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Banking on the Mobile

By: Howard Wilcox


Juniper Research defines mobile banking as “the provision of banking services to customers on their mobile devices”: specifically, we mean the operation of bank current and deposit or savings accounts. In terms of definition of “mobile device,” we make the distinction that the primary function must be mobile telephony. This excludes other mobile and handheld devices with a different primary function such as entertainment.

Juniper Research excludes other financial services such as loans, credit cards, and insurance services, although we recognize that migration toward other financial services is happening in some services and is clearly the logical next step especially as banks will have the opportunity to cross-sell.

Specifically, this document focuses on additive banking, which is defined by organizations such as The World Bank and CGAP as adding further choices or channels for banks to serve their customers or making the banking experience more convenient for existing customers. This white paper focuses on the technology used in additive mobile banking, and is extracted from the full report entitled Mobile Banking: Strategies, Applications and Markets 2008-2013.

Additive banking is a critical strategy for established banks globally. It applies in developed nations where the banked population is approaching 100 percent and the banks want to reach particular customer segments in a more effective way or offer greater choice – such as Gen Y users, or road warriors with smart phones.

It also applies in developing nations where banks want to provide services in a more convenient manner to existing customers but are hampered by poor banking infrastructure (few branches, few ATMs, and limited online banking access possibly because of poor fixed broadband network infrastructure). The banked population in many developing countries is limited to 20 percent or less.

The second category of banking is generally known as transformational banking, which is about extending banking services to customers who cannot be reached profitably with traditional branch-based financial services: Typically these services exploit the ubiquity of the mobile phone and are led or fronted by MNOs (mobile network operators) often in conjunction with banks. Transformational banking is particularly applicable to reaching the unbanked population in developing countries and underbanked segments in developed nations.

The following table summarizes the two categories:

Additive Banking:
Existing Bank Customers

Transformational Banking:
New Banking Customers

Developed Countries

Greater channel choice and increased convenience

Reaching the underbanked and unbanked

Developing Countries

Greater channel choice and increased convenience

Reaching the underbanked and unbanked

We also distinguish banking from mobile payments, although we recognize that the dividing line between payments and banking is increasingly blurred, especially in developing countries.

The definition of a mobile payment is often open to interpretation and can differ from source to source. Juniper Research has a simple definition of a mobile payment as “payment for goods or services with a mobile device such as a phone, PDA (Personal Digital Assistant), or other such device.”

Mobile Banking: How Is It Delivered?

From a technology viewpoint, mobile banking is delivered in three main ways:

Messaging-based Mobile Banking

This is currently the most popular method of mobile banking and the easiest to deploy from the financial institution’s point of view. SMS text is by far the predominant mobile phone technology in use for mobile banking messaging, although USSD is also used in some applications.

Messaging is used to alert bank customers of account balances, overdraft limits and for notification of important transactions, such as payments. Most messaging services are free to the user but some retail banks have charged a monthly subscription for alerting and have seen a reasonable uptake for the service.

There have been few instances where even transaction-based services have been offered via SMS. However, one of the major reasons that SMS based transaction services have not achieved much traction is security because is acknowledged to be not secure. The main advantage of SMS mobile banking applications is that almost all mobile phones can use SMS.

There are a number of banks that have implemented or have plans to deploy secure messaging where the consumer is required to download an application to the phone that manages the secure transmission of messages between the two parties.

Mobile Internet Browser

Banks have deployed mobile internet and WAP websites since the late 1990s but consumer adoption has only been significant in recent years as a result of faster mobile broadband networks, cheaper or flat rate data network tariffs and more advanced mobile handsets such as smart phones.

Most mobile internet banking website users will have access to mini statements and balance inquiries at the base level and more advanced services including payment instructions and bill payments.

The advantages of using a browser-based service include security – no information is left on the phone, and from the viewpoint of rapid rollout, the browser is the universal application on smart phones and no special download is required. In addition, if the mobile site mimics the online site, then users will be very familiar with operation.

A screenshot example is shown below:

Figure 1: Garanti Mobile Banking Service

Downloadable Application

A development of recent years has been the downloadable application that offers bank customers a selection of banking services through a single application delivered by the bank to the consumer’s mobile phone. The application is mainly Java or Brew-based, but can also be based on an STK (SIM toolkit) that is used by MNOs to provide added value data applications.

The application can be easily customized depending on the user interface complexity supported by the mobile. In addition, mobile applications enable a very secure environment. The main disadvantage of downloadable application clients is that the applications need to be customised for each different device model: typically at the moment for example applications for the iPhone and the Blackberry are receiving a lot of press. Services that are available through a typical downloadable application include balance account statements, bill payment, funds transfer and an ATM locator.

A screenshot example is shown below:

Figure 2: Lloyds TSB Retail Mobile Banking Pack Screenshot

Market Projections

The report provides six year forecasts for mobile banking, across eight regions of the world: North America, South America, Western Europe, Eastern Europe, Far East & China, Indian Sub Continent, Rest of Asia Pacific and Africa & Middle East. Forecasts include subscriber take up, traffic, transaction sizes and values.
In comparison to mobile banking information services, transactional mobile banking will have lower levels of usage adoption by mobile phone users.

Figure 3: Mobile Banking: Transactional Users – 2011 Regional Forecast (%)

About the Author
Howard Wilcox is a Senior Analyst with Juniper Research, leading the Mobile Commerce and Mobile Technologies streams. Howard is author of the Mobile Payments Markets reports series, along with the Mobile Broadband, Fixed WiMAX and Mobile WiMAX reports. He is frequently interviewed by industry
journals in both the mobile and finance sectors, including the BBC. Howard has more than 25 years' experience in the Telecommunications sector. He was previously Director of Industry Intelligence at Marconi, where he has spent most of his career in a variety of analytical roles.

For more information, please contact:
Michele Ince, General Manager

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