[Dave Birch] Most of you will, I’m sure, have read The Economist this week, which says that:

As mobile phones have spread, a new economic benefit is coming into view: using them for banking (see article), and so improving access to financial services, not just telecoms networks

[From Mobile banking: A bank in every pocket? | The Economist]

Pretty uncontroversial stuff. Mobile banking, whatever. But only yesterday I nearly dropped my iPad on top of my iPhone when I read this article from the management consultants McKinsey talking about mobile banking…

The survey of executives at 150 European banks, conducted earlier this year, confirms that mobile is here to stay. Most senior executives reject the idea that it’s a fad

[From What’s the future of mobile banking in Europe? – McKinsey Quarterly – Financial Services – Banking]

Wait, “most”? Seriously, are you kidding me? You mean there are some “senior executives” of European Banks who do think that mobile is “a fad”. You’d think they’d have got the message by now, having seen their butlers and chauffeurs using these new-fangled “mobile telephones” for some time.

The McKinsey article quotes a survey from the European Financial Management and Marketing Association (EFMA) which forecasts that in five years’ time, essentially, only a third of younger (i.e., under 25) customers will be using mobile banking. This is seems like a perspective from ten years ago. In fact, it was the perspective ten years ago. Chris Skinner made me laugh when he was having a go about this three years ago!

Robin Banks visually trembled and said, “not strictly true sir. When APACS and the industry made this decision, we didn’t think mobile telephones were going to be as ubiquitous or usable as they are today.”

[From The Financial Services Club’s Blog: Why mobile banking has taken so long]

Well, no-one had perfect foresight*. But surely it must have been transparently obvious for the last few years that mobile will be the central channel for future financial services. Not an additional channel, but the central channel. The long-term convergence of the industry toward a single customer experience will take everyone toward the mobile experience. Whether you are in a branch, on the train or in bed you will have your mobile in your hand for all banking transactions.

Gartner’s senior analyst for the financial sector has cast doubts on whether Australian banks should invest heavily in mobile banking applications and near field communication (NFC) payment systems.

[From Gartner casts shadows on mobile banking – Strategy – Business – News – iTnews.com.au]

Let’s set aside for a moment the fact that mobile banking and mobile payments are different businesses. No, wait. Let’s not.

Money transfers and payments over mobile phones are likely to be among the top 10 most important mobile applications by 2012, according to Gartner.

[From Money transfer to become hottest mobile app: Gartner – SiliconIndia]

If I’ve interpreted the Gartner runes correctly then, they are saying that mobile payments is worth investing in but mobile banking is not. I don’t think that’s right.

There is a strong case for Mobile Banking ROI. On the costs side, a call center transaction costs the bank $3.75, an IVR transaction costs $1.25. A transaction through the mobile channel costs the bank $0.08. So more frequent use of the mobile channel will reduce calls to the call center and IVR thereby reducing costs.

[From Mobile is Not a Step Child of Online Banking – BankInnovation.net]

There’s a discussion to be had about what kind of mobile banking investments banks might make, naturally. But there is no debate about whether they should have a mobile channel. As in the case of payments, the real and valuable discussion is about which parts of the value network the banks should support themselves and which they should leave to others. In the case of payments, for some banks, that will mean giving up altogether. But in the general case, it’s about finding the right mixture.

But should banks develop their own platforms or could they share one from a provider such as Swift? After all it is all just about sending a message securely across a mobile network.

[From Will banks avoid the mistake of DIY internet banking platforms and opt for shared mobile banking? – Inside Outsourcing]

Good question, and not one that I am especially qualified to answer. I can add to the debate by pointing out that, once again, it’s been clear for some time

Imagine you are a bank with no branches or ATMs, almost three million customers and only 195 employees in total. This is eBank in Japan.

[From E-bank Japan sets mobile banking example | 13 Oct 2008 | ComputerWeekly.com]

Again, these aren’t new observations, but just to reinforce their message, it’s that banks won’t see much return on investments in mobile if they are just pfaffing around using it as a small browser window.

It’s more than just a channel, mobile solutions provide a new way to think about old processes.

[From Mobile Banking – It’s more than just another channel – Bank Innovation]

Couldn’t agree more. And if you do that, I strongly suspect, you will end up with a role for the mobile phone that is integral to all transactions, not only mobile ones. The role of the mobile has been discussed many times during my Centre for the Study of Financial Innovation (CSFI) Fellowship on “Identity and Financial Services“, to the point where i am convinced that identity management, not payments, is the single main reason for banks to invest in exploiting the technology.

Not everyone has access to the internet. But we are well on the way to pretty much everyone having a mobile phone. And in parallel with that, what those phones can be used for is growing almost as fast.

[From Public Strategy: Channels not so much converging as crashing together]

Or, to put it another way, identity is the new money. The role of the mobile phone in financial services will be disruptive because it bring functions that do not currently exist. Using the mobile phone to look at a bank website isn’t disruptive, but using the mobile phone to prove that you are a Barclays’ customer, over 18 and resident in the United Kingdom is. I can make, I think, a confident prediction that the synergy between the mobile phone as a personal device and personal identity as a business function is so great that it will mean a revolution.

Arguably the largest disruptions in mobile phone use over existing practices have come from the very personal nature of mobile phone ownership: incoming and outgoing communication; social networking; web browsing and media consumption; search queries are now by default a private matter with sharing a matter of choice.

[From Mobile banking? Personal banking]

In time, I expect my phone to be an indispensable part of every single banking transaction I do: that’s because the mobile phone is going to become my identity selector and authenticator. Let me stress that this hardly a wild, science fiction prediction. It is based on an analysis of the technology roadmap, the business drivers and the social trends. And, of course, looking at what’s happening around the world. Let’s go back down under for a moment.

The National Australia Bank has confirmed a spike in customers using its retail banking services from internet-enabled mobile phones is likely to lead to it replacing security pass codes – now sent by SMS – with biometric voice prints within a year because of growing security concerns.

[From CIO > What is next in mobile banking]

Again, another key synergy with the mobile channel: voice recognition and voice authentication mean major, major changes in the way we interact and transact. Mobile isn’t a “fad”, or an important channel or a nice to have layer on top of online banking. It’s the basis for a new way to do banking.

It’s more than just a channel, mobile solutions provide a new way to think about old processes.

[From Mobile Banking – It’s more than just another channel – Bank Innovation]

All of which, to finish, means that the evolution of security technology in the mobile world is going to have a fundamental role in shaping the way that all financial services organisations are going to do business in the future. That’s why it’s so important for the people putting together business strategy to understand the relationship between technology choices (some of which must seen pretty obscure) being made now around mobile architecture and infrastructure.

* Not strictly true. When the Centre for the Study of Financial Innovation (CSFI) published its first report on electronic finance, more than ten years ago, I clearly remember it highlighting the mobile phone as a key channel.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers


2 comments

  1. It was all going so well until you got to the bit about voice biometrics. Please, Dave, please – forget biometrics. To all intents and purposes, they don’t work. I quite agree about the central importance and inevitability of mobile. I quite agree about the crucial importance of identity. But the evidence all suggests that biometrics don’t and won’t help. Join the biometrics apostasy, Dave, then we might see mEverything finally take off.

  2. … have you seen the date on that What is next in mobile banking article you quote from? November 2009. Two years since voice biometrics was the “next” thing. When is “next” coming? For you, Voice Biometrics, I think the war is over.

    [Dave Birch] A fair point, and for voice identification I might agree that there is a way to go, but I think voice authentication (especially with local matching in the handset) is a practical mix of security and convenience.

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