Today only 59% of the world’s population uses mobile phones. That means nearly 3 billion people are excluded from the mobile economy. This number is far too large to be a problem; it has to be an opportunity.

A 10% increase in mobile penetration leads to a 1% increase in low to medium income GDP. That means if we put mobile phones in people’s hands, we have an opportunity to add approximately US$160 billion to the global economy. But is that it, or can we add more?

According to a model developed by Bell Labs and the World Economic Forum, with the right combination of actions and investment, we can accelerate the impact of mobility by as much as 36%, measured in GDP.

The model predicts how mobile policies, applications, technology, and economics can impact the future. The team found that while mobile broadband is a good thing for economic and social growth when we combine it with the right applications it gets even better.

Driving adoption

Mobile networks provide access to people, markets and services. They provide a means to connect more people to the growing digital economy. This is especially important to developing countries and rural areas.

Developing countries now comprise 86% of the world’s population, and over half the people in those nations are living in rural environments. Mobile access in these areas is still far behind adoption in developed regions.

People in emerging markets are only half as likely to have access to mobile communications as the residents of developed countries. And fewer than 10% have Internet access, far below the global average of 23%.

If we can provide more people with mobile access, we can grow economies and improve lives. Numerous studies have demonstrated the impact of mobile penetration on GDP growth.

Brought down to an individual level, GDP per capita is an indicator of standard of living. GDP is used along with data on life expectancy and education to calculate Human Development Index scores. Mobility affects GDP and can be a tool to drive social benefits such as education and healthcare into underserved areas.

But accessibility can be a challenge because the economics for serving rural and low-income populations are tough. As a result more countries such as – Australia, Singapore, Malaysia, Mexico and New Zealand – are starting to drive digital economy agendas. These initiatives call for substantial investments in infrastructure. Like any investor, nations want to maximize their return.

According to the World Economic Forum and Bell Labs, 3 main factors will drive the largest returns.

1. Rethinking infrastructure. With current traffic and technology adoption patterns, our team predicts many urban networks will soon be overloaded. Conversely, many rural areas are underserved. Mobile access today is not ubiquitous. To achieve ubiquity quickly, we need to look at new business and green technology models that lower costs and accelerate universality.
2. Scaling relevant applications. We need broad deployment for certain mobile applications. One of the most telling aspects of the study is how applications can accelerate economic and social growth. We’ve seen it in Kenya with mobile payments. These sorts of applications have real social benefits and we need to find ways to scale them more quickly. The issue here is not one of innovation – it’s about broad deployment.
3. Developing a near-zero cost mobile device and services that are less than 5% of income. This is not new. If we want to extend mobile services to lower income communities we need to address this. Our model shows pricing has a major impact on mobile related growth. Tackling this target may seem like an impossible task, but we need to set the bar.

Revisiting infrastructure investments

The economics of traditional business models are being challenged. Organizations and governments that want to drive economic growth will need to rethink their approach to infrastructure. They will need to be creative to grow capacity and extend reach.

In rural areas, coverage will be the major concern. Developing a business model that supports cost-effective mobile service delivery will require innovative thinking and a partner ecosystem. Some rural settings do not have access to electricity, but we no longer need to choose between delivering electricity or communications infrastructure. With new alternative energy solutions, electricity and mobile can now arrive hand in hand.

In urban areas, providers will deal with staggering traffic demands. Bell Labs predicts the average number of devices per square kilometer will grow from 400 in 2011, to 12,800 in 2015. That increase in the number of users will generate a more than 30-fold increase in traffic. Scalability will be critical to ensure that networks can respond to the load and provide coverage to meet the growth.

Applications must be relevant and scalable

Countries that want to maximize growth should encourage mobile applications that support basic human needs. The more relevant the application, the more incentive people have to adopt the technology. One of the most interesting findings from the study was that not just one, but rather a suite of applications can drive growth much faster than select single applications (Figure 1). Research substantiates that technology adoption happens at a much faster rate when applications are bundled together and appeal to a large portion of the population. Education, healthcare and banking applications are important examples, but they must be simple and locally relevant. Additionally, mobile applications that target the specific needs of women in developing countries will help bridge the gender gap and address this underserved market.

