Mobile Financial Services Climbing Out of the Crisis Mire

Yesterday, I was took part in a panel discussion hosted by InformationWeek, BS&T's sister brand, about mobile banking and payments. Along with myself were Doug Brown, Bank of America's SVP, mobile product development; Charles Landry, VP and general manager with VeriSign, the event's sponsor; and Lori Beck, director, product management, with Western Union.You might think m-banking was kind of moved to the back burner, given all that has occurred with the financial crisis. After all, with the federal government breathing down their necks and scores of disenchanted customers to deal with, putting the resources into launching another channel strategy may not be the best idea when in survival mode. However, with the turnout and general interest from the attendees at last night's event, I'm led to believe that although mobile financial services may have fallen out of the limelight a bit, its comeback is here.

Some of the consulting firms are pretty bullish on mobile too, as we climb out of the crisis. TowerGroup says m-banking usage in the U.S. will grow from 10 million users this year to over 53 million in 2013-a compound annual growth rate of 52 percent.

To put it another way, Javelin Strategy & Research predicts that in five years, 58 percent of U.S. adults with cell phones will be using m-banking.

I guess what's not surprising is that there were a lot of questions from the audience about what's holding the U.S. back from fully embracing mobile as a channel for banking and payments. All the panelists, including myself, agreed there were a variety of factors, many of which have been discussed by BS&T before. These include a fragmented mobile telecom infrastructure, which leads to the next problem-cooperation and ownership of the customers, a battle between banks, telecoms and payments providers which will only heat up in the coming months and years; and, that perennial favorite, security.

Security is on the minds of consumers as well, when it comes to m-banking and payments. KPMG figures show that 91 percent of respondents to a survey said they never tried m-banking before. Of this 91 percent, 48 percent said the main reasons were security and privacy issues. So there are obviously some perceptions and misperceptions around security and the mobile phone that must be overcome to encourage widespread adoption of the channel.

But I also think there's a visibility issue with mobile financial services, at least at banks. In the same KPMG survey, 68 percent of respondents said their bank didn't offer m-banking. Just how true is this? Maybe they simply didn't know about it. Many of the early adopter banks have been concentrating on marketing mobile to their existing online banking customers. This makes sense since they probably feel this is a ready-made audience of tech-savvy people. Even Bank of America has been doing this, according to Brown. However, he says the bank is starting to change its marketing strategy to target those who aren't already online. In fact, 9 percent of BofA's m-banking customers are new to the bank, which illustrates how this new channel can drive customer acquisition efforts.

These offline, yet mobile, people consist of a customer segment that should not be overlooked by banks. Javelin says 11 percent of non-online bankers would be likely to use m-banking (13 percent of online bankers said the same thing). Furthermore, TowerGroup figures show that by 2013, 27 percent of m-banking users will not use the online banking channel at all. This is a significant number of people and banks shouldn't just limit themselves to their online customer base.

Although the use of mobile for financial services will continue to climb steadily, there has to be some inflection point at which user acceptance will explode. No one knows for sure what this will be or when it will occur. I can't see the cell phone companies, banks and payments providers/networks coming together any time soon in one harmonious cooperative existing "for the common good" of growing mobile financial services. Maybe it will take another force beyond anything the industry could have imagined. Maybe, quipped Doug Brown, it will take Oprah!

Yes, maybe a little Oprah-style PR would be just the kick in the pants needed for mobile financial services to take off in this country.