The Mobile Banking Market. 2 Source: Protiviti KnowledgeLeader Overview of Mobile Banking Source:

The Mobile Banking Market

2Source: Protiviti KnowledgeLeader http://www.knowledgeleader.com/

Overview of Mobile Banking

Source: http://mobilepaymentmagazine.com/global-mobile-banking-industry-report; http://www.pepperlaw.com/pdfs/mctaggart_freese%20mobile%20banking.pdf; http://www.mobilecommercedaily.com/2011/02/15/mobile-banking-services-can-lead-to-300pc-roi-for-banks-accenture

• Mobile banking is emerging as a key electronic channel for the global banking and financial services industry.

• Increasing adoption of mobile phones among general consumers, particularly among the younger generation in the 18-34 age group, and rapid rise in demand for mobile payments are expected to increase the demand for mobile banking services.

• The rapid adoption of mobile phone technology is caused by a combination of low infrastructure costs, the rise of pre-paid service, the decrease in handset prices and the privatization of mobile phone service. CTIA, the wireless industry association, reports that there are 78 million smartphone subscribers in the U.S.

• The industry is also expected to benefit from favorable government and regulatory specifications, which are aimed at providing banking services to unbanked customers to promote economic development.

• Mobile banking users in all generational levels tend to have more in liquid assets, such as checking and savings accounts, CDs, or money markets, which makes them desirable as customers to financial institutions.

• Banks generating the highest ROI on their mobile banking investments emphasize customer convenience, provide rich exchanges of information between bank and customer, and accurately measure how customers use their mobile phones to bank.

The global mobile banking customer base is expected to reach 1.1 billion by 2015.

The global mobile banking customer base is expected to reach 1.1 billion by 2015.

The United States, Europe and Asia-Pacific dominate the global mobile banking market.

The United States, Europe and Asia-Pacific dominate the global mobile banking market.

According to a study by Accenture, mobile banking services can lead to 300% ROI for banks.

According to a study by Accenture, mobile banking services can lead to 300% ROI for banks.


Key Facts – Mobile Banking Users

The mobile banking consumer carries a higher balance than the average banking consumer and has a greater net worth.

Mobile banking users bring greater value to an institution by maintaining higher average balances than the average online user ($64,303 versus $48,384) and greater net worth ($341,017 versus $313,346).

Source: http://blog.nielsen.com/nielsenwire/consumer/mobile-banking-a-growing-and-lucrative-market/


Drivers for Investment in Mobile Banking Service Offerings

• Competitive Pressure: Increased competitive pressure around mobile payments would motivate financial Institutions to move more quickly. Competitors include other financial institutions as well as technology and payments companies, indicating that banks and credit unions are aware of the threat from non-traditional competitors in this arena.

• Observed Consumer Demand: As banks and credit unions observe more customers demanding the convenience and flexibility of mobile payments, they will focus more time and energy on providing these capabilities. As the capabilities of mobile phones increase, consumers will begin to see the mobile phone as a compelling candidate to replace their physical wallets and demand for mobile payments will increase.

• Established Revenue Opportunity: Banks and credit unions can more easily establish a clear value proposition.

• Emergence of Device and Process Standards: The development of a technology standard and/or the entry of an established technology player(s) with sufficient clout to dictate the use of a specific standard would help financial institutions justify additional investment in mobile payments. The “one-off solutions” in the market and multiple models in play make it difficult to develop a comprehensive mobile payments strategy, and financial institutions are hesitant to invest in technology that may quickly become obsolete in the rapidly developing mobile payments arena.

• Merchant Readiness: Banks and credit unions view merchant enablement as the key to the adoption and success of next-generation mobile payments.

Source: http://www.fiserv.com/WP_2011-mobile-payments-white-paper-v1.pdf


Source: http://www.infogile.com/pdf/Mobile_Banking.pdf

Account Information

• Mini-statements and checking of account history

• Alerts on account activity or passing of set thresholds

• Monitoring of term deposits

• Access to loan statements

• Access to card statements

• Mutual fund/equity statements

• Insurance policy management

• Pension plan management

Payments & Transfers

• Domestic and international fund transfers

• Micro-payment handling

• Mobile recharging

• Commercial payment processing

• Bill payment processing

Investments

• Portfolio management services

• Real-time stock quotes

• Personalized alerts and notifications on security prices

Support

• Status of requests for credit, including mortgage approval, and insurance coverage

• Checkbook and card requests

• Exchange of data messages and email, including complaint submission and tracking

Content Services

• General information, such as weather updates and news

• Loyalty-related offers

• Location-based services

Mobile banking will surpass online banking as the most widely used banking channel by 2020.

Mobile Banking Services


Advantages of Mobile Banking

Source: http://www.mobilecommercedaily.com/2011/02/15/mobile-banking-services-can-lead-to-300pc-roi-for-banks-accenture ; http://www.infogile.com/pdf/Mobile_Banking.pdf

• Drastically cuts down the cost of providing services to customers. For example, an average teller or phone transaction costs about $2.36, whereas the average electronic transaction costs about $0.10.

