The concept of a direct bank isn't anything new. Banks have existed only in the Internet ether in some form or other since online banking took off in the late 90s. However, technologies change and savvy financial institutions try their best to keep up with them. One of these FIs is Tokyo-based Jibun Bank—a direct bank that exists in the mobile telecom ether.
Jibun Bank was launched last year through an alliance between Bank of Tokyo-Mitsubishi UFJ and KDDI, a telecommunications company with more than 30 million subscribers in Japan that offers mobile phone services under the brand name "au."
According to Takeo Tohara, president and CEO of Jibun Bank, the aim of the partnership between financial institution and telecom company was to move to the next stage in the evolution of customer service and "any time" banking.
"The core strategy behind the partnership between Bank of Tokyo-Mitsubishi and KDDI was to take customer centricity in banking to the next level by providing convenient and secure banking services via the mobile phone," Tohara tells BS&T. "As a joint venture, Jibun Bank aims to develop full banking services with a target of 2.4 million accounts and deposits of 1 trillion Yen by its third year of operation."
Jibun Bank came into being as a result of the ever-growing shift in Japan toward using mobile phones for many facets of daily life, explained Tohara. Furthermore, this movement was being led by the younger generation of consumers as they started their own banking relationships.
The partners studied their potential customer base carefully, according to Tohara. For instance, he says that mobile phone penetration levels in the bank's active customer base are near 100 percent. Additionally, Japan has a very well-developed mobile infrastructure—Japan leads the rest of the world in 3G cell phone proliferation, with nearly 104 million 3G handsets in use, or about 90 percent of cell phones in use in Japan, he says. As a result, they found that customers do much more on their mobile phones besides talk.
With this information in mind, establishing Jibun Bank seemed a logical next step. "Bank of Tokyo-Mitsubishi and KDDI launched Jibun Bank to provide a complete bank in a mobile phone, enabling the bank to target the newest generation of customers and take advantage of mobile technology to differentiate the allied companies in their respective business areas. We aim to remain competitive by offering high deposit rates and low fees," Tohara relates.
But in a world where mobile banking and payments are becoming the norm—especially in Japan—what makes Jibun so different from other m-banking offerings on the market? It's the fact that the mobile phone is the primary channel for Jibun and not an add-on.
"Unlike traditional banks where mobile banking is used as a secondary channel through which customers can only conduct account enquiries and basic transactions, Jibun Bank is entirely based in the mobile phone, with the Internet serving only as a secondary channel," Tohara explains. "For a Jibun Bank customer, the entire lifecycle of products and services are available on the mobile phone, right from account opening to account closure.
In addition to more standard transactions such as Yen deposits and funds transfers, customers can access more complex banking services such as foreign currency deposits, loans, credit cards, electronic money, e-shopping payments and financial planning tools. The bank also has started selling insurance products and is planning to add the new products aggressively, according to Tohara.
These features are certainly beyond what is offered by many m-banking services today, especially in the U.S. Therefore, Tohara says Bank of Tokyo and KDDI sought a core banking system that could scale and adapt to a mobile environment with minimal trouble. The partners selected Flexcube from Redwood Shores, Calif.-based Oracle for the task.
"A virtual bank with the mobile phone as the primary channel requires the highest level of automation," he explains. "The account opening process for Jibun Bank (which is from a mobile phone) is a fully automated process from both the bank and customer points of view."
He says the only manual processes are printing the forms and dispatching account information, which are outsourced to a printing company. The files are uploaded directly from the mobile phone or sent by the customer to a printing company. Further processing is executed at the printing company, which processes the data and delivers the information in electronic format to the bank, which then automatically processes the data to execute account activation. As such, he says the technical design of the project needed to undertake a much higher level of automation than conventional banking.
Given the relative sophistication of the banking applications offered by Jibun Bank, security was a concern. Tohara says the bank employs a multi-level authentication process.
"We have developed linkages from the mobile banking platform to the Nayose system, which is developed by the financial services authority in Japan, to identify groupings of deposits held by the same person," he notes. "At the customer level there are various safety options including ATM Lock and Computer Lock (both requiring au Information Link services) and transaction notification through mobile phone text messages so that customers can use Jibun Bank with peace of mind."
A direct mobile bank in the U.S. may be a little ways off, but Tohara does have some suggestions around how best to execute an m-banking strategy. First, he says to accept the fact that mobile banking will grow and be adopted on a large scale as the future delivery channel.
He also emphasizes that mobile should not be relegated to playing second fiddle to more established channels. Instead, it should take center stage for banks. "Traditional models of mobile banking have relied on mobile as a lower level channel, after branch, ATM and the Internet," Tohara explains. "But characteristics of the mobile phone, such as 24/7 availability to the customer and its personal connection to the customer, make it a very powerful channel to create and offer more products and services."
Tohara also suggests target marketing the services and products for the mobile phone. For instance, Jibun has been most successful with women and the younger generation of consumers.
It is also important to be mindful of the convergence of m-banking with other mobile customer transactions, such as m-commerce payments and funds transfer via mobile number, gives the customer a more complete and comprehensive experience, he comments.
All of these recommendations won't mean much unless the underlying technology strategy is sound, Tohara says. "Mobile phone banking leverages technology to the maximum. Hence, a sound technology strategy, from core application selection to implementation strategy, is required to ensure that mobile banking is comprehensive, secure and convenient."