For a variety of reasons—technical, demographic, economic—there is now a great deal of interest in, and growing usage of, mobile devices for banking. Most of that use is still informational, like balance checking.

And, as often happens when something reaches the “tipping point,” that wonderfully descriptive term made famous by Malcolm Gladwell, the change in momentum comes quickly.

Mobile: Not if, but when
“This is not a product you should wait six to nine months to get into,” insists Jeff Lewis of Metavante.  “You have to offer some form of mobile service as a baseline.” One example: simple text alerts of account developments. Lewis, president of Metavante’s ePayment Solution Division, says that banks that do not offer mobile service have told him that customers in exit interviews have said they were leaving the bank to get it.

United Bank, Grand Rapids, Mich., didn’t wait for that to happen.

“We don’t like coming in second to any bank”—particularly when it comes to adopting technology to serve customers, says Tim Lockwood, senior vice-president and chief information officer of the $428 million-assets bank. United was the first community bank in its market to provide mobile banking.

A few years ago, Lockwood began asking his core processor (ITI, now Fiserv)  to come up with a mobile banking solution after he noticed that Bank of America offered the service. What had been a somewhat low-key discussion took on new urgency when BofA acquired LaSalle Bank, putting the financial giant squarely in United Bank’s market.

Fiserv had by then brought out a mobile product, and it didn’t take long before the Michigan bank introduced mobile banking service. Within a few months of the October 2007 launch, United had 30 customers actively using it. That has grown to 300 as of April 2009, out of the 3,000 customers who regularly use online banking. The bank uses Fiserv’s browser-based service (also referred to as WAP for “wireless application protocol”), which requires a user to have a mobile device with a browser. “WAP technology is compatible with nearly every cell phone on the market, even phones several years old,” says Lockwood. 

United Bank’s marketing vice-president, Gwyn Harnish, says that 700 customers tried to connect to a mobile banking how-to demonstration on the bank’s website last year, but some realized they didn’t have the mobile service plan to view it.

SMS, WAP, and “downloads”
WAP service was the first to be offered to banks, but more recently some banks have begun offering SMS (short message service), or text-based, mobile service, either as their only offering or as one of several choices.

In addition to browser-based and text-based mobile banking services, there is a third category—downloaded applications (also referred to simply as “downloads” or “applications”). These are gaining ground thanks to the rapid growth of smart phones, led by the Apple iPhone. The “downloads” have more functionality and can be tailored to the specific needs of a customer and the specific device being used. 

“As you look at mobile banking today,” says Rod Dir, chief operating officer of mobile banking provider, Firethorn, “each [format] has a purpose.” As banks move forward into mobile commerce, in which transactions are conducted that combine things like coupons, loyalty points, and payments, Dir believes such capability will require downloaded or preloaded applications.

The ultimate convenience
That may be coming, but today, BankAtlantic, Ft. Lauderdale, Fla., is making life easier for its customers with a mobile solution rolled out in January 2008. The browser-based service was followed three months later by text-message service for people who have phones without internet capability. Both are hosted solutions provided to the $6 billion-assets bank by MShift. The browser service is comparable to online banking from a PC, except that mobile users are redirected to a mobile website that allows better presentation on a phone’s small screen (customers have the option of returning to the bank’s main site).

The text service is much more limited. The customer calls a special mobile banking number, enters a PIN, and immediately receives a text message on his or her phone showing an account balance and the last three transactions.

The bank jumped into mobile banking last year because of the convenience it provides for customers, according to Marilyn Hernandez, internet banking manager. The bank promotes itself as “Florida’s Most Convenient Bank” (most branches are open seven days a week), so mobile banking was a natural addition.

“We were not the first in the market,” says Hernandez. “But it was a good time to introduce the service as customer awareness and demand grew.”

Hernandez says volume has been growing every month. As of March, BankAtlantic’s customers produced approximately a half million page views. (One visit can involve more than one page view. She did not have figures available for the text service.) When the browser service was rolled out in January 2008, it had an acceptance rate of 2% of active online banking users. Currently, approximately 16% of the bank’s customers have used the service and that number is growing.

U.S. mobile focus shifts
When mobile banking applications first began appearing four and five years ago in the U.S., amid much fanfare, you would have thought the banking world was going to change overnight. Much of the hoopla had to do with using phones much like contactless cards for purchases at the point of sale. Those applications have moved along in other countries, but they remain in the early stages here.

