: More than Just Your Bank in Your Mobile Wallet Mobile banking and paying bills directly through your bank are just the beginning of the financial power you’ll soon hold in your hand in your cell phone. VISA and MasterCard are both well into testing and rollout of various mobile device transaction services, including person-to-person payments and point-of-purchase payment technologies. Near Field Communication (NFC) technology is gaining traction, and will enable “wave and pay” for retail purchases. Target Stores already claims the ability to scan mobile barcodes in all of its stores, giving customers access to their gift cards right from their phones, 12MediaPost News Marketing Daily, “Target Makes Its Gift Cards Mobile, Scannable,” by Sarah Mahoney, February 10, 2010 and Starbucks has been testing similar functionality in some of its West Coast stores.

In the not-too-distant future, managing one’s entire financial life — from depositing money, to paying bills, to buying anything and everything, to lending a friend some cash — will all be possible from the palm of your hand, wherever you and your hand may be. All the more reason to keep a firm grip on that phone, and be sure you don’t leave it on the restaurant table — at least once it pays the bill.

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