• For service providers, mobile banking offers the next surest way to achieve growth. In countries like Korea, where mobile penetration is nearing saturation, mobile banking is helping service providers increase revenues from the current static subscriber base.

• A bank could, through the use of mobile technology, inform owners each time purchases above a certain value have been made on their card. This way the owner is always informed about when their card is used, and how much money was taken for each transaction.

• Customers can also request additional information. They can automatically view deposits and withdrawals as they occur and also pre-schedule payments or checks to be issued.

• Through mobile messaging and other such interfaces, banks provide value-added services to the customer at marginal costs.

• Another benefit is the anywhere/anytime characteristic of mobile services; the customer does not have to visit an ATM or branch to avail of the bank’s services.

• Mobile money management and mobile banking can increase banking penetration to untapped markets at a relatively low acquisition cost.

• Mobile banking services can increase customer retention, especially among customer segments that increasingly expect more sophisticated mobile offerings.

• Consumers get the flexibility and mobility that they are increasingly demanding, as well as the potential for increasingly personalized services from their financial institutions.

• Mobile banking can lower the cost of financial transfers for banks, because they remove the need for physical points of presence and ensure a timely and secure method of transaction.


Opportunities Offered by Mobile Banking

The cost of processing a transaction through a mobile phone can be as much as 10 times lower than through an ATM and as much as 50 times lower than through a branch.

Opportunities for Operational Efficiencies

•The more transactions that banks can drive to mobile

phones, the greater the possibility that they can close

poorly performing branches and increase operating

efficiencies by shifting the focus of branch employees

from transactions to more advisory-type services that will

lead to greater sales or cross-selling rates

Opportunities for Revenue Growth

•Mobile banking offers banks several opportunities for

increasing revenues, which include monetizing the value

of customer analytics, delivering greater real-time access

to products and services and conducting targeted

marketing campaigns based upon the knowledge of

consumer preferences that banks collect

Source: http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_consulting_MobileBanking_010711.pdf


Key Challenges

According to a comScore study, only 26% of those using mobile banking say it is their preferred method of accessing financial accounts. Around half of all those using mobile banking tools prefer using personal computers and 10% still opt for the branch as their primary touch point.

The continuing evolution and adoption of mobile banking requires that banks overcome challenges and potential roadblocks:

Customer experience and awareness• Despite the popularity of mobile banking among younger market segments, many

customers are unaware of the powerful value proposition that mobile channels afford.

• Banks need to educate their customers about the benefits of mobile banking and make sure that they differentiate themselves from other competing solutions.

Complex integration and partnership model• To achieve operational efficiencies and realize the full growth potential, banks

need to integrate their existing bank platforms, including core banking, customer relationship management, and payment hubs with mobile banking solutions.

• Banks will also need to manage a multitude of partners such as telecommunication providers, social media outlets, data analytics providers, retailers, payment networks, mobile device manufacturers and many other stakeholders.

Increasing pressure from competitors• Banks will face growing competition in the coming years from

telecommunications providers and other non-bank payment processors offering services that compete with mobile banking.

Money laundering and risk• As mobile banking begins to offer more transactional services, such as complex

funds transfers, the possibility of these services being exploited for criminal gains rises exponentially. For instance, the funds transfer services offered through mobile banking may be exploited and used to transfer or launder illegally obtained funds.

Source: http://thefinancialbrand.com/17850/the-growing-importance-of-the-mobile-channel/; http://www.bankersacademy.com/pdf/Transitioning-to-Mobile-Banking.pdf; http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_consulting_MobileBanking_010711.pdf


Best Practices in Marketing of Mobile Banking Services

The Right Positioning of Mobile Banking• Marketing the positive side of mobile banking services gives customers a better idea of the benefits that they will

receive. Customer Satisfaction• Mobile banking operators must anticipate and satisfy the needs and preferences of customers (e.g., the payment

of utility bills, handling of microsavings and microloans, and the ability to send donations to NGOs or government organizations).

Mobile Banking Promotion • Mobile banking promotional services must be simple and easy in order to suit customer requirements.• A straight-forward message such as “send money home,” or “pay your bills,” along with an explanation of the

service that suits the financial literacy of consumers is most appropriate for mobile banking clients.The Right Sales Strategy • The marketing tools and strategies adopted in the implementation of mobile banking include educational

campaigns about the specific uses of mobile banking, sponsorships, endorsements, mobile messages, exhibitions, trade discounts, public relations, redemption coupons, road shows and shop-front activities.

Educational Campaigns• Educational campaigns to enhance the financial literacy of clients may be fruitful in improving penetration rates

since a lack of knowledge about microfinance services is one of many problems faced by micro-entrepreneurs.Reach Out to Potential Mobile Banking Customers• Sales teams must proactively visit potential clients at their homes or workplaces, offering convenience and free

credit upon purchasing mobile banking services.

