Dialing in on Mobile Finance: Growth Lies Ahead
CAMBRIDGE, Mass. - Mobile communications is booming.
The soaring usage of text messaging and two-way devices combined with the proliferation of Blackberrys and other smart phones among mainstream consumers is powering a new generation of mobile users.
These users are infusing their next-generation mobile devices into everyday lifestyles, and with it a growing reliance and acceptance of the technologies these devices offer.
Not surprisingly, many credit unions and banks see mobile finance as the next great stage in product offerings. The hype is nothing new, of course: As far back as 2000, industry pundits were touting mobile banking's merits.
In hopes of separating mobile banking fact versus fiction, Aite Group's Nick Holland surveyed mobile network operators the world over about their thoughts on mobile banking, payments and commerce.
These vendors highlighted additional revenue streams as the primary reason to adopt mobile banking platforms. Nearly half of those surveyed tabbed bottom line reasons as an "important" or "extremely important" incentive to offer mobile transactional banking services. Similarly, more than 80% of these same vendors cited bottom line justifications for adding mobile payment functionality.
Who is going to pay for these services? Holland found surprising optimism among mobile vendors that consumers themselves would willingly pay a premium for mobile banking and finance solutions. Holland noted that, indeed, most current payments are made within a subscriber's mobile phone bill.
"For mobile banking, operators are expected to generate revenues primarily from end-user subscription fees for mobile data access," said Holland. "Of mobile operators, 73% considered it 'likely' or 'extremely likely' that they would generate revenues from mobile banking in this manner."
Accompanying this optimism is the rationale that customer perceptions of security would be the leading factor in determining mobile-finance adoption rates. This same 73% of vendors cited end-user security as the key factor in overall adoption.
As the mobile sector, however, continues to expand, security and functionality must follow in tow, the Aite Group analyst said. Newer, more potent mobile devices will not only change technology capabilities but also the expectations of customers and members when using them for financial purposes. Holland sees this future of mobile commerce (m-commerce) as having a home in more robust, Internet-like environments.
"With mobile devices rapidly evolving capabilities akin to personal computers, and with present-day handsets such as the Apple iPhone pushing end-user expectations for HTML Web browsing and WiFi connectivity, it is likely that m-commerce will soon move away from the walled gardens of mobile-operator WAP portals to the 'normal' Internet accessed over mobile devices," he wrote.
One of the most exciting possibilities in mobile finance may be one already being extensively tested in certain locales: contactless payment at point-of-sale (POS) terminals. This method of payment employs Near Field Communications (NFC) to negotiate a transaction between a mobile device and contactless terminals. The mobile unit operates much like a credit card, exchanging currency between the two points.
Of the mobile operators surveyed, Holland uncovered strong support for contactless, POS purchases. The operators predicted that one out of 10 mobile users would start using this technology over the coming two years. Peer-to-peer transactions (between mobile phones) are expected to be nearly double this figure.
Surveying device manufacturers, however, told a different story. Only a few plan to include this functionality in future devices, and those companies see adoption rates mirroring the Bluetooth model of five to six years out for this kind of adoption rate of POS purchases, the Aite Group said.