Banking on the Go

There are more than 233 million mobile U.S. subscribers — an astounding 78 percent penetration rate — which makes mobile access even more pervasive than the Internet. Not surprisingly, banks and financial institutions are beginning to work with carriers to tap their customers through this near-ubiquitous channel.

ClairMail allows users to receive mobile alerts on account activity.

Mobile banking officially has arrived now that AT&T Inc. and Verizon Wireless both have gone live with mobile banking initiatives with banking institutions SunTrust, Wachovia and others. The banks use a platform from Firethorn Inc. to enable customers to download a secure application to check balances, and in AT&T’s case, pay bills, using their mobile devices. While the carriers are somewhat secondary partners in the deals, AT&T spokesman Warner May says the service makes sense for the carrier, “because we’re interested in providing as much choice as possible for consumers’ use of the phone,” which of course drives traffic and demand for data plans. He notes that it’s a compelling proposition to take the many unused three- or four-minute blocks of time that the average person has on a daily basis, and turn them into productivity time. “Bill pay is one of the key items our customers are asking for,” he says. “Meanwhile, we’re delivering 61 million customers to our banking partners.” Firethorn’s application allows password-protected, one-click access to mobile banking, and Firethorn negotiates with the banks, taking some complexity out of the deal. “So we manage one application that works with many banks,” says May. “Everybody wins.”

For Verizon Wireless’ part, Jim Straight, vice president of consumer products of the company, says that while basic account access is where he sees the first domestic takeoff of m-finance, it will pave the way for more advanced applications down the road, such as m-wallet strategies and peer-to-peer payments. “There are all kinds of things we can do with a mobile phone, and here’s another one,” he says. “But the big issue is getting people to use the phone for basic lifestyle and work applications, then easing them into other activities. Marketing efforts behind this will help, and the value of the phone and the service will increase as they move through the steps.”

Mobile app provider mFoundry inc. will work with Sprint Nextel Corp. to let Sprint Vision or Power Vision customers check their bank balances, transfer funds between their accounts, make bill payments and more, with participating banks. The Sprint Spotlight mobile banking solution will include services from a number of financial institutions, including Citibank. And VeriSign Inc. will leverage its expertise in secure content delivery to host participating banks within Sprint’s mobile banking solution.

Some financial providers are taking a carrier-agnostic view altogether. Visa International is teaming up with VeriSign to provide mobile offer management capabilities, including the delivery of mobile coupons, by leveraging VeriSign’s content delivery services. VeriSign will enable Visa, its members and merchants to create customized campaigns, mobile offers and promotion programs that can be used across carriers (albeit with those carriers’ sign-off). “Consumers are driving demand for new mobile commerce services and applications. They need to be able to access information and make purchases in a secure environment anywhere and on any device,” says Brian Matthews, vice president of industry marketing and financial services at VeriSign.

Meanwhile, Metavante Corp. is forming a joint venture with Monitise to operate a mobile banking and payments ecosystem in the United States; mobile carriers, financial institutions, payment processors, payment networks and billers can collaborate on the platform to provide financial services to consumers, the first of which should appear in the fall. The two have a track record of success: Metavante delivers banking and payment technologies to 91 of the top 100 U.S. banks, and Monitise already has cut its teeth on Monilink, a joint venture with LINK, the operator of the U.K.’s ATM infrastructure. The venture also will produce a common, intuitive and secure interface to check account balances, transfer funds between bank accounts and pay bills any time from the mobile phone.

“The carriers are critical for mobile finance as they directly impact the economics, functionality and consumer experience,” says Jim DuFon, executive vice president of sales at Sapphire Mobile Systems Inc., a mobile payments platform provider. “They also dictate what applications can be used on the cell phone. “Carriers should embrace all of the legitimate mobile finance initiatives as they enhance the consumer’s cell phone experience, thus ultimately creating consumer satisfaction and retention. Also, there are several initiatives out there that can increase carrier revenue, such as mobile banking and payments via SMS. Why wouldn’t a carrier want to support programs that will benefit themselves?”

Canadian carrier TELUS is exploring this idea with a strategic partnership with mobile payment company ClairMail Inc. to work through retail banks, credit unions, brokerages and credit card companies across Canada to offer mobile account access and bill pay to customers; the carrier will serve as a reseller of ClairMail to financial institutions. TELUS also will generate revenue from the text messaging fees and airtime required to use mobile banking services.

The TELUS “2–Way Mobile Customer Interaction powered by ClairMail” integrates with a financial institution’s back-end systems, so customers directly access their accounts through the phone. It includes two-way alerts for questionable account activity, transaction approvals and other issues requiring active customer involvement, on-demand access to account information and no-hold customer service.

To date, the m-banking services being rolled out in the United States are pretty basic. But Tole Hart, research director of mobile devices and consumer services at Gartner Dataquest Research, says we’re just on the edge of the m-banking wave. “So far there haven’t been any big moves, but rather convenience services, such as the ability to check your balance before you buy something to keep from overdrafting the account,” he notes. “But it will blossom more once you can pay for things with the phone. This year we’ll see simple banking applications and trials, next year a few limited deployments of advanced services, and then in 2009 and 2010 we’ll really start to see the infrastructure rolled out for more advanced functionality.” It’s predicted that close to $1 billion worth of worldwide payments will be made via mobile by 2010.

Getting beyond allowing basic mobile account access will require a whole host of billing validation systems, integration, credit checks and business modeling. Some of the potential transactional models remain problematic. They include the idea of sending a coupon or promotion out to a user as they walk by a coffee shop or store. In some circles, that’s considered spam. Other industry watchers question the wisdom of giving people who are already on the doorstep of a store an automatic discount. Without a way to determine whether that coupon-receiver is in the process of walking into the store already, it’s the equivalent of automatically slashing one’s margins through discounting everything in the store.

Then there’s the idea of enabling mobile purchases of hard goods. One approach is to have charges show up on a cell phone bill. That effectively could make the operator into a financial services company. If a cell phone bill is loaded up with charges, how can the operator guarantee that the customer has the credit-worthiness to make a purchase? Who handles collections and repossessions? Also, the types of fees the merchant would have to pay to implement the payment method may not be acceptable to them, constricting the availability of that service.

Regardless of how m-finance will continue to develop, develop it will. “Given the striking similarities in the paths our two industries have traveled, it is only natural we have arrived at a moment of convergence,” said John Philip Coghlan, president and CEO for Visa International, in a keynote speech at this Spring’s CTIA conference. And AT&T’s May says the promise is undoubtedly there. “It’s early days, but this is absolutely something we’re very bullish about growing and extending,” he says.