Mobile banking has been on the telcoagenda for several years, but has yet to take off in developed countries. After a recent spate of product releases featuring near-field communications (NFC) technology, however, this seems set to change.
Google,…
Mobile banking has been on the telcoagenda for several years, but has yet to take off in developed countries. After a recent spate of product releases featuring near-field communications (NFC) technology, however, this seems set to change.
Google, Citigroup, MasterCard, First Data and Sprint Nextel have teamed up to launch a mobile app called Google Wallet, which enables contactless payments at shops.
France Telecom-Orange has also just announced a similar initiative with BarclayCard, known as Orange Quick Tap.
Other telcos seem set to follow.
A report by the Future Foundation, a consumer research group, found that the number of UK consumers claiming to use some form of mobile banking has more than doubled over the past three years to nine per cent.
Moreover, the report forecasts that the majority of Britons will be using mobile banking within the next three years.
If that is true, telcos will be battling with banks, credit card companies and online payment companies like PayPal for the largest slice of the profits.
So what opportunities are there for telcos in mobile banking, and how should they operate alongside/against other companies in the value-chain?
Stronger relationship
The switchover to mobile banking will not just be a case of the same service being delivered in a slightly different way.
The industry consensus is that the switch will entail a major change in consumer behaviour and offer significant opportunities for the companies involved to introduce value-adds.
The head of innovation at Visa Europe, Sandra Alzetta, said these could involve real-time alerts, balance enquiries and location-based services.
Speaking at the Monitise breakfast conference in London last month, Alzetta said: “We believe passionately that mobile can add significant value to our consumers.” Speaking about his company’s decision to participate in Google Wallet, Fared Adib, senior VP of product at Sprint Nextel, told Telecom Finance: “We hope that customers will recognise that Sprint is an innovative company and [that] will ultimately bring us new customers and increase the satisfaction of our existing customers who find new uses for their Sprint devices.”
Partnerships dominate
So far, all the major mobile banking projects have involved groups of companies working together, rather than solo ventures by banks, telcos or others.
According to Sprint’s Adib: “Sprint is a wireless company, so it is important for us to partner with leading companies in the technology, finance and banking industries to ensure we are offering our customers a solid product.” He also said that Sprint was always evaluating new partnerships and services.
The head of business development at Lloyds Banking Group, Shooman Perry, agrees with the partnership model: “Different players in this value chain are trying to work out how to unlock this value”. We will see an “interesting dance between these players” as that uncertainty is resolved, he added.
Security still a concern
According to the Future Foundation report, the top reason among consumers for not using mobile banking was security, above other concerns like cost or a simple preference for other types of banking. This is not without foundation. Fredrik Motzfeldt, CMT leader for EMEA at insurance broker and risk adviser Marsh, said that the potential was “very high” for an attempted cyber attack on a telco involved in mobile banking. “Anything that moves in cyber space is ripe for attack,” he said.
Motzfeldt also suggested that protecting customer data should be a key concern for companies. But operators, as well as other companies involved in the business, are aware of the risks and taking measures to deal with them effectively, Motzfeldt added. He concluded that the “opportunities far outweigh the risks”.
Developed markets lag
While mobile banking is still just an abstract idea for most Western consumers, it has already become an increasingly integral part of life in some developing countries. The most notable example is the M-Pesa payments system, operated by Safaricom in Kenya and Tanzania.
Most recently, Indian cellco giant Bharti Airtel signed an agreement with Ecobank to promote mobile banking in 14 of the African countries it bought into via Zain a year ago.
The uptake of mobile banking in developed countries has been much slower, for several reasons including greater customer familiarity with branch/call-centre banking.
Whatever the reason, it is clear that companies will have to adapt their mobile banking services to the different markets where they operate, potentially via the smartphones and tablets that are more common in developed countries.
But Sprint’s Adib argues that it also depends on the “cultural equation” in each market.
“What solution meets customer needs?
Is it transferring money? Is it managing an investment portfolio or making transactions on a phone? Or, is it consuming or purchasing digital content or hard goods?” said Adib.
“There are different needs based on the financial cultures in these areas and we think NFC and the contactless capabilities being introduced add another layer to the solutions that meet those needs.” The consensus is that mobile banking will take off in developed countries, but that the proportions of mobile banking users will be higher in emerging markets.
While mobile banking will offer just one way for someone in a mature market to perform financial transactions or check their accounts, in many developing countries it will be the main (and possibly the only) way to perform similar actions.
Mobile banking, therefore, will offer a wide variety of opportunities and potential markets for banking, retail and telecoms companies in the future.
By Mike Kielty
Reports on the future role of telcos as market grows
