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Are the banks missing a trick?

Consumers are driving technology adoption in the financial services industry like never before. Indeed, as the popularity of smartphones and tablets grows, consumer demand for information and services via the mobile channel is rising somewhat faster than banks can keep pace with.

Much of the innovation in mobile transactional services at present is coming from outside the banking industry, ironically. For example, in Kenya Safaricom has taken the initiative with M-Pesa, the mobile money transfer solution, while elsewhere in the world Starbucks has rolled out 2D barcodes enabling customers to pay with their mobile phones. There is also a lot of industry noise from leading telecoms providers in the UK and US over who will take a share in the mobile financial services revenue opportunity. These telcos and retailers are clearly leading the way in providing innovative services that allow consumers to better manage their finances, which their customers are welcoming with open arms.

So why are the banks being slow to respond to this competition? Security is still an issue with many banks worried about the reputational risk of financial data being intercepted via the mobile channel. However, the perception that consumers’ concerns about fraud are preventing them from utilising mobile banking services is misplaced. These fears are increasingly dissipating, especially amongst the younger generation, with many mobile users actively looking for online and mobile content from their banks before it is published.  In fact, one of our clients has already seen a three-fold increase in traffic from customers’ iPhones to their banking website in the last six months, which is now accounting for around five per cent of total traffic.

The array of mobile devices on the market presents an exciting new channel for banks to capitalise on. There are those outside the banking space who have realised this and are leveraging the channel to its full potential to offer new and appealing services. I think we are truly at a tipping point where the financial services industry must capitalise on the opportunity before other entrants run away with the lion’s share of the mobile banking market?


Comments: (2)

John Dring
John Dring - Intel Network Services - Swindon 19 April, 2011, 12:57Be the first to give this comment the thumbs up 0 likes

Its ironic that from the Mobile Operator perspective the innovation is often seen as been from the banking/payments sector and not the Operator sector!  The reality is that both the Banks and the Operators are drawn out of their comfort zones for different reasons.  Operators fear the risk management and payments regulatory environment, and Banks fear the liabilities and possible exposures of leveraging the 3rd party mobile channel.  The result is stalemate and often a little suspicion of each other.

In between are the Payments networks.  They are currently driving (and ring fencing) the adoption of NFC as the next big thing.

These initiatives and other Over the Top players are gradually working their way around the lack of framework provided by both Banks and Operators.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 21 April, 2011, 13:52Be the first to give this comment the thumbs up 0 likes

Banks are a part of the US isis payments JV that includes Discover and Barclays apart from Verizon, AT&T and other TELCOs. The origin of M-PESA will show that it was founded to cater to a market that banks didn't want to serve for ages for whatever reasons. Hemmed in by a combination of regulations (e.g, While MNOs might be able to serve the microfinance market in India profitably, they're not permitted to) and consumer trust issues (e.g., Who will buy a CD from a  non-FDIC insured institution in the US?), there's only so much that non-bank financial services providers can do. Personally, I think banks have a long way to go in exploiting mobile technologies in corporate and investment banking. 

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