Mar 25, 2010

By Brett King

If you're my bank – you better get moving…

Mobility in banking and payments is not a fad. This week I gave a keynote address at the 3rd Mobile Commerce Summit Asia (Manila) and meet with global players in the mobile payments and commerce space. Apart from the fact that half-way through the second day we experienced a 6.1 magnitude earthquake, the entire conference confirmed my view that banks are under massive pressure on mobile innovation – and the majority of them are not moving anywhere near fast enough.

The core proposition of mobile banking is two fold. Firstly, the device is already ubiquitous with 80% of the world’s population already owning a mobile phone. With only 20% of the world’s population having access to a bank account, it is patently obvious why mobile is the enabler for mobile wallet, payments and bank facsimile. WIth PayPal, Facebook, Square, Verifone and others launching themselves into the mobile payments arena, there is a great deal of interest in this space. Secondly, convenience has always been the core driver for the success of Internet Banking, so with mobile internet the convenience factor is even higher because you carry your “internets” with you.

“If I leave my wallet at home, I may not notice it for the whole day. But if I lose my cellphone, my life will start stumbling right there in the subway.”-21 year-old Kim Hee-young, Sookmyung Women’s University
NYTimes Article May 2009[1]

The fact is that once people start getting used to receiving and making payments from their mobile phone, whether it is via SMS initially, or via contactless (NFC) applications in the near future, the convenience element will drive adoption rapidly. With natural social media (tribes) implemented into mobile devices too, adoption would accelerate even quicker as social media creates a member-get-member effect for mobile wallets. If a few banks were to enable cash-in and cash-out via ATMs from your mobile wallet, this would add to the viability and push competitive innovation. The point is – you already have a mobile phone, if someone sends you some mobile money – you are converted into a customer right there and then. No need for fancy marketing, advertising or infrastructure. Then the more merchants that accept payments from mobile money whether online or in-store, the faster again that average spend/utilization will climb and non-participating merchants will hop on board.

Using Ping.Ping viral mobile wallet for payments via SMS/NFC

So if you’re a bank have you really got anything to worry about, or is it, much ado about nothing as some learned colleagues have posited in the past? (Although to be fair to The Finanser he did soften his stance the next day)

Banks like to think they’ve got a lock on payments because everyone needs cash, and to trade cash you need some form of a banking license. Well that doesn’t explain the unmitigated success of M-PESA, G-CASH and other mobile money implementations in developing economies where the unbanked have embraced such with both thumbs. In fact, developing economies with huge populations of unbanked are absolutely prime targets for fast adoption of mobile money transfers.

Bank’s might also argue that they’re not really interested in the unbanked, and ‘real’ customers are probably not going to adopt mobile money transfers as quickly as the unbanked because they’ve got a perfectly good credit card and/or debit card they can use. Well they may have a point, but only if those same banks can accelerate the integration of credit cards and mobile phones. Why? Because the name of the game here is mobility.

The reason mobile money is going to take off so quickly is that I already have to carry my mobile phone everywhere I go, and with mobile money I don’t have to go to an ATM, branch or physical location to get cash – because I can spend my moBucks at any participating retailer.

A great example of ubiquitous adoption of cashless technology is the Octopus case study in Hong Kong. Octopus is a contactless (NFC) smart-card that was introduced as a replacement to paper ticketing on Hong Kong’s transport system back in 1997. Within 3 months more than 3,000,000 (that’s 3 million) cards had been issued. Once ubiquitous merchants from McDonalds, Starbucks, 7-Eleven, Bookstores to Cinemas and Swimming Pools. Why? Because carrying around a card and paying by a contactless ‘swipe’ is still less hassle than going down to the ATM and using cash at the POS (point-of-sale).

Customer behavior is what will drive mobile wallets – the search for convenience. The same imperative is why customers are looking to check their account balance, transfer funds and pay bills through mobile internet banking.

As Chris Dadd from the UK Mobile Data Association and RBS said today at the Mobile Commerce Summit in Manila:

“If mobile-based banking or payments are easy to use, fast, cheap, social and in the cloud the growth will be unstoppable…”

I’m sorry to say, but most of the banks I talk to are only now just considering mobile enablement. So realistically by the time they develop their iPhone App or get their act into gear we are at least 6-9 months away from workable solutions. That’s too slow. End of story?

Banks can accelerate their involvement in the mobile, social boom by being open and collaborative. By partnering with every telco, app developer and retailer they can think of, by encouraging (or forcing) card issuers to upgrade POS technologies, and by helping customer awareness of mobile solutions, banks can play a vital role as integrators of mobile into commerce and payments. In fact, banks should work on publish a channel SDK and put a partner program on their websites right now for this stuff – building it on the go.

If not, my guess is they’ll simply become spectators in the next big thing.

[1] “In South Korea, All of Life is Mobile”, NYTimes May 2009

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