Source: http://microfinancehub.com/2010/05/04/9-marketing-best-practices-in-mobile-banking-part-ii/


A wide spectrum of mobile/branchless banking models is evolving:

Source: http://mobilepaymentmagazine.com/global-mobile-banking-industry-report; http://www.infogile.com/pdf/Mobile_Banking.pdf

Mobile Banking Business Models

Bank-focused model• Emerges when a traditional bank uses non-traditional

lowcost delivery channels to provide banking services to its existing customers

• Examples range from use of automatic teller machines (ATMs) to Internet banking or mobile phone banking to provide certain limited banking services to bank customers

• Additive in nature and may be seen as a modest extension of conventional branch-based banking

Bank-led model• Offers a distinct alternative to conventional branch-based

banking in that the customer conducts financial transactions through a range of retail agents (or through mobile phone) instead of at bank branches or through bank employees

• Promises the potential to substantially increase the financial services outreach by using a different delivery channel and a different trade partner

Non bank-led model• A bank does not come into the picture (except possibly as a

safe-keeper of surplus funds) and the non-bank (e.g., Telco) performs all functions

• Bank of America

• JPMorgan Chase & Co.

• Wells Fargo & Co.

• Citigroup Inc.

• ClairMail Inc.

• Firethorn Holdings LLC

• Fronde Anywhere Ltd.

• Industrial & Commercial Bank of China Limited

• Macalla Software Ltd.

• mFoundry

• Monitise plc

• MShift Inc.

• Sybase Inc.

Key Players


Mobile Banking Technologies – 1/2


IVR – Interactive Voice Response• Operates through pre-specified numbers that banks advertise to their

customers• Customers make a call at the IVR number where they are usually

greeted by a stored electronic message followed by a menu of different options

• Customers can choose options by pressing the corresponding number in their keypads, and are then read the corresponding information, mostly using a text-to-speech program

• IVR is more expensive compared to other channels as it involves making a voice call, which is generally more expensive than sending an SMS or making a data transfer

SMS – Short Messaging Service• SMS uses the popular text-messaging standard to enable mobile

application-based banking• The customer requests information by sending an SMS containing a

service command to a pre-specified number and the bank responds with a reply SMS containing the specific information

• For example, customers of HDFC Bank in India can get their account balance details by sending the keyword “HDFCBAL”

• The main advantage of deploying mobile applications over SMS is that almost all mobile phones are SMS-enabled

Mobile banking is being deployed through mobile applications developed on the following channels:

SMS Network Architecture



Mobile Banking Technologies – 2/2

WAP – Wireless Access Protocol • Banks maintain WAP sites, which customers access

using a WAP-compatible browser on their mobile phones• WAP sites offer the familiar form-based interface and can

also implement security quite effectively• For example, Bank of America offers a WAP-based

service channel to its customers in Hong Kong• Mobile application users access the bank's site through

the WAP gateway to carry out transactions, much like Internet users use a web portal

Standalone Mobile Application Clients• Most suitable to implement complex banking transactions

like trading in securities• Can be easily customized according to the user interface

complexity• One requirement of mobile applications clients is that

they must be downloaded on the client device before they can be used

• The major disadvantage of mobile application clients is that the application needs to be customized to each mobile phone type

WAP Network Architecture

Mobile Application Clients Network Architecture


Key Recommendations for Financial Institutions

• Financial institutions need to do more to sharpen their marketing and messaging so their customers have a better understanding of mobile banking services.

• Financial institutions may be able to lower the cost to serve this expensive consumer segment by promoting mobile banking as a more convenient and easy alternative to using the branch, call center, IVR and/or ATM.

• Mobile banking can help institutions increase customer acquisition and loyalty while improving their overall competitive positions by establishing a future platform for delivering premium mobile products and services that can be monetized.

• Mobile banking is more appealing to users of high-end mobile devices than basic cell phone users.

• To allay consumers’ security concerns, financial institutions should educate consumers about how easy it is to use mobile text (SMS) alerts to validate transactions and monitor accounts for potential fraud.

• Institutions should offer a wealth of services to appeal to different customer segments, including money transfers, fraud alerts, bill payment reminders, mobile deposits, account balance threshold alerts, ATM and branch locators, click-to-call, click-to-WAP and loyalty program updates.

• To lower the barriers to adoption among offline customers, institutions should consider allowing enrollment in mobile banking through the banking channel of choice – branch, mobile or contact center – rather than requiring enrollment in online banking to access the mobile channel.

Source: http://www.mcom.co.nz/assets/sm/282/27/M-Com,FiservandVeriSign-OfflineConsumersResearchPaperOct2009.pdf

The Mobile Banking Market. 2 Source: Protiviti KnowledgeLeader Overview of Mobile Banking Source:

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