Source: Finextra Research
Banking by mobile phone - dismissed as a technological white elephant just four years ago - is set to make a fresh claim on bank IT budgets in the face of growing consumer attachment to the ubiquitous devices.
Many banks had their fingers badly burned in the goldrush years of the dotcom bubble, pouring funds into cumbersome and unpopular WAP-based services. As the banks pulled back to lick their wounds, the consumer love affair with mobile technology continued apace. Even as most Western economies approach 100% market penetration sales show no sign of slackening off as users trade up to smarter interactive devices.
Those banks to have returned to the market have been pleasantly surprised by the experience. The UK’s First Direct claims that one-in-eight new customers cite the remote bank’s text-based account management service as their primary reason for joining the bank. Wachovia, the fourth-largest US bank, says that one-in-three of its nearly two million daily balance alerts to customers are viewed on wireless devices.
Speaking at Finextra’s retail financial technology Finexpo event in September last year, David Fallowell, head of business futures and usability at Nationwide pointed to research conducted by the building society that had picked up on a trend among young women to paint their nails to match their mobile phone fascias.
"This is very interesting," he says. "It tells us that mobile phones have become an essential lifestyle accessory and are seen as an extension of the user's personality."
Finextra’s own survey of retail bank IT spending patterns conducted in the summer of last year and released at Finexpo found mobile devices gaining in importance as banks identified the channel as a priority area for customer-facing technology investment.
The resurgence of interest has been noted by the vendor community. Already this year, US electronic payments processor First Data has moved to establish a business unit focused on delivering mobile payments and services, and has appointed a former banker, FleetBoston's Nandita Bakhshi, to head up the new division.
And just last week, UK wireless content provider Stream paid a maximum £1.5 million to Morse for its loss-making mobile payments and data subsidiary MChex. Stream talked up MChex’s comprehensive suite of connections to all five UK mobile networks, but the real meat in the deal is with the vendor’s contract with the Link interchange network to convert consumer handheld devices to 'mobileATM' screens, from which consumers can view bank accounts and purchase air time from their hand sets.
The initiative points to a possible future for the mobile phone as a pocket ATM. Today’s mobile phone is slimmer than most wallets and purses, more ubiquitous than the Internet-connected PC and considerably more convenient than physical bank access points.
The displacement of traditional bank-issued plastic cards by SIM cards as a means for transmitting and receiving payments has long been posited as a looming threat to the banking business. However, lack of standards, flakey infrastructure and security issues continue to hamper moves in this direction.
More likely, the SIM will compete with loose change for a share of consumer pockets, with the handset emerging as a convenient micropayment device and information screen for viewing account details.
It may not kill off the ATM entirely – after all a mobile phone will never be able to dispense a fistful of ten pound notes - but it poses the first real threat to the franchise since the earliest machines arrived on the high street almost 40 years ago.