Mobile banking may someday become a killer application,
but for now it’s only taking baby steps.
Despite some flameouts of the dot-bomb days, many banks and financial institutions offer some form of customer account access through the Web or through client-side mobile applications. But mobile banking today – specifically credit card use – is taking its first substantial steps to mainstream adoption in the United States through mobile alerts and notifications.
Last year, officials at Visa began laying out the company’s plans for new partners and pilot projects. Now, 18 months later, field tests are under way. In those trials, notifications are sent by text message as soon as charges are made anywhere in the world and regardless of the time of day.
The testers include 2,000 employees spread among Visa and eight of its resale partners – PNC Bank, SunTrust Bank, U.S. Bank, Wachovia and Wells Fargo in the United States, along with Royal Bank of Canada, TD Bank Financial Group, and Vancity in Canada. Behind the scenes, Visa’s technology partners are Cassis International, Ecrio, Giesecke & Devrient, IBM, Inside Contactless, mFormation, Nokia, Venyon, VeriSign and ViVOtech.
“Visa is pushing the envelope here,” and is using home-brewed technology, according to Mark Schwanhausser, analyst with Javelin Strategy & Research. “It has the potential to redefine real-time… the only thing better would be in the middle of the transaction, before it’s authorized,” he noted.
Messages show the date, time, dollar amount, merchant name, location and clickable link for telephone support, said Pam Zuercher, Visa’s head of global product innovation.
Banks can differentiate their service by deciding which information to include or exclude from the messages, by changing the specific wording of the messages and by charging for it or offering it free. The software is carrier-agnostic because from the cloud perspective all messages are just ordinary texts, she explained.
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“What’s on the long-term roadmap for us are 2-way communications, so actionable alerts where the cardholder has an opportunity to act on the message and send messages back and say this isn’t me,” Zuercher said. There also could be messages sent whenever an account is opened or when rewards and incentives are available; Visa announced a similar pilot for sending merchant offers through Chase last month.
Jim Kittridge, COO of Wachovia’s card and payments division, said the Visa technology is a logical extension of Wachovia’s current service of sending nightly updates.
“The most powerful piece of what we’re piloting is not only the fact that a customer can get this information in near real-time, but the fact that the customers themselves actually set up the parameters as to when and how they get those messages,” he said. For example, customers could choose to only receive alerts above a certain monetary threshold, or only when charges are placed from certain locations.
The Visa service is still working out some inherent issues, Kittridge said. The character limits of text messaging, teaching customers to trust that the messages are legitimate, the differences between amounts paid versus amounts charged at the point-of-sale, brand names versus corporate names on statements – those issues all can become problems, although there’s frequent communication between the partners and Visa to address such twists. “This is proving to be a great learning experience for us,” he said.
“It’s the most ubiquitous device that most people carry in today’s lifestyle. When you have a bad customer experience, you kind of wonder, ‘My gosh, this world is so wired and this institution is so wired, why can’t you deliver this information to me faster?’” said Peter Ho, Well’s Fargo vice president and product manager for card services and consumer lending. “We actually are very impressed with the speed with which the alert is delivered. Ninety-five percent of the time I feel the phone buzzing before I even sign the receipt or walk out of the store.”
Ho sees a path from mobile alerts to the mobile banking panacea, but said it won’t necessarily be a direct route. “They’re two different events. When you’re talking about point-of-sale payments, there’s a much larger ecosystem that you have to work around. This will probably get more people to think about payments on mobile devices and that’s a positive step. But it’s not the killer app that will get everyone’s eyes wide open and say let’s go do this.”
Meanwhile, Zuercher, Kittridge and Ho all agree that security is the aspect of mobile banking most in need of attention, even if it’s as much perception and hype as real threats. Zuercher said the alerts software resides on Visa’s mainstream authorization network for reliability, but that text alerts do not contain any identifying account information. No matter how much the security the good guys think they possess, text messages are not encrypted and short codes probably can be cloned. There are a lot of smart people out there today, and some of them are the bad guys, Ho said.
Although at least six startups make technology similar to Visa’s offering, Javelin’s Schwanhausser said a massive consumer brand like Visa entering the space could be a game-changer. It makes sense that other credit card companies will follow. If Visa’s plan works, consumers soon will be comfortable associating banking with mobile phones. “This is part of a bigger trend here,” Schwanhausser said. “Mobile banking is starting to make its second push.”