Mobile banking can snare the underbanked: Javelin research. The underbanked population is huge – about 35 million Americans, or 15% of the population – said Javelin researcher Mary Monahan in an interview but the pitch in her most recent report is twofold: Mobile banking may be the way to lure this group into a financial institution and, importantly, she insisted: “a financial institution definitely can make money on this cohort.”

She added; “They are young. Their prime earning years are in front of them” – which may mean they have many decades of profitability for the financial institution that offers them the services that persuade them to deeper the relationship.

In the report Javelin defines “the underbanked” as consumers without a checking account and also “often without a primary financial institution relationship.”

That means they are up for grabs and, said Monahan, this group has money to spend on wire transfers, pre-paid cards and other financial instruments.

Monahan stressed that non-banks such as PayPal, Western Union and Walmart are circling their wagons around this group and, she said, “this is a population that shouldn't be ignored.”

Probably the key point in the report, which was issued June 14: “Mobile banking services are needed to meet the underbanked where they live and work. The underbanked in the U.S. are less likely to own computers (60% vs. 72% for all consumers) or pay for broadband services (34% vs. 59%), but more likely to own a mobile phone (74% vs. 68%). They are less likely than all consumers to use online banking (56% vs. 72%) in the past 90 days, but the underbanked use mobile banking at higher rates (36% vs. 28%).”

Added Monahan in a prediction of coming attractions: “Institutions will be amazed at how many consumers will be signing up for mobile banking without online banking.”

That will be a stress point for many credit unions – which have built mobile offerings as parasitic on online, typically involving the same username and password. A rethink may be in order, per Javelin, because it is adamant that the underbanked are determined to play by their own informal rules.

Said Javelin in its report: “Many underbanked consumers find it difficult to access branches during traditional banking hours. For this population to enter the financial mainstream, it is helpful to enable them to access services in alternative settings and hours, in places where they shop, work, and go about their daily lives.”

That means mobile banking.

“Set them up with simple pre-paid accounts. Build in the appropriate security precautions. And this is a cohort that can be profitable,” said Monahan.

More Mobile RDC. Questions continue to be raised about just how much of a game changer mobile remote deposit capture will be in the face of a younger generation that seems to be eschewing paper checks.

Now Aite's Ron Shevlin weighs in with this important news flash: mobile RDC “is unlikely to be a significant revenue generator,” per Aite research.

Mobile RDC may be cool, but there just is zero evidence that significant numbers of members will pay for mobile RDC.

Shevlin stressed that there are big savings involved in mobile RDC – at a processing cost of pennies per item, compared to $3+ to process a paper check. That, not the quest for illusory profits, ought to be motivation enough to offer mobile RDC.

Beyond Passwords: Face the facts: “Passwords are a weak link in the authentication chain,” said Marty Jost, a Symantec spokesperson, in an interview.

In recent weeks LinkedIn has acknowledged a breach that involved millions of passwords of users of that professional networking site, and dating site eHarmony also suffered a breach.

That kind of news has become commonplace, and the rest of the bad news is that many of us persist in using easily guessed passwords such as “123456” or “password.”

“Passwords are getting compromised on a regular basis,” said Jason Mical, director of network forensics at security company AccessData in an interview.

Something better – stronger – will speed adoption of mobile banking by consumers who, in most surveys, cite security concerns as a prime deterrent.

The good news, per Jost and multiple other security experts, is that the race is on to better protect financial institutions with tools that consumers will accept and that will up the ante beyond today's present password protection.

Here is the sore spot. Make security too onerous and consumers will look elsewhere for financial services. That just is fact, said Jost.

But that is the attraction of new tools, recently debuted at the Bank of New Zealand, for instance, that automatically – with no need for user involvement – generate unique “soft tokens” on the mobile device and thus validate this user for this session, said Entrust's Mike Byrnes, an authentication expert.

What this does is extend upon well-established hard token password generation. where a physical device (the size of a car key in many cases), generates a unique password every 30 to 60 seconds. To log in a user needs to input his/her “permanent” password plus the ever changing token password. That technology of course is a fast defeat for key loggers such as Zeus.

The problem, though, is that the user needs always to carry that hard token. Realize a bill needs paying as you stand in Port Authority bus terminal but the token is at home in Princeton and that is a bill that won't be paid until you get home.

The other problem is that the user has to input two passwords and twice the work is not a recipe for a happier member.

Thus the elegance of software on the phone generating a onetime password and itself communicating it to the financial institution computer.

“Essentially this turns your cellphone into a token,” explained Symantec's Jost, whose company has a similar offering. “This automates the process. It is completely transparent to the user.”

Savvy financial institutions already are jumping on this. Most are not talking about it – Entrust's Byrnes said few are willing to go on the record. But they are buying and installing next-generation tools that are intended to heighten security of mobile banking, with or without help from users.

Instant Insights /

Mobility Matters: Tracking the Mobile Banking Revolution in Credit Unions

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