Better Safe Than Sorry
Before banks can make any mobile opportunities a reality, however, they need to be mindful of security. Clearly, banks are comfortable with traditional configurations, in which PCs are wired and plugged into networks via Ethernet cables. "Banks can see where the computer is plugged in and detect where the firewalls and other layers of security are," explains AirDefense's Rushing. "But with wireless, all bets are off."
In fact, a lack of security is a surefire way to kill any wireless project. "Customers will only adopt [wireless applications] if they trust their bank, and if applications are treated and maintained responsibly," NCR's Race asserts.
While wireless networks are not yet 100 percent secure, there is hope on the horizon. "The encryption problem has been solved, but due to the nature of wireless, users are still able to mimic and piggyback onto networks over the air," AirDefense's Rushing says. "Until this is resolved, banks need to monitor what is going on and who is doing what functions."
Despite some security concerns, however, new mobile banking applications already are emerging. While total mobile banking remains a theory for the time being, the first step toward achieving that nirvana may be through contactless payments. Supported by a contactless smart card or NCF (Near Field Communication) chip embedded in a mobile device, customers may gain a new way to access ATMs, pay for purchases or make electronic deposits. An NFC chip encrypts credit card or bank account information; then, using short-distance radio waves, transmits data to a receiver that can reside in a point-of-sale payment terminal, an ATM or a kiosk. Since the chip is considered two-way technology, the unit also can receive other data, such as receipts or coupons.
"The concept also holds the opportunity to mitigate payment card skimming and fraud," NCR's Race points out. "By removing the mag stripe from the equation, consumers no longer need to insert a card into an ATM slot. This eliminates the chance of embedded data being skimmed or cloned."
Looking ahead, banks may choose to outfit entrance doors with electronic sensors that detect these chips. "This will alert associates to when a valued customer enters the branch," Race says.
While European markets already are testing various contactless banking applications, the domestic market may soon follow suit, according to Race. NFC chips will gain traction during 2007 and 2008, paving the way for these solutions, he contends.
While U.S.-based banks are hopeful, they do remain cautious. "Banks overseas are testing mobile payment alternatives, and they clearly provide an opportunity," said Richard Martino, senior vice president, U.S. Bank (Minneapolis; $217 billion in total assets), at the "BetterManagement LIVE!" conference. "However, it will happen over time," he added.
Daniel Thorpe, senior vice president with Charlotte, N.C.-based Wachovia ($700 billion in assets), agreed. "Europe is ahead in this arena, and from a business level, they are more comfortable with the technology," he told show attendees. "To gain critical mass here, the industry needs to ensure security [for users]."
Security issues aside, banks also are at the mercy of another factor. "The mobile phone industry will enable and drive these solutions, as they own the underlying and supporting technology -- not the banks," concludes Thomas Spitzer, president and CEO of Tyfone, a Portland, Ore.-based provider of applications for mobile phones. **