Figure 1: Mobile adoption accelerates when applications are bundled and have mass appeal

Affordability is key

The higher earning segment of the population isn’t the focus here. For ubiquitous access to become a reality, affordability at the lower income level must be addressed. In developing markets, device costs combined with a monthly service charge can be a huge barrier for many. Accelerating the adoption of mobile broadband to make communication services available to all socio-economic levels means they must be affordable. When the price of the mobile solution falls below 5% of the household expenses, mobile adoption becomes much more realistic (Figure 2). However, there are a number of factors that need to come together to make this happen:

• Technology vendors need to develop innovative network architectures requiring very low capital and operating expenses
• Device manufacturers and content providers must develop extremely low-cost, simple interface devices with Lighthouse applications to drive uptake
• Operators must work together with public and private sector organizations to create low-cost services for low-income households
• Government agencies need to implement tax incentives and policies that will drive economic growth

Figure 2: Affordability is key to mobile adoption

The reality is, without a strategy that will put broadband within the reach of the low-income population, no policy will work – even for countries with a mobile broadband agenda. All of the players identified above must participate to create a feasible ecosystem to drive adoption.

A common goal for the common good

Countries that develop a mobile broadband strategy can optimize growth. But they need the right combination of infrastructure, applications and economics. According to our model, countries can drive GDP growth as much as 36% higher than an access-only approach. Simply put, when people have infrastructure and applications at an affordable price, mobile use will grow along with a country’s digital economy and its people.

Last month, Compete released the results of its Q3 2010 Smartphone Intelligence survey. One of the notable insights from the survey is that mobile banking usage is on the rise, with 40 percent of respondents reporting using mobile banking apps once a month or more. However, with only 6 percent of consumers using mobile banking apps daily, we also noted that mobile banking is not yet part of the consumer’s regular routine.

According to a new study by Accenture, banks enabling customers to use a mobile device to check balances, transfer money, and pay bills can achieve returns on investment as high as 300 percent. We also see financial services companies increasingly competing on application technology in order to attract and retain consumers. Clearly, financial services institutions have good reason to push for consumer adoption of mobile banking.

Curious about what challenges face marketers of mobile banking, we asked smartphone users who indicated they were not interested in mobile banking specifically why they were not interested. We asked about using smartphones to check account balances, pay bills, receive and redeem coupons, transfer money to friends/family (e.g. Western Union or PayPal), to find a local bank branch or ATM, to manage investments (e.g. buy or sell stocks), to purchase goods from retail websites (e.g. from Amazon.com or ebay.com), and to purchase goods at the retail point-of-sale (e.g. buy a coffee at a Starbucks store).

So why aren’t smartphone users interested in mobile banking?

Well, it really came down to two things – concerns about security and lack of a perceived need for the function. For each of the features we asked about, the number one or number two response was either:

• I don’t need to do this, or
• I don’t trust the security of my mobile phone for this

Other responses included:

• I am concerned there will be hidden fees if I do this
• I do not have a data plan with my phone that will allow me to do this
• The wireless connection on my phone is too slow to make me want to do this

These last three responses consistently accounted for less than 10-15% of the total.

Check out the chart above, and you will see that a perceived lack of need was the number one reason smartphone users said they weren’t interested in using their phone as a ticket, to make a point-of-sale purchase, to manage their investments, or to receive and redeem coupons. In addition, consumers are very concerned about security of the their phones, especially when it comes to using them to purchase goods from websites, transfer funds between accounts, or viewing bank account statements.

Addressing Security and Fostering a Sense of Need

The good news is that addressing security concerns and fostering a sense of need can be attended to in marketing messaging. A quick look at the mobile banking messaging at Bank of America, Wells Fargo, and Chase reveals that the dominant messaging for mobile banking across brands is “convenience.” With lots of room to build out marketing messages around security and benefits beyond convenience, this is certainly an exciting opportunity to connect with consumers.

NEW YORK, Feb. 9,  2011 – When banks enable their customers to use a mobile device to check balances, transfer money, pay bills, apply for credit or manage their personal finances, they can achieve  returns on investment of as high as 300 percent, according to a new study commissioned by Accenture (NYSE:ACN).

Banks generating the highest returns on their mobile banking investments achieved ROI by emphasizing customer convenience, providing rich exchanges of information between bank and customer and accurately measuring how customers use their mobile phones to bank, according to the research which was conducted by TowerGroup on behalf of Accenture.

