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.

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.

Credit card issuer American Express Co. said Wednesday it has hired former Sprint Nextel Corp. executive Daniel H. Schulman to lead a new business growth group ...

Schulman, 52, will be responsible for business development, mergers and acquisitions and global strategy to expand alternative mobile and online payment services and build revenue streams outside card and travel businesses. He will oversee online payments unit Revolution Money and the global prepaid business.

The new group he will head "is designed to extend our leadership into the world of alternative payments and create new fee-based revenue streams for the post-recession environment," Chairman and CEO Kenneth I. Chenault said in a statement.

I could have called it something else. But let's face it... alternative payments these days are related to mobile. There are other kinds (are there?) but we are mostly interested in the evolution of mobile as a vehicle for economic transactions. So AMEX is doing just that. Getting more serious about it and ensuring that their mobile strategy includes a way to purchase goods (and services?) while mobile and to make money off that service by charging fees.

Nothing new here. Keep moving along.

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!

In a press release this morning, MasterCard has announced that desktop and mobile developers will have access to an API from the credit card giant later this year. The company hopes that by opening its technology to developers, new and innovative e-commerce applications that leverage the MasterCard network will be created, potentially competing with the likes of Visa, PayPal and Square.

MasterCard Chief Innovation Officer Josh Peirez says the company is "excited about tapping into the ingenuity of software developers around the globe to help create the next generation of game-changing payment applications." A newly launched portal - MasterCard Labs - will give developers access to APIs, SDKs, guides and forums for discussing and experimenting with the company's technology.

The announcement comes at a time when the mobile-payments market has begun to heat up with competition between startups and large credit card providers. San Francisco-based startup Square has many people excited about its mobile application and dongle that allows credit cards to be scanned by various mobile devices; online payment staple PayPal recently teamed up with Bump Technologies to provide a mobile transaction service as well.

Visa also recently announced its own foray into the mobile payments market. Earlier this month, the MasterCard competitor teamed with DeviceFidelity to launch special cases for iPhones which would allow users to take advantage of Visa's wireless and contact-less payment method, Visa payWave, straight from their phones.

But mobile payments is just one of the platforms MasterCard hopes developers will innovate on using its technology. The company says it has identified 20 other areas in which their APIs could be used, including payroll systems, social networking applications, eWallets, and online games. With the growing popularity of sites like Blippy, which allows users to automatically share their credit card purchases with their friends, MasterCard may be providing a valuable API to developers at a ripe moment for these kinds of platforms and services.

Many have been skeptical about these new services due to apparent security risks that come from mobile payment systems, but MasterCard is taking precautions to make sure their platform is not abused. According to its press release this morning, "all developers will be approved and registered by MasterCard to ensure that MasterCard payment and data services continue to be used appropriately and productively."

TORONTO, March 3, 2010 – Canadians will soon be able to leave their wallets at home thanks to a wireless payment sticker trial launched by EnStream LP, Canada’s leading mobile commerce company. The Zoompass Tag ^TM is a wireless payment device designed in the form of a sticker that can be attached to a mobile phone. The Zoompass Tag ushers in the future of mobile payments by allowing consumers to tap their phones at checkout to make purchases at retail stores.

In 2009, EnStream launched the revolutionary Zoompass™ mobile application and began offering Canadians the first version of a mobile wallet. Available at www.zoompass.com and accessible on most mobile phones in Canada, Zoompass already allows users to send money quickly and securely to friends and family.

“The new Zoompass Tag goes even further by allowing Canadians to make their regular store purchases quickly and securely, using only their mobile phone.” said Robin Dua, President of EnStream LP. “All Zoompass users will soon be able to pay for their morning coffee, gas at the pump, and lunch at a fast-food restaurant with a quick tap of their mobile phone.”

By tapping a mobile phone with the Zoompass Tag on a contactless reader at the point-of-sale, payment is automatically drawn from the user’s Zoompass stored value account. Contactless payments remove the need for coins and cash, plus time spent waiting in lines and digging for change. Canadians can look forward to having exact change ready via their mobile phones whenever they need it.

Customer’s financial information is stored on secure servers, not on the mobile phone, so even if the phone is lost or stolen, the customer’s Zoompass account remains secure. Together, the Zoompass Tag and Zoompass application allow consumers to monitor their purchase transactions in real-time.

“Every transaction is logged in the Zoompass application and can be instantly seen on the mobile phone. This is very handy to track purchases and budgets in real-time,” added Dua.

The sleek and appealing sticker measures 43 mm by 33 mm and can be easily affixed to any mobile phone.

“This is the most advanced wireless payment sticker available in the Canadian market today. Our Convego® Air Mobile sticker is the only sticker of its kind with a flexible body and a unique shuttle distribution method. It is the only sticker being trialed by the leading Canadian wireless carriers for use on their mobile phones”, said Kim Madore, VP Emerging Technology and Market Development for Giesecke & Devrient, producer of the Zoompass Tag.

The Zoompass Tag can be used at most contactless payment ready locations. Leading retail merchants such as Tim Hortons, McDonalds, Petro Canada and Loblaws will accept payment through the Zoompass Tag as these merchants are rapidly adopting contactless payment terminals in an effort to offer convenience to consumers and save costs.

The trial is offered to select Zoompass clients and is expected to last up to 3 months. The pilot will allow EnStream to evaluate many aspects of the mobile payment experience and shape the way Canadians pay for goods and services in the future.

It is appealing... but it is the same thing as my Starbucks or Timothy's card. I load them and then I use these when purchasing my coffee.

Key to this announcement is the following phrase: "payment is automatically drawn from the user's Zoompass stored value account."

I want it to take the money out of my bank account directly... The problem with this method is that I have to maintain yet another account. I want integration... not fragmentation!

The little sticker is not as appealing to me as the press release makes it sound: "...sleek and appealing sticker measures 43mm by 33mm and can be easily fixed to any mobile phone."

I know this is a step forward, but it seems too much like a step backwards.

Nevertheless progress is progress...

Remember - this is a carrier lead initiative. To be honest with you I am waiting for the banks. I have a feeling they can do a better job at it.

Integration... not fragmentation!

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.