Bank Technology News  |  August 2008

By Rebecca Sausner

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There’s no shortage of hype surrounding mobile banking, and there is even some impressive early consumer adoption. But what’s been sorely lacking in U.S. deployments is a revenue model; so far, the channel’s been a money pit for the institutions leading the charge on implementations.

But maybe it doesn’t have to be that way. Case in point: The National Bank and ANZ, related New Zealand banks, have been charging for mobile services—as have all their competitors—since they went live with the offering more than a year ago.

ANZ launched its mobile banking offering, powered by New Zealand-based M-Com’s triple-play platform, in May 2007. The product foundered for a bit, but when the bank reorganized around its delivery channels in October things really picked up steam, says Robert Mark, who was entrusted as channel manager for the mobile and phone channels.

ANZ makes a compelling case study because it has two brands, and positioned its mobile bank offering differently to the customers of each. Customers of The National Bank, the higher-end brand, pay twenty-five cents per text message or inquiry to receive balances or mini-statements. Customers of ANZ, the more blue-collar brand, pay $2 per month for text banking services including balances and mini-statements showing their last 10 transactions.

If ANZ customers want transactional mobile banking they pay another $2 per month, and use M-Com’s Java application, which enables a “pay anyone” feature, bill pay and funds transfer between accounts, along with the usual balance inquiries and statements. In addition to the monthly recurring cost, customers pay twenty-five cents per payment when they send money to another individual’s account, and twenty-five cents per alert they sign up to receive.

Marketers, and maybe economists, would say that charging for anything depends on the perceived value of the product or service. When ANZ launched its mobile product, the bank positioned it as a channel of convenience for their 18-to-36-year-old customers that don’t have complex banking needs, Marks says. “It provides control and a bit of surety, and users are willing to pay additionally to have the convenience,” Marks says.

About 60 percent of those who have signed up thus far were already Internet channel users, a number Marks expects to settle at about 50-50. That means the bank is having strong success diverting customers from other more costly channels, primarily the call center. “The 18-to-24 segment was putting a lot of pressure on our contact center for purely transactional queries,” he says. “So we’re saying if we could get 10 percent of our customer base using mobile banking, that could take two to three million calls out of the contact center per annum.”

In addition, ANZ customers who have migrated to the mobile channel show lower churn rates. “If they’re frequent users of mobile, churn drops to five percent,” he says. “Normal for that group is 10 to 15 percent.”

The bank won’t say how many of its one million customers between 16 and 55 years old have signed up for mobile banking, but “percentage-wise, we’re probably slightly ahead of BofA or Chase,” Marks says—pretty impressive given that his customers are paying.

Marks has some thoughts on how the New Zealand market differs from the U.S. First, Kiwi’s are comfortable with the “pay anyone” service that allows them to send money to another individual’s bank account simply by entering the other person’s account number.

As a financial services market, New Zealand is more advanced than the U.S., but also a fraction of the size. Both of these may play into the players’ success at a revenue-generating model for mobile banking. But M-Com, which recently announced a deal to be Washington Mutual’s mobile banking provider, says there’s a business case for mobile banking in any country. “The business case for mobile banking is twofold: You can charge for it, and it brings transaction fees, and, second, you can migrate customers off more expensive channels,” says Serge van Dam, head of marketing for M-Com. “I can demonstrate on both sides how you can make money. [U.S. banks] have chosen not to, and then complain about it.”

Van Dam suggests that U.S. banks start now by charging customers who are non-Internet bankers to use the service, and then as they add bill pay, pay anyone, international remittances, they can add per transaction fees. But U.S. analysts are skeptical whether U.S. banks could reverse course now and start charging.

“The freebie genie is out of the bottle in the U.S.,” says Celent’s Red Gillen, who covers mobile banking. “It’s going to be free for informational banking services, like balances, or transaction history. There’s such a close similarity to online banking. ...But bill pay might be different.” (c) 2008 Bank Technology News and SourceMedia, Inc. All Rights Reserved. http://www.banktechnews.com http://www.sourcemedia.com

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