A few short months ago mobile finance was expected to spark a race among banks and service providers to offer financial services, including home banking, online bill payments, and even mobile wallet platforms, with the winner taking it all.
But it turns out consumers aren’t interested in doing mobile banking using their mobile phones, especially if it involves a complicated WAP interface. Between 2 and 5 million banks accounts in Europe have been WAP enabled, according to research by IDC. But of those millions of accounts available, only a small percentage is actually being used. Many UK banks have halted their wireless banking because “customer haven’t signed up for WAP services”, says Forrester Research in a survey of 18 UK banks published earlier this year.
“Mobile banking isn’t taking off… few Europeans use their mobile phones to bank online,” says Forrester. Furthermore, Internet banking is used by only 18 percent of Europeans.
Despite banks pulling the plug on their Internet portals, some of which cost hundreds of millions of Euros to build, because of the fall off in use online trading. And despite announcements that some have halted new wireless services, interest in mobile banking is picking up among subscribers, but only as one aspect of multi-channel approach to banking.
What suggests more than anything that mobile banking and mobile finance have a chance for a great future, is the emergence of the software and solutions position to enable banks to cut costs by increasing self service by customers.
Fragmentation Plagues Mobile Finance
Today, most mobile banking implementations are pilot projects and not readily scalable. They were developed in isolation of existing systems and channels.
In order to offer simple mobile banking services, banks have to support dozens of phones and terminals, as well as support variations in protocols and browsers. Wireless security is not end-to-end yet, nor is it streamlined. Authorization is still an issue and network operators are still trying to wall off customers from other service providers.
But don’t blame the banks because they will just blame the “immature technology”.
Some people ask why banks don’t take matters into their own hands - buy a couple of million or so identical terminals from a single manufacturer to alleviate the need to support multiple manufacturer’s and multiple terminals, then give the handsets to the best or most desired customers for free. User documentation, interfaces, and support would be dramatically simplified.
The answer is that there is little incentive for the banks to do so. “Why go to all that expense when the potential return is incremental at best,” asks Oliver Ruekgauer, Senior Vice Presiden Wmode, Europe.
“Mobile banking today is checking your account balance or paying a bill. How often do you need to do that? You do it once a month. You don’t need an expensive mobile data terminal to do that.”
Reasons for Optimism
Despite the enormous challenges still to be overcome, banks, and the analysts who advise them, are not giving up on mobile finance. It will be an important market, but it is just not going to happen as fast as was initially thought.
“Consumers will embrace mobile finance,” says Forrester. But mobile finance will be much more than checking account balances or SMS stock price alerts.
“Banks should clearly define their wireless strategy - understanding which customers to address, the relevance of a multichannel approach, and the role they want to play ... to ensure contents and back-end integration,” says IDC, a market research firm.
Macallo Software, a venture-backed Irish startup is thought to be a market leader because of its ability to support the needs of the banking industry, in particular that mutlichannel concept.
Its software is a self-service enabler. A handful of major financial institutions are reported to have signed up to deploy its solution, both commercial and investment banks. Postbank Telfort uses it for retail customer services, while Dresdener Kleinwort Benson delivers it brokerage clients a range of self-service options.
Another startup, Meridea Software, founded by Nokia, Accenture, and the venture capital company 3i, is developing what it calls a “framework for multi-channel services.” It is still developing the software, scheduled to be available in the fourth quarter of this year.
The framework will enable the banks to save money compared to current systems and the cost of maintenance is lower, according to Esa Tihilä, President, CEO of Meridea. “Our presentation framework is designed to support about 500 different types of terminals,” says Tihilä.
“Banks are spending tens of millions of Euros each year maintaining their existing distribution channels and they are not getting the returns they should,” he says.
Self Service is the Driver of Mobile Finance
But it all hinges on new handsets being available. Nokia and Siemens are providing forum members with prototype terminals. However, neither manufacturer has said publicly if they are going to actually deliver the required terminals in volume.
“We have no dates for production or shipping,” says Liisa Kanniainen, spokesperson for Mobey Forum.
Other vendors are also gearing up. Siemens has an alliance with Commerz NetBusiness, a subsidiary of Commerzbank, one of Europe’s largest commercial banks. Other vendors active in this segment include, Logica and 724 Solutions. IBM and Ericsson have announced an alliance to deliver solutions too.
Clearly, mobile finance will find its momentum. The way Forrester sees it banks would be wise to deploy high-speed mobile data services targeted at their own staff: “Firms will learn from Bank of Scotland’s 3.2 million Euros trial which lets business banking managers access information and process data on their laptops… banks will go further with GPRS, letting staff access documents so customers can sign a loan agreement in their presence.”
The existing industry suppliers and a handful of new ones are learning about the needs of banks and their customers. New businesses units or alliances are being set up with the mobile finance infrastructure issues. The future looks bright for mobile finance as one of the channels that the banking industry will use to save money by encouraging customers to serve themselves.
It will also be a channel for potential new revenues if the hurdles can be overcome.
Valerie Thompson is a freelance business and technology journalist, specialized in emerging networking and computing topics. She lives in Zurich, Switzerland.