March 30, 2004

For banks to attract new business and sustain the loyalty of existing customers, consumers must be able to reach financial institutions through multiple channels. With consumer interest currently focused on Internet banking, mobile banking in the United States has not yet reached the level of popularity it currently enjoys overseas. But, the use of wireless banking as a customer channel, as well as an internal tool within financial institutions, is steadily gaining ground in the U.S.

Still, there are some rough edges to smooth over, according to banks and industry experts. Though the technologies are within reach, and the potential of mobile banking seems endless, banks are not yet using wireless channels as a means to conduct transactions. For now, they are warming to mobile banking by first rolling out wireless channels as a communication tool between bank and customer.

Most popular among mobile activity is the use of mobile alerts between banks and customers. ABN Amro (Amsterdam, EUR 560.4 billion in assets) previously used Chicago-based Centerpost's CashPro Web product to send e-mail alerts to its customers. When the bank surveyed CashPro Web users, asking if they were interested in receiving alerts via mobile devices, "We had an overwhelming response, says Milton Santiago, ABN AMRO's senior vice president and chief treasury technologist, electronic banking products, North America. According to Santiago, "over 98 percent of the customer base" was interested in receiving mobile alerts.

In March 2003, the bank implemented CashPro Freedom, which enables the bank to send Short Message Service (SMS) messages, e-mail and voice alerts to customers' mobile devices any time a transaction occurs. The tool allows customers to track their account activity without logging on to a Web site and searching its pages.

"Customers are free of being in front of their PCs," says Santiago. "They may be [checking their accounts online] all day because they are waiting for specific funds. What [CashPro Freedom] does is give them the freedom of being away from their PCs and the freedom to manage their business and not to be tied to the bank by the hip."

The message, which is sent to any mobile device, is tailored to that device, Santiago says, and it is sent in real time, as soon as a transaction has occurred within the account. The message is delivered by the bank's personalized answering agent, R.I.T.A., a Real-time Internet Technical Agent. "Any type of automated response, e-mail or page comes from R.I.T.A.," Santiago says.

Text messages from R.I.T.A. go directly to the mobile device, and are encrypted as SMS or e-mail messages. But how does a voice recording get delivered securely? The call from R.I.T.A., which can make the distinction between a live answer and a voicemail response, only discloses a portion of an account number, just enough for the customer to recognize his or her account, Santiago says.

"You can't really say that the person who is intended to get the message is the person who picked up the phone," he explains. "What we did to make customers comfortable is that we don't disclose the entire account number. We give them a certain amount of digits, enough so they can identify their accounts."

Wireless service providers are also looking into the security issues involved in mobile banking. Sprint (Overland Park, Kan.), which is now offering banks wireless services for their customers, is keeping an eye on upcoming regulations regarding encryption of customer information on wireless devices, according to Jeremy Turk, telemetry account manager, Sprint. "One of the regulations, which is coming up next year, is one where all of the data transacted has to be encrypted," says Turk. "The password and the data itself would have to be encrypted. Based upon how our networks are designed, we have encompassed those means so that [banks] don't have to do anything."