But the focus of mobile has now changed. We’re now in the “reality phase,” as one source put it. MShift’s experience reflects this. The San Jose-based mobile platform provider had about a dozen North American financial institution clients in 2005. Now that figure comes to about 175, according to Pamela Livingston, vice-president, business development.

Over the past few years, several interrelated factors have come together to drive these applications: carrier network capabilities; the sheer numbers of handsets and improved features; and customers’ needs and behavior.

“The carriers’ willingness to upgrade their networks made WAP competitive,” says Firethorn’s Rod Dir. That enabled banks to replicate the online experience on mobile devices. Network development continues apace.

“Sprint, Verizon, AT&T are all rushing to 4G,” says Livingston, referring to the next generation wireless network.

The number of mobile devices has proliferated, but the emergence of the heavily marketed iPhone (and the raft of “iPhone wannabees,” as Livingston calls them), has raised the awareness of the possibilities of smart phones, and has given a boost to the application download format.

Customer behavior in the mobile space has also changed radically.

As of a few months ago, “text messages exceeded phone calls,” points out Jeff Lewis of Metavante. Mobile banking gives customers what they want, he says—quick answers to simple, short questions. It’s about “staying in control, and taking care of financial business in a quick, easy way.”

Charles Landry, of VeriSign Messaging and Mobile Media, points out that the demographics are also changing. It’s not just twenty-somethings that are using mobile technology, says Landry, who is  vice-president and general manager, products and innovation. More mature segments are  getting comfortable with it, and like the convenience.

Balance inquiries are No. 1
Those are the broader trends. There is also a near-term driver: the economy. People are much more aware of financial matters now, Lewis observes. BankAtlantic’s Marilyn Hernandez confirms that economic woes have helped increase interest in mobile banking.

“Customers are looking for more resources to help manage their finances—using mobile and online banking to help avoid overdrafts and help avoid late fees by paying bills on time,” Hernandez explains.

This gibes with the usage BankAtlantic sees of its mobile service. Viewing account balances is the number-one activity, followed by reviewing recent transactions, and transferring funds. Finding the nearest branch or ATM location is also a frequent choice.

Viewing account balances sounds pretty pedestrian, but the reality is, customers still frequently check their balances, usually by phoning the bank’s call center.

Hernandez says mobile improves customer service several ways. One improvement: Instead of calling the bank and waiting in a voice-response queue, customers can obtain balance information immediately. Mobile has also reduced inbound call volume, she says. And for people who do need to speak with someone, waiting time shrinks.

A related point: Many banks market mobile service mainly to their online banking customers, figuring they are already comfortable with technology. One mobile banking vendor believes they may be missing a big segment.

“You need to target more than your online base,” says Calvin Grimes, product manager, mobile solutions, with Fiserv’s Electronic Banking Group.

Continuing, Grimes says that “there is a huge untapped market of non-online banking customers—people who don’t have regular access to a PC.” This could be service personnel, doctors, lawyers, or small-business owners or managers who often are not in an office.

Is business mobile the next big thing?
Synergistics Research Corp., which conducts multi-sponsor research for the financial services industry, found that “small businesses are adopting mobile banking and payments at a very quick pace,” as stated in a news release earlier this year. Genie Driscoll, COO and senior vice-president-research for the firm, said in an interview, “we knew businesses were using mobile banking, but we were surprised by the extent.” The accompanying charts indicate that virtually all business respondents use some form of mobile device, and that two thirds report doing some form of mobile banking, including online purchases (43%). Driscoll says she believes the growth of smart phone usage as well as that of personal digital assistants is a major factor, because those devices enable so many applications.

“We’re seeing a lot of business acceptance of mobile banking,” notes Don Rhodes, director, risk management policy, and a payments system expert for the American Bankers Association. “Landscapers, plumbers, and other people who move around can stay in touch with the office and do cash management.”

Neither United Bank nor BankAtlantic focus heavily on the small business mobile market. In United Bank’s case, it has a mobile plan for business that offers ACH and wire-transfer capability, including originations.

The service is “by request,” says CIO Tim Lockwood, adding that at present nobody has requested it. “We’re probably glad about that,” Lockwood allows, “because of the increased risk involved.”

Fiserv’s Grimes believes that the small business market for mobile is huge overall, with financial applications part of that. “Consumers typically are looking for information, while business users do transactions,” he says.

A couple of sources observed that the distinction between “retail” and “small business” usage is often difficult to differentiate. Others pointed out the revenue potential for mobile banking lies in transaction fees. Most services offered currently—even those that offer billpay—are free. But that would not be the case with ACH originations or other comparable business transactions. BJ