Consumers have become increasingly sophisticated and are demanding easier access to a broad array of financial services through new channels such as mobile. Gone are the days of branch banking and paying by check. Consumer and corporate clients are now looking to access financial services without time, location or device restrictions.
|Talbot: Need to remove service and technology limitations to unleash m-commerce.|
For financial institutions, remaining competitive means not only meeting customer demands, but doing so in a manner that improves their return on investment through reduced operational and customer-servicing costs, and increased revenue. Worldwide, financial institutions are seeking banking and payment solutions that make best use of their IT investments, providing interest and fee-based income opportunities, whilst strengthening their overall service offerings.
Like Internet banking and electronic payments, m-commerce (m-banking and m-payments) is a way for banks and even mobile operators to create new service offerings with the potential for creating new revenue streams or cost-saving opportunities.
Banks have been testing and launching m-commerce products since the late 1990s. After the first faltering steps of WAP banking, banks often restricted themselves to simple push information and marketing alert services. These alerts services, when promoted, have been extremely successful for banks over the last five years. This was reflected in the 2007 Sybase 365 global consumer m-banking survey, where information on account balances was the No.1 requested m-banking service.
In the last few years, we have seen a small number of banks start to expand their service offerings beyond the simple 1-way push alerts, both as a response to consumer demands, and to address business issues for the banks, including information request and security enhancement. A great example is on-demand account balance via the mobile phone. Up to 60% of calls to a bank’s call center involve an account balance request; if a bank moves a proportion of these calls to the mobile channel, there are clear cost benefits for the bank as well as a better customer experience.
As banks have started to increase the products and services available via mobile, they have been forced to work within the limitations of their chosen mobile channel. SMS is ubiquitous, but unable to support services that require industry recognized authentication. WAP supports a rich interface, but the customer has to have a flat-rate data plan in order for it to be affordable.
Java/BREW provides the richest available interface, but requires a level of sophistication from the consumer in terms of installation and registration that doesn’t exist for the mass user today. Banks and operators that have gone down this single-channel route face limitations in functionality, reach and consumer uptake.
As banks and operators expand their portfolios of mobile products and services, they will need to break out of the single-channel approach and offer services via multiple channels to address both the limitations and reach of a particular channel, balanced against consumer preference and confidence in individual modes of access.
M-Banking Isn’t Just for Mobile
Over the past 18 months, it has become increasingly clear that the “m” in m-banking refers to the device, rather than the user actually being “mobile” or “on the move.” The clearest example of this is the use of the mobile phone as a 2FA (two or second-factor authentication) device.
Although online banking has been a great success for banks, there also has been a rise in phishing, resulting in consumer concern regarding Internet security. In response, banks and regulatory bodies have looked for mechanisms to provide additional protection for online banking.
The traditional route that some banks have taken is to issue 1-time PIN generators to their customers. This enabled the banks to request this additional PIN in the standard username/password log-in procedure.
Although this solution increased customer security and confidence, it has various downsides. First, the tokens are costly to provide and distribute to account holders, and second, it requires customers to carry them with them should they wish to access their online accounts from more than one location. As most people have more than one account, they could be forced to carry multiple tokens at all times to be able to perform a transaction or consult their account balance online. This is clearly a painful exercise for the consumer. The delivery of the 1-time PIN as an SMS has many advantages; from cost savings and inventory management for the banks, to practicality and ease of use for the customer.
The roots of m-payments can be traced back to the first premium rate telephone services through to the mobile ringtone business launched back in 1999. Today, these m-payment options still flourish in the marketplace, but have been complemented by a range of new services including mobile top-ups, credit cards, direct debit and mobile wallets incorporating the likes of remittance products.
Although these services have, so far, come from small independent companies and are geographically based, it’s clear these services are a natural extension of traditional banking products and payment instruments, positioning banks and operators as the best place to deliver such products to their customers.
According to a recent report from ABI Research, consumers interested in using their mobile handsets for payments via NFC want to create new accounts for such services. Exploiting existing financial relationships with consumers will be the best approach to drive adoption of these new payment instruments.
Thanks to the penetration of wireless devices, opportunities for new products and services are exploding. One product is mobile remittances. The official remittance market today is worth more than $250 billion, and with mobile as the predominant communication tool in the key remittance markets of Asia, Africa, the Middle East and Latin America, it’s no surprise that remittances have now been extended to a mobile application.
As with the expansion of m-banking services, the range of m-payments services will expand as consumer confidence in the mobile as a payment instrument increases. Future developments including using the mobile for NFC transactions such as transportation, ticketing and payment for digital and physical goods will only serve to increase this confidence.
M-Commerce Comes of Age
M-commerce is already providing glimpses into what will certainly become a major means of day-to-day commerce for billions of consumers and enterprises worldwide. It’s inevitable that the world evolves from an e-business or Web model to an m-business or mobile browsing model. With the maturity gained by growing from an experimental channel to a core customer channel, consistency of experience, reliability and product offering will be of even greater importance.
Although m-commerce and its constituent parts, m-banking and m-payments, have yet to materialize in scale or profitability, the removal of service limitations as well as economic and technology issues imposed by a single-channel approach, will mean rapid growth. With handsets that now “work” and by offering a multichannel solution, banks and operators will be able to realize the full potential of m-commerce to address consumer and business needs and create new products and services.
Talbot is vice president of m-commerce for Sybase 365.