Bob Egan, chief analyst for TowerGroup, spoke with ABA BJ about the developing the U.S. mobile market. As recently as six months ago it was common to hear that the U.S. was behind the international sector, particularly Japan. But top tier U.S. banks and the group’s community bank counterparts have made progress with mobile. Egan offers his thoughts.

Despite the market turmoil that could have slowed the mobile banking train, projects related to the channel continue. What are your thoughts on how the channel is progressing here?
Mobile got ample press last year due to announcements from the top ten banks. The leaders—SunTrust, Bank of America—got started on a broad strategy right out of the gate with substantial offerings. So I would describe last year as the trigger point, because technology enablement occurred. We hit the peak of the hype cycle in spring of 2007.

Meanwhile, we saw many “me too,” fast follower announcements, many of them supported by the processors. Jack Henry announced goDough, to conduct transactions such as balance inquiries and fund transfers. Metavante announced its partnership with Monitise Americas to make its offering. Open Solutions Inc. licensed the Fundamo solution for its clients here in the U.S.

As a result of all these individual roll-outs, you now have some 300 banks with some form of mobile banking services. Things were getting more mainstreamed and more serious. You finally saw Verizon launch with a third of banks. You finally saw AT&T make a commitment to pre-provision the downloaded applications on the phones.

You sound optimistic.
Well, I have my skeptical, “voice of reason” side and the part of me that’s optimistic, especially when I consider the potential for the interplay of card payments and mobile services. Initially, I was very curious how the adoption curve would develop, given that this is a new channel and people have been asking tough questions about the business model and what would work.

But with 3.5 billion phones in circulation, banks are realizing that this is a channel that can’t be ignored. So what you’re seeing is them introducing the first version of the services and getting experience in this market. At the same time, they’ve got to engage in “back filling” of the appropriate analytic IT to make this channel pay off.

Why are analytics so important?
You don’t want mobile banking to merely be “internet banking lite,” because that’s not a way banks can make money. Eventually, what banks will have to offer is a full menu of payment functions, including remittances, person-to-person payments, merchant-related services. Those will be revenue sources for the bank.

How are analytics actually used?
Here’s an example. You walk into a Best Buy and decide to purchase a plasma flat panel television.

And, you decide to use your debit card, as so many people do these days, even for big-ticket items. The bank runs a series of analytic assessments on you in real-time, including a pull of your FICO score. The bank sees that you are a good customer with a car loan, savings, and checking account. They want to retain you.

What better way, than,  to call your mobile, right in the store, and offer you an alternative for payment?  They ask you, would you like to put this purchase on a card instead and pay in four interest- free payments? That’s one sort of scenario that would be useful for mobile.

Would you need to be wireless application protocol-enabled to do that or could you use a text message?
You could use a text message. There are banks that do similar sorts of real-term multi-channel plays in fraud alert scenarios. Here, you would be using the analytics and the call center’s outbound messaging in order to make that offer.

By the way, in Spain, where a bank has been in production with this for about six months, the customer satisfaction scores have just gone through the roof.  This is an area with exciting potential.

You presented at this summer’s Mobile Conference in Las Vegas. What were some of your findings?
I looked at some of the flawed studies that had said consumers weren’t interested in mobile banking, and I offered my own observations, which, in effect refuted those findings. From what I’ve seen of the bank data, consumers are using mobile to check balances and to make account-to-account funds transfer within the same bank—typically a busy parent refunding a college student’s account.

On the other hand, I pointed out the ongoing roadblocks. One of my biggest criticisms is that the telecos are still holding that valuable “real estate” on the browser hostage, forcing banks, and any other third party that would want to provide an application, to work around them. I’ve also been critical of the mobile specialists that tend to offer discrete “point” solutions instead of a more platform, “suite of solutions” approach, although that’s beginning to change.

What would the ideal scenario of telcos working with banks look like?
If the telcos were cooperating, what you’d see is a bank application that was loaded into the phone with standards around its format and function. It would be easy for the phone owner to find and use and easy for the banks to provision.

Today, banks need to support browsers while they also work on downloaded versions of applications. There’s too much duplication of effort. BJ

 

As for the Citibank Hong Kong deployment, the initial set of services will include Hong Kong-based stock trading, real-time stock quote, and funds transfers to Citibank accounts worldwide using Citibank Global Transfers or a Hong Kong third-party account. There will also be billpay from Citibank accounts;  the ability to see detailed balance of banking and credit card accounts for up to 90 days; opening and renewal of time deposits for local and foreign currencies; and market and investment news.

More services will be launched at a later stage. And, MMV’s platform will make it possible to access Citibank’s Mobile Financial Services on the recently announced iPhone3G.

As far as the iPhone, then, will there be additional features available to those users?
No, not initially. But the idea is that we’re trying to offer options to our customers and support the kinds of popular devices that they are using.

The first announcement makes sense given all the activity in Asia. How do you see things shaping up here?
I wouldn’t say that it’s been a quiet summer here. For instance, Citibank is doing trial work on person-to-person payments with Obopay again in follow up to the pilots we did in Boston and Chicago last summer. MMV expects to make announcements every quarter about new projects and additional capabilities.

Our competitors are also busy. U.S. Bank launched a mobile banking service early in August. USAA announced a service in July that offers banking services. Washington Mutual also made a July announcement about the availability of a mobile banking service. BJ

 

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