Sunday, May 18, 2008

Banks turn to mobile access as the next big thing

NEW YORK (MarketWatch) -- Now that online banking has been around for more than a decade, and widely accepted by customers, banks are turning their attention to taking the show on the road.
A survey released earlier in the week by financial services firm Aite Group found 23 of the 80 largest U.S. financial institutions expect online and mobile banking will be top priorities for product development in the next two years. The survey, conducted in the first quarter of 2008, covered 22 banks and one credit union, and 11 of the top 15 banks in the U.S.
The survey found that in the next two years, banks are intending to invest heavily in new fee-based payment services, mobile banking innovations and online marketing efforts. It is a service that multi-tasking consumers are demanding, banks say.
"People are very keen on using the phone to do mobile banking in a couple of ways, including checking accounts, balances and direct deposits and to help them find banking centers," said Bank of America's Doug Brown, senior vice president of product development for e-commerce.
Banks have specific targets for mobile advancements, as well: 65% of respondents to the survey said they will focus on expedited bill payment as a main priority in the next 24 months. That number was nearly matched by the 61% of respondents who said they will make pre-approved, special offers to online customers a priority.
Bank of America says it has more than one million users currently using mobile banking and expects that number to jump in the next 24 months as it rolls out more features. Other mobile banking proponents include Citigroup , which rolled out its Citi Mobile banking service in April 2007, and Wells Fargo , which debuted Wells Fargo Mobile last July.
All of these mobile programs attempt to bring banking services to customers via phone- or browser-based technology.
Still, most banks are trying to find a way to take the mobile banking experience to the next level, some analysts said, which is a task that presents multiple challenges.
"At the moment, mobile banking is online banking 'lite', bringing many of the basic information-related services such as balance checking to the mobile domain," said Nick Holland, a senior analyst for financial analysis company Aite Group LLC that has been covering mobile banking for eight years.
"One of the challenges for mobile banking today is the lack of interoperability among these technologies. Some telephone carriers support only one technology. Some phones support only text messaging, not Internet access," Rhodes said. "Interoperability, security and scalability are all challenges that have to be addressed not only by banks, but by telephone carriers and handset manufacturers, as well."
That may change as sophisticated handhelds, like the Apple iPhone and third generation BlackBerry devices are now flooding the market, and the new capabilities are sure to drive new services, said Holland and others.
"You'll start to see some more mobile-only features such as 'panic' bill pay over mobile in the next couple of years, as well as services that leverage the uniquely mobile attributes of 'always on, always have'," Holland said. "Like location-based, opt-in information, where the device notifies you of sales and promotions that are happening in the vicinity."
Holland said banks may have to wait for that capability for at least three to five years.
But the market may be moving too fast for many new initiatives, the survey indicated. More than 70% of respondents said that the number one barrier to growing online banking and bill payment adoption is their difficulty to roll out new functionalities fast enough.
That can be a major hindrance to banks and other large financial institutions looking to roll out fast, simple customer outreaches, only to find those programs and interfaces are already passé.
Bank of America's Brown disputes that assertion, saying that although only certain forms of mobile banking have caught on in other parts of the world, he remains convinced that there is a significant market need for it in the United States.
"The North American market is moving ahead and has some differences that make up the infrastructure, which is why iPhone was launched here first. That will drive some differences," Brown said. "But we are bullish that mobile banking resonates with most customers, so we are just racing ahead to deliver those steps."

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