RDS SPECIAL: U.S. Banks Should Learn About Mobile from International Counterparts

There's no doubt that the U.S. is blessed technologically. We've nurtured the seeds of innovation on so many levels. But then I talk to people from other countries about what they're doing with mobile phones and I feel like we're a bunch of cavemen here!I exaggerate, of course, but we all know just how far behind the rest of the world (developed and otherwise) we are in terms of the functionality of our cell phones. The reasons vary, from the almost Soviet-like rules of use and exclusivity of our cell phone carriers to the fact that we just didn't need mobile phones as much as the rest of the world because our landline infrastructure worked.

Yesterday, I spoke with Len Pienaar, CEO of mobile and transact solutions with First National Bank. This FI is based in Johannesburg, South Africa-a place where the landline infrastructure has some gaps. But Pienaar and First National knew that mobile was the channel that would help it expand its services to customers both new and old.

"South Africa might not have a very big population, but it is one of the most sophisticated countries in terms of banking technology, such as real time transactions and full channel integration," explained Pienaar. "But we're in a market where a huge part of the population can't access the Internet. So we experienced a good deal of pressure from the government and our shareholders to make banking more inclusive. Mobile was really our only channel of choice. Everyone has a mobile phone in South Africa."

He said the current iteration of mobile banking is the bank's third attempt at the service. The bank started off with mobile banking based on WAP technology where a Web page was basically squeezed onto the small display of a cell phone. The results weren't quite as expected. However, when the bank offered mobile banking via SMS text messaging, things took off.

First National uses technology from Redwood City, Calif.-based Clickatell to send alerts and messages to customers about credits and debits, suspicious activity, and allow customers to make balance inquiries, and even lets customers top off prepaid minutes for their phones or buy vouchers for their utilities bills. Prepaid is very big in South Africa, said Pienaar, and is also one of the most popular functionalities in the bank's mobile service. These are the main features that consumers tend to desire of mobile banking, he said. Banks tend to lose sight of this fact when they roll out their mobile banking initiatives, making them too cumbersome as they try to do everything. According to Pienaar, "Fraud syndicates leave our customers alone" because of the huge penetration in mobile banking at First National because of the alerts and the frequency with which customers check their account information on their phones.

The bank averages over 100 million mobile banking transactions a month. "You open an account with us and you leave with mobile banking. It's expected now," he said. The biggest challenge is getting people to choose and remember their PINs, he jokes.

The SMS banking was launched in 2005. Today, however, Pienaar said the bank's mobile business is being driven by the Unstructured Supplementary Service Data (USSD) protocol, which runs on GSM phones. USSD is similar to SMS, but unlike SMS, USSD transactions occur during the session only. With SMS, messages can be sent to a mobile phone and stored for several days if the phone is not activated or within range.

Of course, First National is just one example of what banks outside the U.S. are doing with their mobile initiatives. South Africa is certainly a market with very unique conditions that made it perfect for exploiting the mobile channel. How things evolve in this country will surely vary but we can learn from First National's example. Keep it simple. People use texting to a great degree in this country. And although people may have web-enabled phones, they might not know it or not know how to use it. Text is probably the most straightforward way at this point in time to launch a mobile banking initiative.

Things still have time to evolve in the U.S. so it will be interesting to see how it all turns out. But according to Pienaar, "I can't see mass adoption of mobile banking in the U.S. with WAP. So I think we'll see the same trend with text in the U.S. as we did in South Africa."