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Nancy Feig
Nancy Feig
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Mobile Banking Experiencing Increased Adoption

As an increasing number of institutions pursue mobile banking initiatives, questions remain over which delivery model is best, whether consumers really want the service and how banks can realize a return on their investments.

But Are Consumers Listening?

Despite the growing mobile banking push from banks, however, not everyone is convinced of the service's value. "I've been watching my bank clients get all worked up over mobile. [But] where is the time out to say, 'Does anyone really want this technology?'" relates Forrester's Graeber. "There is a lemming effect out there. ... If the big guys do it, everyone else does. [But] the big guys don't really know how to make money off of it."

Most vendors and bankers, however, point out that there was no real demand for Internet banking in its early days -- a fact that didn't seem to affect its eventual widespread adoption. "[Adoption] is never going to happen as fast as optimists would like and [always] faster than pessimists would like," says mFoundry's Sievers.

"I had the same discussion about Internet banking," Firethorn's Rackley adds. "No one is sitting around saying, 'If I could connect to my financial institutions via mobile, life would be great.'" However, they probably weren't thinking that they needed bottled water or satellite radio, but look at how those products have taken off, Rackley says.

"I love seeing newspaper and television commercials for mobile banking," says Huntington's McGee. "All of those pieces will help consumer awareness." According to McGee, research indicates that 30 percent to 35 percent of current users of online banking have shown interest in mobile banking.

Among the factors that may be holding back customers from adopting mobile banking are concerns about security. "Security is one barrier to adoption, so we embrace that challenge," says Bank of America's Brown. "We ensure that it is a secure device and a secure connection." Brown notes that the bank maintains a list of 450 allowed and supported mobile devices, and also utilizes its SiteKey online banking authentication tool for the mobile channel.

What Is the Value Proposition?

Beyond building consumer demand and securing the mobile channel, banks also are challenged to build the business case for mobile banking, mostly because the ROI is impossible to pinpoint. "It's a way to attract a younger audience," says mFoundry's Sievers. "And a good retention point."

While Forrester's Graeber concedes that retention and deepened relationships can come from "electronic hooks," she does not consider that an answer to the ROI question. Graeber says firms already have used up all those benefits with online banking and bill pay. But that doesn't stop mobile banking's proponents from touting customer satisfaction as a measure of ROI.

"It's a service, convenience, another feature in our cap to keep customers happy and keep them with us as long as possible," says Huntington's McGee.

"Being early adopters of mobile banking technology among financial institutions of our size will help us establish an early foothold with more clients," concurs Irwin Union Bank's Cox.

And, "It's an opportunity for us to be more active with people in managing their finances," adds Bank of America's Brown. Though he acknowledges that mobile banking has not and will not displace other banking channels, Brown stresses that it complements existing channels. "The phone is becoming such an integral device," he says. "It's right in the sweet spot of what people are asking for today."

Regardless of the debate over current demand for mobile banking, banks will continue to test different types of solutions to find the ones that fit their customer bases. "We'll continue to see the big guys test and learn," says Forrester's Graeber. But she worries about the smaller institutions. "I worry about smaller banks and credit unions -- do they even have a customer base that matches up to the sweet spot?" she asks, adding that the next year will reveal a lot about the mobile banking trend.

According to Gartner's Cohen, some projects will start to show their faults, new vendors and acquisitions will reshape the space and the ROI race will heat up. "Banks can expect more of the Firethorn/Qualcomm [deals]," Cohen says. "In some ways that's going to be good because Qualcomm [for example] has deep pockets and mobile device expertise."

MFoundry's Sievers says that while some technology providers will continue to grow, many will get acquired by payments companies and general financial services technology providers, such as Metavante or Fidelity. "It's inevitable that there will be consolidation" in the vendor landscape, he asserts.

And despite skepticism from some experts, banks will continue to pursue mobile success. Bank of America, which has more mobile banking users than all other U.S. banks combined, is "very bullish on the prospects for mobile banking," the institution's Brown says. "We want to demonstrate that this is the real deal with real customer usage. We won't be rolling back this model."

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