09 March 2009 Features

 

Moving Money

Paul Skeldon

Mobile banking and payments are - at last - ready for mass adoption

The announcement in February at Mobile World Congress - the annual gathering of the world's mobile telecoms industry in Barcelona - that Visa is to work with mobile industry body the GSMA to develop standardised mobile financial services worldwide marks for many the culmination of a courtship dance between two of the world's largest industry sectors that has fizzed and crackled for almost a decade.

Ever since the billing properties of mobile phones came to notice as a means of commerce, the tie up between the ubiquity of the mobile handset, the power and global reach of the network operators and the needs of banks to offer better service to existing customers - and to expand banking to developing nations lacking in basic infrastructure - has looked inevitable. And here in early 2009 we may just be starting to see it happen.

But ‘mobile banking' is a pretty nebulous term these days, covering both banking transactions and payments, as well as remittances, notifications, stock alerts and even electronic wallets. Additionally, the line between mobile network operators' billing services - typically for the purchase of games, ringtones and downloads - and the role of banks and credit card companies in purchase of goods on a phone for use on the phone - and the simple purchase of goods via a phone - is becoming blurred. The move to make the internet accessible via mobile is also opening up a range of possibilities to both industry sectors, while causing no small amount of friction between them as to who owns the customer.

Until the economic downturn, many network operators were mooted to be looking at becoming banks. They already have huge foreign exchange businesses because of the international nature of their operations. The step to develop from mobile billing into banking applications alongside this FX trading seemed to be the next logical move.

However, circumstances have changed. Not only has recession forced operators to look at focussing on core operations - running network and billing services - but also the arrival of the Apple iPhone and a raft of iPhone-a-like smartphones have also changed the game.

The iPhone offers mobile access to the internet - not a mobile version of it controlled by the network operators, but the web itself - so in terms of mobile payments, mobile is just an extension of e-commerce and arrives pretty much fully formed and is, to all intents and purposes, already taken care of in banks' online banking strategies.

Where the real opportunity now exists is in offering banking services to users via mobile devices: money transfers and what are being dubbed "additive banking services" and "transformational banking services" that make better the banking experience for both well-served banking customers in developed countries and for the ‘under banked' in both developing and developed nations.

"Additive banking is a critical strategy for established banks globally and applies to developed nations where the banked population is approaching 100% and banks want to reach particular customer segments in more effective ways," says Howard Wilcox, a senior analyst at Juniper Research. "It is also about reaching the under banked in developed nations. Transformational banking, on the other hand, looks to do much the same in developing countries where poor existing banking infrastructure prevents hurdles to developing banking services."

Much has been written about the developing world's use of mobile as an alternative banking infrastructure, but in reality mobile banking's immediate future lies in these additive services in developed markets.

"Banks need to bring convenience to customers and to differentiate themselves from one another in terms of easier and better services for a more mobile population," says Sean Moshir, chief executive of Celltrust and co-chair of the Mobile Marketing Association mobile banking sub-committee. In his view the simplest solutions are the best and that is why we are about to see an explosion in the use of SMS banking.

"Mobile web access still has some problems, such as cost of data and handset limitations, but SMS is pretty ubiquitous worldwide," he says. "The only problem is lack of security, so we have so far only seen it used for banking notifications and balance requests."

But Moshir is confident that trials of Secure SMS - which features user registration, PIN protection and encryption - by networks in the US will, within two years, deliver simple, secure text-based money transfer and bill payment services that banks globally can utilise.

"In trials, secure SMS has proved to be very simple to set up and to run and works well. It has the added advantage that a bank can just use a simple short code to offer access by SMS, voice or even WAP to its services," he says.

It is this tie up with what mobile phone networks can do and what banks want to offer that is the true power of mobile banking. The network knows pretty much who the phone user is if they are post paid. Pre-pay consumers are a mystery to them. However, if pre-paid users are registering to use mobile banking services, then the banks know who they are. Working together the two sides can share all this information: to offer a picture of who does what, when, where and how - as one anonymous mobile exec put it: "They will know more about you than your mother."

This has obvious benefits such as security: the banks and networks between them will know who is registered to do what with each handset. It will also be able to track handset operation and offers an important security backstop behind the user's PIN protection.

"This security is all part of the education process," says Moshir. "We have to show consumers that it is totally secure and safe, as well as being easy, if it is to take off. The technology is there, but the mindset isn't quite."

This degree of awareness as to user habits also offers targeted marketing opportunities. The key though is collaboration, which where Visa and the GSMA come in.

"Visa's comprehensive mobile strategy, its experience of enabling consumers to transfer funds across borders and domestically were the deciding factors in working with Visa," says Bill Gajda, chief commercial officer for the GSMA.

But what the banks and credit card companies get out of the relationship is that services can be delivered securely to users and, with pre-registration and PIN protection, these services are as safe - yet more flexible - than using an ATM.

In addition, the use of a single, memorable five-digit shortcode to contact the bank means that transactional services can now be tied in with calls to call centres, email contact and, as said, marketing services.

But this once again raises the question of who owns the customer - and more importantly, the customer's data? Network operators have long realised the value of the information they sit on about their customers, do they want to dilute this value by sharing that info with someone else? Moreover, network operators have spent a lot of their own money on developing payment and billing mechanisms of their own which they will protect fiercely.

The two sides are circling each other in ever-tighter formation and mergers of needs and skills are occurring. Forecasts by Juniper predict that 1.4 billion people worldwide will be using mobile banking services by 2015 and that is starting to look ever more likely, but there is still someway to go. And who knows how the disruptive iPhone and its spawn will change the game yet again in the coming months?

Paul Skeldon is a freelance media and mobile technology journalist and editor of Telemedia-news.com