“Bank customers want greater control over managing their finances and prefer to bank in ways that fit their lifestyles,” said Andy Zimmerman, director, mobility services, Accenture. “Technology is enabling customers to move beyond simple account notifications sent by text message from their banks to more sophisticated interactive applications.” 

According to Zimmerman, the mobile banking channel offers an opportunity for banks to create a meaningful dialogue with their customers, deepening loyalty and broadening the services to which their customers can subscribe. “Leading financial institutions that are communicating the value of these services to their customers are generating new revenue,” he said. 

“The pace-setting banks in this study have shown that high mobile adoption and return on investment hinges upon providing a suite of services that are relevant to their customers, educating customers on how to use mobile services and regularly measuring customers’ usage patterns and satisfaction rates,” said Noel Gordon, global managing director of Accenture’s banking practice. “The mobility market will continue to grow as banks adopt the best practices of those with successful mobile banking programs.”

According to the study, financial institutions with successful mobile banking programs:

• Fully understand customer’s expectations of mobility, such as their need to have the same experience on their smart phone as they have on their laptop.
• Minimize customer fees, which helps ensure greater customer engagement.
• Monitor and leverage the evolving functions of customers’ handsets and the platforms they use.
• Ensure that their staff is fully engaged in supporting mobile banking.

Successful programs can yield high return on investment

Among the 10 financial institutions studied, the key findings include:

• ROI of 300 percent. A Middle-Eastern financial institution has achieved a return on investment of at least 300 percent through customer education by showing its two million mobile banking customers how to access and use services, and offering new, convenient ways to pay bills online using their mobile devices, including “topping up” their pay-as-you-go mobile phones, paying utilities bills, or paying a fixed monthly fee for a premium services package.
• ROI of 230 percent. An Asia-Pacific bank has achieved a return on investment of 230 percent since launching mobile banking in 2007. It is transitioning from informational services – sending text message reminders to customers for example, to interactive services such as enabling customers to register online for mobile banking. The bank’s executives said the focus on engaging staff at branches and the call center was critical to success.  
• Annual customer growth of 60 percent. A European bank whose customers can check balances, transfer money between accounts and trade stocks with their mobile phones has achieved 60 percent annual growth of its mobile banking customers. The bank’s executives said support of multiple smart phone device platforms has contributed to success.

No time to post these days... So the best I can do right now is provide you with good content from elsewhere.

Since banks like Bank of America launched native iPhone apps for Apple’s app store in late 2008, there has been an ongoing discussion about whether the future of mobile banking will be dominated by native apps or browser-based services.

With the adoption of smartphones that let people download mobile apps (like iPhones, Andoid phones, and BlackBerrry devices)  still being small today, banks will need to continue offering browser-based mobile banking services to reach most of their customers. But with smartphone ownership growing fast, I expect that most growth in mobile banking adoption will come from native apps and not from browser-based services in the coming years because:

1) Native mobile apps offer a much more compelling mobile banking user experience:

• Apps are easier to find. App stores have become an important way for consumers to discover content. To find a mobile app, customers simply need to search for the bank’s brand name in the app store. Furthermore, mobile banking apps often appear in the list of most popular free apps — which creates additional promotion. Banks promote their native apps heavily since it positions the firm as an innovation leader and associates their own brand to other popular brands like Apple. By contrast, it is more difficult for customers to find out about their bank’s mobile banking Web site domain. Initiatives like dotMobi, with specific domains for mobile-dedicated sites still suffer because it is not clear which sites carry the .mobi extension and which don't. Furthermore, — since mobile search is in its infancy —searching via search engines like Google require additional effort.
• They are easier to setup. Once a customer has downloaded an app, it is automatically bookmarked with an icon on the mobile’s home screen and thus easy to access again in the future. By contrast, customers who access a mobile Web site who want to save the link to the URL for future use need to take an additional step to either bookmark the link in the mobile browser or to create a shortcut on its home screen.  
• Apps  provide better usability. Since less information needs to travel via the mobile network, most apps load and respond faster than mobile banking Web sites. Furthermore, apps’ are easier to navigate since they have only one level of navigation that is specifically designed for the user goal they are trying to accomplish. By contrast, mobile banking Web sites make use of the mobile browser’s generic navigation plus an additional app-specific navigation.

