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Mobile Banking Takes Off ... Or Does It?

Although some observers question consumer demand, bankers say mobile banking adoption will come far quicker than did adoption of online banking.

Perhaps indicative of that, Kelly Brieger, a spokeswoman for Clickatell, a Redwood City, Calif.-based provider of text messaging services to banks, including two of the top three South African banks, says U.S. clients won't allow their names to be released. "We signed three domestic, regional banks in the last six months, but they're all really tight-lipped," she explains.

The only source who even comes close to suggesting that banks have put the brakes on m-banking developments is Forrester's Higdon. The top 20 banks are already committed to the channel, he says, so "they're certainly not scaling back or abandoning those projects." Smaller banks, however, may hold off to see what works, he suggests. "Nobody knows yet -- we're waiting to see what slides off the wall."

To Text, or Not to Text?

London-based Barclays Bank ($2.27 trillion in assets), the 18th-largest bank in the world, hardly qualifies as small, but it still represents some of the uncertainty surrounding the form in which mobile banking will be delivered. Following the bank's introduction of browser-based mobile banking in summer 2007 and tests of various vendors' SMS-text offerings since, Barclays now plans to make its major m-banking push a text offering early next year, according to Phil Sowter, the bank's head of mobile and self-service initiatives, who admits that Barclays will be a little late to the SMS fray.

Barclays is convinced that text messaging is consumers' preferred method of banking on the run -- for now, Sowter says. "It's not a matter of either/or," he adds, suggesting that there is room for both browser-based and text-based mobile banking. But it will be some time before the content of the average Web site has been designed with the mobile user in mind, Sowter asserts.

"SMS is where the market is at in the U.K. at the moment," he continues. "It offers the reach and adoption that isn't there for downloads or browser-based m-banking."

Given the uncertainty about m-banking platforms themselves -- not to mention vendors' proprietary products -- Barclays exemplifies why some banks might keep mum on vendor announcements. Though Clickatell cited Barclays as a customer, Sowter tells BS&T that Barclays conducted "a couple of tactical pilots" of m-banking text alerts but would not proceed with Clickatell.

In Sowter's view, there's a lack of "scalable" vendor offerings for SMS-text banking. "We're looking at much larger and more-complicated SMS messages," he explains. "We want to extend the range of alerts beyond online banking customers." Sowter says Barclays' text service will include unique features, but he declines to elaborate.

Eventually, "The fixed and mobile Web will converge," Sowter contends. And he is echoed by others, including Huntington's McGee.

"We'll see many institutions layer one technology on another," McGee predicts. "The progression will be from browser to text to downloaded applications," he asserts, noting that the cost of deploying the three dominant forms of m-banking rises in that order. That said, "A tiny little bank with a good programmer could launch a mobile browser solution for a couple thousand dollars," McGee contends. But for that, he adds, "You'd likely just be able to check transaction history."

BankPlus, a $2.1-billion bank based in Jackson, Miss., isn't exactly tiny, but compared with the few banks operating locally that offer m-banking -- such as Wachovia Corp. (Birmingham, Ala.; $812.4 billion in assets) and Regions Financial Corp. (Birmingham, Ala.; $144.4 billion in assets) -- it is. According to Dave McLeod, BankPlus' EVP and chief technology officer, as of July, 3,000 of the institution's 30,000 online customers have adopted browser-based m-banking since it was first offered in late February 2008.

"Today, it's just an extension of our Web site," McLeod says. But, he adds, BankPlus hopes for revenue opportunities from m-banking in the future. "Bill payment is the only Web banking function you can't do in our m-banking," McLeod notes. But he stresses that BankPlus plans to offer m-banking functionality that goes beyond online banking, such as alerts.

Where's the Money in M-Banking?

McLeod's characterization of BankPlus' m-banking plans encapsulates many of the issues facing banks: How do they make money from m-banking? Why would customers want m-banking in the first place?

In the words of Forrester's Higdon, the knock on the current state of m-banking is that "All we have done is simply port over everything we have online to a mobile platform." Indeed, Citi's Kietz remarks that there was some online "badmouthing" of Bank of America for such "porting" when it recently released an m-banking service for the iPhone. Yet Charlotte, N.C.-based BofA is the industry's big mobile banking success story, with more than one million m-banking customers, and the iPhone is widely lauded for raising consumer awareness of mobile devices as transactional tools, not just communication devices.

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