The Professional Market Segment

Strategic Excellence in Banking

Publication Date	October 2007
Publisher	VRL Financial News
Product Type	Report
Pages	190
ISBN Number	not applicable
Product Code	VRL00018

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Summary

Mobile phone usage worldwide is much higher than that of the internet and offers tremendous potential as a financial channel. Banks are under pressure to develop and implement mobile banking strategies but face uncertainty. In these vital early stages, when crucial decisions are being made, executives will benefit from the insights and recommendations contained in this report. After abandoning initial rollouts following poor consumer take up, banks are rushing to re-enter the market. Consumer demand remains uncertain and cost reduction through channel substitution (in particular by deflecting calls from the call centre) is the key driver, although there is little empirical support for this. This report explains how banks all over the world can develop and implement mobile banking. A one size fits all approach is not appropriate as each market has unique requirements. Questions answered by this report include:

What is the case for mobile banking? Customer retention and brand enhancement image are compelling short term arguments, although the importance of these will diminish as mobile banking becomes more commonplace. The most powerful argument in the short term is in the cost savings and customer value generated by fraud prevention alerts. In the longer term success will come from leveraging the unique characteristics of the mobile to complement the capabilities of other channels such as ATMs, branches, sales managers and call centres. Profitable new services generated by the mobile channel will include last minute bill pay, remote transaction authorisations, payments and remittances, real-time loans and third party offers.

What is the size and commercial potential of the market?

The introduction and country profiles within this report discuss mobile phone penetration, usage patterns and the main players. The introduction presents the business case for mobile banking, the benefits of mobile banking and why it has so much potential. The section on marketing discusses the key demographics with the greatest demand for the service.

What technology platform is the most suitable?

Perhaps the most important choice facing banks is the choice of technology platform. The three main platforms are SMS-

based, browser or WAP-based and client application based. Each has strengths and weaknesses and none has gained dominance so far. The initial failure of WAP-based solutions is discussed at length, with an update on how it has since improved. The author cautions banks to avoid the common tendency of dismissing this platform based on past experience. What are the main security issues to be addressed? Although security threats are present, mobile is regarded as a securer channel than the internet. The real challenges lie in optimizing the balance between security and usability, overcoming negative consumer perceptions surrounding security and educating consumers on the steps they can take to maximize their level of protection.

What are the opportunities 5-10 years from now?

Mobile payments are viewed as one of the 'end games' of mobile banking. While banks are wise to keep a close eye on the development of NFC POS payments, widespread adoption is not guaranteed. Banks should focus on developing revenue generating payment services which can be rolled out with relatively low costs including airtime top-ups, remittances and P2P payments. Partnering with telcos and third party payment vendors is an effective way of achieving this. Marketing to mobile banking customers is also an opportunity. Banks have a wealth of consumer data. When combined with the location specific capabilities of the mobile device, it can be a powerful platform for targeted and contextual marketing. This can be used to cross-sell the banks' own products and services or provide offers from third parties. Banks entering this space must carefully consider their customers privacy. They must carefully understand consumer appetite for such advertising and the potential impacts on their brand from providing third party offers.

Who should buy this report:

CEOs, Heads of Retail Banking, e-channels, IT, Strategic Planners, Marketing Mnagers. This report uses data, exclusive interviews and original case studies from over twenty different countries to give a

detailed overview of the fast developing world of mobile banking.

The report presents:

The lessons from the first doomed attempt to create mass mobile banking in the early 2000
The short term wins from mobile banking and the opportunities over the next 10 years including eBill Payof, remote transaction authorisations, real-time loans and third party offers;
A simple explanation of the key technology issues such as platforms, security and usability;
The impact of mobile banking on financial services, including eBanking the Unbanked of, delivery channels, marketing, payments, remittances, SME and corporate banking;
The opportunities and threats provided by telecommunication providers
The report also offers:
A glossary of key terms
Bullet point summaries