2) Native mobile apps enable banks to develop functionality that leverage the unique benefits of the mobile channel

• They integrate more deeply with the handset's hardware. Unlike today’s mobile Web sites, native apps can integrate with the handset’s core functions like GPS and camera. Apps thus enable a wider set of functionality that is unique to the mobile channel like remote check deposits and ATM and branch finders that help to find the way to the nearest ‘free’ ATM or branch. Although more advanced browsers with HTML5 will be able to leverage phone features, it will take several years until they are widespread.
• Apps let banks create a ‘proactive’ channel that provides actionable information. Apps enable application developers to push notifications to the smarthpone without the app being launched.  For banks, that means that a range of services can be offered that notify the customer proactively. Banks can for example show their customers when a new transaction has taken place or alert them when their account reaches a certain limit to avoid overdraft. By contrast, mobile Web sites are — like general Web sites — a reactive channel that only provides information once customers decide to access it. Apps can thus leverage some unique capabilities of the mobile channel.

Nothing new here. But as I get myself in the mood of writing again I have been doing some reading. I came across this little post on the Forrester blog. To summarize... the author says mobile banking adoption will be driven more by native applications (vs mobile browser) due to two main reasons:
(1) user experience and (2) native integration.

The number of U.S. adults who own mobile phones dropped markedly in 2010, falling to 74%, down from 85% in 2009. However, smartphone sales bucked the trend. About 20% of all U.S. adults now tote a smartphone, as do 27% of mobile phone owners. With about one in five consumers now using mobile banking, financial institutions must understand the mobile marketplace and deploy mobile‐banking platforms to serve customers who increasingly are choosing banks based on their mobile‐banking capabilities. Because only 18 of the top 40 U.S. banks now offer mobile banking, the time has come for financial institutions (FIs) to develop, improve upon, and deploy effective mobile‐banking strategies and solutions. Javelin’s “triple play” approach provides actionable steps that financial institutions can follow to increase mobile‐banking adoption and capitalize on the growing smartphone, “mobile‐banking friendly” segment.

Javelin analyzes the demographics and behaviors of mobile‐banking customers, mobile banking and smartphone adoption rates, mobile device offerings, carrier and model penetration, along with survey data that describes what consumers want and how they bank via mobile device. This report identifies key consumer segments to target, the most effective approach for reaching customers, and the features

Primary Questions:

• What does the mobile marketplace look like?
• What are the current adoption rates for mobile penetration, mobile banking, and both smartphone and feature phones?
• How does security factor into mobile banking?
• What do typical mobile bankers look like, and how do they behave?
• What is the best method to reach consumers on their mobile devices?
• How do different smartphones and their owners compare?
• Which smartphones are most used for mobile banking?
• Which carriers have the largest market share?
• What features and mobile capabilities do consumers desire?
• How should FIs prepare for the future of mobile banking?

I don't have access to the report... but I would venture a guess and say that some of the data presented in this report may help you decide as a Financial Institution how much weight (as part of your mobile strategy) you place on SMS Banking (or Text Banking) versus mobile browser and native applications.

I have more thoughts on this and I will expand on this any more topics related to mobile financial services over at the Mobile Strategy Blog (http://m-strat.org).

Be well!

On January 14th I broke a story "New Firethorn App and Website" and today they made it official..."Firethorn Adds Mobile Banking Support for Over 3,700 Financial Institutions," but that's only half the story.

I spent some time this afternoon combing through the fine print and was SHOCKED and ALARMED by what I read.

Here are a few snippits:

"In addition, you hereby grant Firethorn and its service providers a limited power of attorney, and you hereby appoint Firethorn and its service providers as your true and lawful attorney-in-fact"

"YOU AGREE THAT WE WILL NOT BE LIABLE FOR ANY LOSS THAT YOU MAY INCUR AS A RESULT OF SOMEONE ELSE USING YOUR PASSWORD OR ACCOUNT, EITHER WITH OR WITHOUT YOUR KNOWLEDGE."

"You agree that we and our service providers may send you, by short message service (with an opportunity to opt-out), by e-mail, and/or by other methods...other offers, including without limitation welcome messages, information, alerts, surveys and other requests for information, advertisements, and/or promotions of all kinds."

