The current state of the mobile banking payments marketplace can charitably be described as "confused," with at least nine distinct payment models and four banking platforms competing for attention, as shown in the table below. Even this list does not include trivial examples such as using a mobile phone to call a mail-order firm and place an order using voice communications or the use of a wireless modem and a laptop to order goods from an online retailer.
|Type||Example||Main Sponsors||Hardware Dependency||Enrollment Dependency|
|"Walled garden"||AT&T i-mode||Mobile telecom operator||Supported handsets||None (mobile bill pass-through)|
|SMS push payments||PayPal Mobile, ZIPwire||Independent third party||None||Required|
|Premium SMS/short||GoLive! Mobile, mBlox||Mobile telecom operator, third party||None||None (mobile bill pass-through)|
|Contactless||GO-Tag, PayPass||Bank, chip manufacturer||Compliant sticker or other form factor||Enroll, order chip media|
|Mobile applications||Mobile Money Ventures, mFoundry||Banks, third party||Supported handsets||Software download, enrollment required|
|Mobile bill pass-through||BOKU, Zong||Mobile telecom operator, third party||None||None (mobile bill pass-through)|
|Near-field communication||TrueMove (SIMpass), Isis, DeviceFidelity, Tyfone, Visa||Mobile telecom operator, handset manufacturer, bank, chip manufacturer, standards organizations, point-of-sale terminal manufacturer||Compliant or adapted handset, compliant terminal, software||Software download, hardware purchase|
|Wireless transceiver||E-ZPass||Government agency, third party||Compliant powered RF device||Enroll, order transceiver|
|Wireless payment terminal||VeriFone NURIT 8000, PayMobile, Square||Merchant acquirer/ISO, terminal manufacturer||Wireless terminal, mobile telecom operator||Hardware purchase for merchant|
It is impossible, therefore, to point to any one technology as the "best" -- everything depends on what you want to use it for, and who the intended customer is. Are you trying to enable payments at the local retail store? What about funds transfers between family members? Or perhaps the purchase of a game for use on the mobile device itself?
From the perspective of banks, open technologies are preferred, because the value grows exponentially with the number of acceptance points. This is the basic engine behind payment cards, as well as branch and ATM networks. Checks have hung on well past their expiration date largely on the strength of their near-universal acceptance.
For this reason, the recent focus on smartphone applications and near field communications/contactless payments seems to us misplaced. Both of these technologies are heavily hardware-dependent, limiting their market reach. The greatest return on investment will come from leveraging technologies that are accessible to the largest number of customers, including:
SMS text messaging
Mobile browser-optimized websites
2D bar codes
While the first two items are well established, the third is still emerging, but has significant advantages in usability. In combination with an optical scanner or a camera, a bar code can bridge the gap between the virtual and physical world (2D barcodes have more information capacity than the familiar UPC codes found on product packaging, so they are preferred for financial messaging). Even a conventional feature phone can present a barcode, perhaps through a multi-media picture message sent in response to a text message.
Rather than concentrate on NFC, which makes the bank dependent on the cooperation of mobile operators and retailers, banks should focus on maximizing their existing investments in SMS and mobile web, and branch out into 2D barcodes for point-of-sale payments. Banks should also seek to ensure that their mobile payment systems are interoperable. Closed systems only benefit non-banks by leveling the playing field and neutralizing the advantage of banks' universal market presence.
The disjointed approach applies to banking as much as it does to payments. Clouding the issue further is the introduction of tablet devices which run on mobile networks. Should these be classified as a mobile device, or as a more traditional desktop? Financial institutions really need to think of four platforms for mobile delivery:
SMS / text messaging
Tablet devices, because of their larger form factor, may in fact be simply addressed as a standard desktop delivery, however there currently appears to be no slowing down the consumers’ desire for downloaded applications, so not developing an application for the tablet may be a mistake. Despite the multitude of platforms for mobile banking, IDC Financial Insights estimates that mobile banking penetration rates continue to be in the single digits for most financial institutions.
Most financial institutions have taken a rather defensive approach to mobile banking. The majority of first adopters offered SMS / text messaging along with browser based access to their online banking platforms. Numerous vendors and core providers developed or partnered with solutions for allowing mobile banking to get some traction in 2007. Most of these solutions quite honestly have not lived up to the expected consumer adoption. There are two likely reasons for this, first mobile banking has not fully delivered new technology, and second few institutions have marketed their mobile solutions actively. Things are beginning to change.
Financial institutions need to develop and adhere to a mobile banking strategy as opposed to simply using mobile as a defensive solution set. Successful institutions will view mobile banking and payments as a way to expand their customer base, and utilize the technology more than just a simple extension of online banking and bill pay. Exciting developments with deposit and bill pay technologies utilizing the mobile devices camera need to be given serious consideration for deployment. In addition, expanding the customer footprint beyond online banking will make mobile available for 40% of consumers who currently are not using online banking. Mobile can also be an excellent platform to attract underbanked and unbanked consumers who are more likely to have a mobile phone than they are to have a checking account.
Finally, financial institutions should look at the mobile device as a component of a multi-channel experience utilizing the near field communications and geo-location services to complete financial transactions. As we have seen the potential on the payment side, the same potential exists on the banking side. Utilizing a mobile device to recognize a consumer as they walk in the door, or providing them with expedited e-signing services will go a long way in cementing a relationship. At IDC Financial Insights, we have consistently seen the value of the branch network, and the mobile device can augment the investments made in "brick and mortar" instead of replace them.