Small financial institutions must face the mobile challenge
Building societies and other financial institutions need to avoid being complacent about new technologies like contactless and mobile payments, delegates at the Building Society Association annual conference in Manchester this week
“Mobile is not going away,” said Aonghus O’hEocha, chief executive at software company GIRT Mobile. “A billion smartphones were sold last year. The number of UK mobile transactions has doubled. Tablets have become ubiquitous faster than electricity did in the last century. Don’t just go mobile-friendly – to compete in this world, you need an app.”
One of the main differences between an app and a mobile-friendly website is the ease of use, he said. While a customer can typically reach a transaction in four steps using an app, with a mobile-friendly website that increases to 11 steps, including typing in the URL, clicking through various links and entering details.
Global Tier One banks are generally well-established on mobile. Barclays has Pingit, an app that enables customers to send and receive funds on mobile. Several building societies are also known for their apps, including Nationwide, as well as the Cumberland Building Society, which is currently planning to roll out an app that includes payments. But smaller societies, such as the Swansea Building Society, are yet to implement internet banking and may not have any mobile presence at all.
“The average cost per transaction for banks today is $3.75,” said O’hEocha. “But with mobile that goes down to just $0.08. Consider that there will be an estimated 1.1 billion people using mobile banking apps and mobile payments by next year. You could save millions. And this doesn’t have to be expensive. Get together with other societies and build a great mobile app that works. Don’t wait around – you will lose members unless you provide this channel.”
Traditionally, security has been one of the main drawback concerns of both customers and financial institutions with regard to mobile services. In the US, some 47% of consumers didn’t trust the security of a mobile phone for banking transactions, according to figures provided by GIRT Mobile. However, O’hEocha suggested that biometrics will soon allow authentication to take place in the background. Tools such as retina scanning, geolocation, IP address and fingerprint should improve security. GIRT has a system called Fortress 7, which operates a shifting combination lock in which the authentication changes regularly. The iPhone 5 has fingerprint scanning as default, while the Samsung Galaxy S4 has face recognition software.
The UK Payments Council’s mobile payment service Paym, which launched in April, brings mobile person-to-person abilities similar to Pingit between other major UK banks. Although customers could already make payments on mobile, these were limited to existing contacts that had already been created on internet banking. With Paym, customers can now set up new payment contacts via their mobile, using just the recipient’s mobile number.
Other tools are also gaining ground. In particular, contactless payments have become increasingly prominent in London and other cities over the last 18 months. Other speakers at the conference highlighted the need to continue making progress towards easier, faster payments.
“We need to simplify commerce,” said Marion King, president and chief executive of MasterCard UK & Ireland. “Payments need to work wherever you are and whatever device you are on. The London Underground couldn’t move the sheer volume of traffic it does without the contactless prepaid Oyster card. People use Amazon because it is a digital wallet, it’s easy and it saves time.”
The Oyster card was introduced in July 2003. Since 2012, customers have been able to pay for bus journeys with their contactless debit and credit cards – a scheme that is due to be rolled out across the tube network before the end of this year. According to TfL, around 30,000 tap and go payments are made daily. Similar schemes are being rolled out across 35 stations on Merseyrail as well as in Northern Ireland.
King added that MasterCard has its own digital wallet, MasterPass, which enables customers to sign up and make payments without entering their details separately each time. It is an e-commerce tool, so customers are paying online rather than in a physical store. The system is designed to work on smartphones and tablets as well as laptops and computers. For merchants and customers, the system is currently being offered free.
“Tesco have gone contactless in all their stores,” said King. “Payments have been around for two and a half thousand years since the first Lydian coins, but it’s only really in the last few years that changes have been made. There are 170 million cards in circulation in the UK. Contactless is coming and it will increase.”