"YOU AGREE TO INDEMNIFY, DEFEND, AND HOLD YOUR CARRIER HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITY, DAMAGES, EXPENSES AND COSTS ... INCLUDING WITHOUT LIMITATION ANY CLAIM BY YOUR FINANCIAL INSTITUTION THAT YOU DID NOT HAVE AUTHORITY OR OTHERWISE DID NOT PROPERLY GRANT AUTHORIZATION FOR THE USE OF YOUR USERNAME, PASSWORD, OTHER AUTHORIZATION CREDENTIALS, OR OTHERWISE IN CONNECTION WITH THE USE OF OR ACCESS TO YOUR ACCOUNT(S)."

"You understand that we are using the account aggregation technology and related services of CashEdge Inc. and/or other third parties to operate and provide the Service."

Important reminder to read the find print in our contracts.

This type of thing is allowed because they know regular folks will not read through it. Shouldn't privacy and an individual's rights be protected as a default? That's what most people assume and that is why most people do not read the fin print.

If we don't take care of ourselves... who will?

Visualize this: A woman is pushing a loaded grocery cart through the frozen-food aisle when she gets a mobile phone alert. Her checking account balance has dropped to $100. Uh-oh, the food will be well over that amount.

But wait. Up pops a clickable ad, offering her the chance to sign up - right now - for overdraft protection.

That might be a marketing no-brainer, but it's still wishful thinking in mobile banking. "Banks are starting to ask for this capability," said Drew Sievers, co-founder and CEO of mFoundry, a Larkspur, Calif., technology firm that creates software for mobile banking and mobile payments. "But security risks are a big concern."

Sievers says current mobile marketing strategies have great potential for helping banks gain a greater share of customers' wallets. For one thing, financial services firms can partner with other businesses that want access to their customers, as Visa has done with Starbucks. A mobile gift card application that mFoundry created for Starbucks features a Visa advertisement. Those who use their mobile devices to reload Starbucks cards get an extra $5 added, if they pay with a Visa card.

Mark Schwanhausser, a senior analyst with Javelin Strategy & Research in Pleasanton, Calif., likes this type of partnership strategy. "Banks have incredible insights into how individual consumers spend their money," he says, "and they sit in a spot where they can play an instrumental role in directing coupons, offers, rewards and other savings to consumers."

Sievers says banks also should be looking to drive traffic to their own products and services by connecting with mobile users. Someone seeking real estate information on Zillow.com is a prime candidate for a bank's mobile mortgage ad, for example. "The banking industry has only barely begun to tap into this potential," he says.

Banks' mobile opportunities are different from those of other industries. A bank is unlikely to add new customers via a mobile ad, but it can grow revenue from existing customers, and this is what Schwanhausser predicts will blossom this year.

After all, connecting advertising to the deep demographic and financial information banks already have on customers is powerful marketing, he says.

Couple of issues here with respects to privacy and security... please Mr. Banker don't share my name with any of your 'partners.'

However as I have been telling some of my clients for a while now... the entire mobile banking landscape will succeed only through partnerships. Banks partnering with other service providers... (but to what extreme? And at what cost to the customer?).

A very important partnership is the one between those that provide services to the banks... Enterprise software providers, mobile app developers, system integrators - the best way to break in and go deep in mobile with a bank will be based on your partnerships with others. This is especially true for startups in the mobile space - go out and seek partnerships with providers who already have entrenched relationships with the big banks.

We have mentioned it here before – the first Canadian Bank to come out with true Mobile Banking would enjoy a competitive advantage in this market.  CIBC has moved up as the new innovator in the Canadian marketplace.  Often seen as the more conservative of the Canadian Banks this move may very well change that perception and instead be the bank that the others follow.  Of course this needs to go beyond this one release: they will have to move from mobile banking to mobile financial services… I assume that will be in the future.

Scotiabank thought they had first mover advantage when they announced back in November that they would offer mobile banking in the Spring of 2010.  CIBC instead surprised us with the announcement yesterday!

So … which one works better from a PR standpoint?

• A press release announcing a future release?
• Or the actual release 3 months ahead of the competition?

It will be interesting to see how the other banks respond and what other features they stack on top of their applications. Or will they all have the same app as CIBC? Just different colours?

No news on a BlackBerry or Android app...