Cash (and More) in Hand

The future of banking is in going mobile.

by Elise Oberliesen

As the recession slowly passes, reports indicate that American consumers — many the wiser — are taking steps to better monitor their spending habits. Mobile banking, which gives banking customers access to accounts and services via smartphones and other mobile devices, lets accountholders conveniently manage their money, often virtually in real-time. It’s an opportunity for American financial institutions to cash in by providing account information that’s easily accessed via mobile Web browsers or applications developed for the likes of the iPhone, BlackBerry and Droid.

Mobile banking tools

According to BusinessWeek, China was early to embrace mobile banking. It’s a different story stateside, where mobile technology has traditionally lagged. Fewer financial tools available in emerging economies like China and India wedged open the door for growth, says Red Gillen, senior analyst at Celent. “The reason the U.S. is slow is because there are so many options: ATMs, online banking, debit cards, credit cards,” says Gillen — options other countries were without or had in limited supply.

The United States is beginning to catch up. The most common mobile banking technologies that American banks are beginning to offer include:

• Person-to-person (P2P) transactions, the mobile equivalent of money transfers, which offer convenience and speed when you need to send funds to another person. PayPal is the best example.


• Alert notifications, which announce account balance status or approaching payment due dates by streaming updates directly to the mobile device via text or e-mail.


• Virtual credit cards, which work like a regular credit card, except that the account detail is stored in the phone, not in the wallet.


• Personal finance management (PFM) tools, which aggregate multiple financial accounts into one location for simplified Web- or application-based access. Mint.com is the runaway success in this area, but banks are beginning to offer their own PFM products.

Increase mobility, decrease overhead

Mobile banking doesn’t just benefit consumers. Gillen says banks could save money by diverting customer service away from the teller line and the call center to the iPhone and the BlackBerry — in effect, empowering customers to serve themselves on transactions that previously might involve a customer service representative. It frees up those reps for more complex transactions, and might even reduce staffing requirements. “[Banks] may not have to build as many branches to support growth,” says Michael Salerno, e-services manager at America First Credit Union in Riverdale.

Convenience at what cost?

Banks want to provide, say, PFM tools to help customers better manage their money. But if banks charge fees for the use of mobile banking products, it can send a mixed message to the consumer. (And at not-for-profit credit unions, which traditionally offer comparatively low or no transaction fees, the decision to charge for the convenience of mobile banking has an added significance.)

Whether charging for mobile banking is wise remains to be seen. Gillen says that transaction fees could quickly accumulate and catch customers by surprise, potentially driving them away from mobile banking and back to the teller — or to a competitor that doesn’t charge for comparable transactions. Other experts suggest that consumers might be more willing to pay for complex transactions, such as expediting a late mortgage payment to get back on track and help protect a credit score.

So far, so secure

Mobile banking is expected to eclipse PC banking. The latter is a mature technology that has had time to address major security concerns; the former is fledgling still. Yet some say mobile banking promises greater security, because although consumers typically access their accounts on multiple computers — at work, home, the library, etc. — they typically have only one mobile device for personal use. Using a single-point-of-access for account inquiries is considerably more private and secure than logging on across a variety of computers. In addition, existing banking security regulations such as secret phrases, or separate “tokens” that work like keys to open locks, add more layers of protection.
But with any kind of hardware device, new or old, security measures must be in place. Experts say it’s a good idea to take steps like keeping anti-virus software up-to-date and monitoring for fraud. Mobile apps with anti-fraud detection can help.

Reach out to the most hands

Banks want to tap customers no matter which mobile device or wireless service they use. Joshua Everton, assistant vice president and e-banking manager at Bank of American Fork, says that’s why it’s important to consider developing mobile banking products for each of the following situations:

• Wireless Application Protocol (WAP). This protocol “talks” to websites that use WML, or Wireless Markup Language. WAP provides Web browsing to wireless devices, including mobile phones, smartphones and mobile devices such as the Apple iTouch. WAP-enabled Web browsers provide a user interface similar to that of a standard computer Web browser, yet constrained to specifications including device screen size and user interface.


• Short Message Service (SMS). This is what most people refer to as text messaging. Account balance inquiries and alerts can be sent and received regardless of mobile device or wireless carrier, so long as text messaging is enabled.


• Application (“app”). An app is standalone software that, once installed on a mobile device, performs a particular dedicated function. For example, Bank of America offers an app for the iPhone, Blackberry and Android OS that allows access to account information and other features. An app’s user interface offers a more streamlined experience for mobile banking than a Web browser, but requires more technological development to account for different mobile device platforms.

Computers and cell phones just may be two of the many prominent inventions of the 20th century. Now that the techno-floodgates are bursting wide open, predicting how new gadgets will make our lives easier in the 21st century is anyone’s guess. People like Everton see a positive future and approach it with enthusiasm. “We’re addicted to our phones, so there’s a good value proposition,” he says.