Mobile Banking Made a Breakthrough and Went Mainstream-Or Did It?
And it's just the beginning of things to quickly come. Or it's not.
Answers to the question of whether electronic banking by mobile device will become as universally adopted as the devices themselves depend on who is asked.
For instance: "What we're seeing is the hockey stick curve of adoption that people always dreamed about now actually occurring," said Scott Moeller, CEO of MShift, a Silicon Valley provider of mobile applications.
"And we're not even close to what will happen in 2010, and here's why: The iPhone was a real game changer when it came out in 2007, but the downloadable applications for banking on it really didn't become widely available until this year," said Moeller, who said his company's client list of more than 200 financial institutions includes 17 of the 50 largest credit unions.
"Now you have Blackberrys and all those other devices, including over 20 unique Android handsets coming to market right now. In 2010, the demand is going to shift from regular phones to smart phones in a way that the best analogy I can think of is to the way dial up was replaced by broadband," Moeller said.
And the mobile bankers will follow, right?
Not necessarily, say some analysts who specialize in mobile banking.
"While 2009 was the year that opened a lot of eyes to what mobile banking can be, I don't think we gained significant traction," said Emmett Higdon, who studies online and mobile banking for Forrester Research.
"I hope it will. In my role as an analyst I have the luxury of talking to everyone from the small credit unions to the BOAs and Royal Banks of the world. I see a lot of potential but we're still in the dark ages in a lot of ways, in comparison to other industries (such as travel) and to other areas of the world when it comes to adoption," Higdon said.
He added, "While we sometimes hear folks say Forrester is bearish on mobile banking, I prefer to think of myself as optimistic and realistic. We rely on our research and what that tells us, and so far we still see 80% to 85% telling us they have little or no interest in mobile banking, and that's a problem."
Meanwhile, another prominent think firm, Celent, said mobile adoption increased 53% in the past two years, and estimates that 35% of online banking households will use the mobile channel by the end of 2010.
But, here again, Mark Beccue is not so sure. Beccue, senior mobile money analyst for ABI Research, said his recent study of the 20 largest U.S. banks (now 17 because of consolidation) projected in early 2009 that of 290 million or so mobile subscribers in the United States, only about 7 million of them will be using mobile banking at year's end, and about a million of those are with one institution: Bank of America. He stands by that estimate.
"I think a lot of the numbers the industry puts out there is way too high. I just don't see mobile use doubling that quickly, although its growth will be strong. Mobile banking remains a subset of online banking and 40% of banking customers are not using that, so my growth curve will remain the same until something convinces me otherwise," he said.
Selling functionality is key, said Higdon. He said that many financial institutions market their mobile banking service "by touting a laundry list of functions. Rarely do they call out a specific feature or explain how it can be useful."
Be like an iPhone commercial, he said. "They don't talk about the device as a piece of hardware. They show you what you can do with it-find a restaurant, learn Mandarin Chinese, and so on. Well, show the consumer how easy it is to do a transfer or pay a bill with your phone."
Along with adoption, the other big question in mobile banking might be how the competition between platforms will shake out. Currently there are generally three ways mobile banking is delivered: by SMS texting, as a downloadable application that resides on the device or by Web browser.
A growing number of tech vendors-Fiserv Inc., FIS and PSCU Financial Services, for example-offer all three, and each has its advocates.
An economic recovery also would help, said Doug LoKrantz, mobile commerce manager at PSCU Financial Services, which currently has 12 credit unions under contract for mobile banking less than a year into its launch of the service. He said more are expected to sign up soon after budgeting for it in 2010.
"I think adoption has been slowed simply by the economy," LoKrantz said. "But it will grow, and I see it really becoming the mobile financial services provider vs. traditional online banking as you're able to do more things on the mobile channel, as it becomes more like your mobile wallet."
Along with economic recovery, security concerns also could hinder mobile growth, another industry observer said.
Catalyst Consulting Group consultant Tripp Johnson said he expects regulators to be focusing more on the mobile channel in the near future, but also said that unlike his first experience with mobile banking, this time it's here to stay.
"I was at Royal Bank several years ago when we partnered with CashEdge to create one of the first cell phone banking capabilities," he said. "We were getting ready to roll it out but then had to scrap it when we realized we couldn't get it encrypted all the way through the different service providers.
"But there are different ways of addressing that now," Johnson said, citing a token-based solution that Addison Avenue FCU is using as one example, and added, "Mobile banking is here again, and this time it's here to stay, although I think there is a little bit of throwing caution to the wind on the security side."
He added, "I think the younger generation is really where it's going to happen. I look at my own young kids and see that the wireless is where they get their Internet. That's probably how they're going to do the majority of their banking someday."
Johnson said his children are ages 3 and 9, a bit younger than the average age of the most active initial users of mobile banking at The Family Credit Union in Davenport, Iowa.
"It's 35. We thought the appeal would be more to the Gen Yers, but the numbers aren't really reflecting that yet," said Kris Lundquist, the $89 million CU's vice president of marketing.
About 200 users have signed up for the mobile service since its late September launch, Lundquist said. About a third is using the Web-based option but the most action is occurring through the SMS channel, she said.
The credit union also is planning to deploy a downloadable version and add a Facebook mobile banking application, all through Fiserv.
Calvin Grimes, Mobile Money product manager for Fiserv, said text is the "low-hanging fruit for most consumers, but when it comes to browser or downloadable application service, our early demographics show that possession of a smart phone is a better indicator of use than are age or income."
Going forward, expansion of payment services-including point-of-sale and person-to-person - are going to drive mobile adoption, along with some services that for now might seem "gee-whiz," although not for long.
For instance, among the 100,000 or so applications available for smart phones is one for the iPhone that allows the user to take a picture of a check and e-mail that image for deposit.
"USAA already is offering that through iPhones, and we're looking at introducing that into our system as a mobile device and carrier-agnostic piece of functionality," said Moeller at MShift. "That's going to be another game changer."