Content

Executive summary
- Introduction
- Mobile banking defined
- The development of mobile banking
- Mobile phone usage worldwide
- The relationship between banks and mobile carriers
SECTION 1: THE BUSINESS CASE FOR MOBILE BANKING
Chapter 1: The business case for mobile banking
- Cost reduction through channel substitution
- Customer satisfaction and retention
- Brand differentiation
Chapter 2: Generating revenue through value-added services
- Leveraging the unique characteristics of the mobile channel
- Mobile banking products
- Bank transactions
- SMS alerts
- Mobile brokerage
- Transaction authentications
- Mobile payments
- Remittances
- Instant cash loans
- Spending reports and budget tracking
Chapter 3: Enhancing other delivery channels
- Online channel
- ATM channel
- Call centre and IVR channel
- Branch channel
- Mobile sales force channel
- Cards
Chapter 4: Marketing via the mobile channel
- Advantages of mobile marketing
- The mobile marketing industry
- Consumer reaction to mobile marketing
- The role of customer permission
- Regulatory considerations
- Six mobile marketing campaigns
- Citi Interactive mobile advertisements in USA Today
- HSBC UK Bluetooth messages sent to people passing its branches
- HSBC US Text interactions in street performances
- Barclays SMS game for youth accounts
- BBVA Offering mobile downloads in CSR campaign
- Banesto Bank Mobile interactivity with in-branch digital signage
- Mobile delivery of merchant coupons and offers
- The proposition for banks
- Tyfone and Bank of Oswego An early trial
- Should banks be delivering merchant coupons and offers?
Chapter 5: Banking the unbanked
SECTION II: STRATEGIC AND OPERATIONAL ISSUES
Chapter 6: Choosing a technology platform
- Voice-based platforms
- Call centre / interactive voice response
- Message-based platforms
- SMS
- USSD
- MMS
- Mobile email
- Instant messaging
- Browser-based platforms
- Yodlee
- Accessing regular online banking on the mobile phone
- Choosing a technology strategy
- Application-based platforms
- WAP versus App
- Back-end integration
- Customer support functionality
Chapter 7: Security considerations
- User authentication
- Finding the balance between security and usability
- Challenge questions
- Two-factor authentication
- Voice authentication
- Encryption
- Security of device
- MoPho phishing
- Viruses
Chapter 8: Usability considerations
Chapter 9: Marketing considerations
- Phased rollout is better
- Marketing for brand enhancement
- The importance of consumer education
- Target offerings to specific customer segments
SECTION III: MARKET PROFILES
Chapter 10: United States
- The relationship between banks and carriers
- Vendors as middlemen between banks and carriers
- Firethorn
- mFoundry
- 'Carrier agnostic' platforms
- ClairMail and Bank of Stockton
- MShift
- Bank of America
- Multiple platforms
- Wells Fargo
- Future developments
Chapter 11: United Kingdom
- The mobile banking market
- Monilink
- First Direct
- Barclays
- Future developments
Chapter 12: Germany
- The mobile banking market
- Mobile banking offerings
- Deutsche Postbank
- Future developments
Chapter 13: South Africa
- The mobile banking market
- First National Bank
- MTN Banking
- Wizzit Bank
- WIZZIT users
- Future developments
Chapter 14: New Zealand
- The mobile banking market
- National Bank of New Zealand
- Kiwibank
- PSIS
- Future developments
- Mobile banking in Australia
Chapter 15: Key emerging markets
- China
- India
- Indonesia
- Nigeria
- Brazil
- Glossary
- Acknowledgements
LIST OF TABLES
- Table 2.1: Willingness to pay for basic mobile banking services, consumers in five Asia-Pacific markets, 2007
- Table 2.2: Interest in and willingness to pay for mobile fraud alerts, mobile users in five Asia-Pacific
markets, 2007
- Table 2.3: Interest in and willingness to pay for mobile fraud alerts, mobile users in five Asia-Pacific markets, 2007
- Table 2.4: Last minute bill pay price sensitivity, US consumers, 2007
- Table 2.5: Means of money transfer used in Kenya, 2007
- Table 2.6: Mobile phone usage in Kenya, 2007
- Table 4.1: Interest in mobile marketing, mobile users in five Asia-Pacific markets, 2007
- Table 11.1: Barriers to mobile banking adoption in the UK, 2006
- Table 12.1: Percieved barriers to the adoption of mobile banking, German consumers, 2006
- Table 12.2: German banks offering mobile banking services, 2003 and 2006
- Table 13.1: Cost of using a Wizzit, traditional bank or Mzansi accounts, 2005-06
- Table 13.2: Average number of transactions conducted by Wizzit users, 2005-06
- Table 13.3: Key demographic indicators for Wizzit users, 2005-06
- Table 13.4: Views of mobile banking among South African consumers, 2006
- Table 15.1: Chinese mobile users' interest in specific mobile banking services, 2007
- Table 15.2: Chinese mobile users' views on whether their bank offers mobile banking, 2007
- Table 15.3: Indian mobile users' views on whether their bank offers mobile banking, 2007
- Table 15.4: Indian mobile users' interest in specific mobile banking services, 2007
LIST OF FIGURES
- Figure 1: US consumer preferences for mobile banking delivery by bank or mobile carrier, 2007
- Figure 1.1: Channel transaction costs for US banks
- Figure 2.1: Most common online banking activities, US consumers, 2007
- Figure 2.2: Expectations of cost of mobile banking, US consumers, 2007
- Figure 2.3: Usage of money transfer services in Kenya, 2007
- Figure 2.4: Financial inclusion in Kenya, 2007
- Figure 4.1: Acceptance of different advertising media: consumers from the UK, US and India, 2006
- Figure 4.2: Most preferable forms of advertising: consumers from the UK, US and India, 2006
- Figure 4.3: Most preferable forms of advertising: consumers from the UK, US and India, by age and frequency of using mobile internet, 2006
- Figure 4.4: Acceptance of advertising on mobile internet: consumers from the UK, US and India, by age, 2006
- Figure 4.5: Preference for targeted advertising on mobile internet: consumers from the UK, the US and India, 2006
- Figure 4.6: Preference for targeted advertising on mobile internet: consumers from the UK, the US and India, 2006
- Figure 4.7: Preference for targeted advertising on mobile internet by analysis of personal data: consumers from the UK, the US and India, 2006
- Figure 5.1: Use of text messaging by ethnicity, US, 2006
- Figure 5.2: Use of internet by mobile phone by ethnicity, US, 2006
- Figure 6.1: Preferred medium for accessing mobile services in five European countries, 2006
- Figure 10.1: Number of online banking customers and mobile subscribers in the US, 2001 and 2007
- Figure 10.2: US consumers' interest in banking using their mobile phone, 2007
- Figure 10.3: US consumers' interest in mobile banking, 2007
- Figure 10.4: US consumers' interest in banking by wireless phone, by service, 2007
- Figure 10.5: US consumers' interest in banking by mobile banking, by service, 2007
- Figure 11.1: UK consumers' interest in mobile banking, by age, 2005
- Figure 12.1: Mobile banking users by profession, Germany, 2005
- Figure 12.2: Perceived disadvantages of mobile banking among German consumers, 2005
- Figure 12.3: Perceived factors that would improve adoption of mobile banking among German consumers, 2005
- Figure 12.4: Preferred mobile banking technology platform, German consumers, 2005
- Figure 12.5: Preferred mobile banking technology platform, German consumers, by age, 2005