Recent developments in the mobile financial services space show that the business arrangements necessary to deliver banking capabilities to a phone are shifting to a model where carriers open their doors to multiple partnerships and multiple application types.
Banks are eager to turn mobile phones into a new channel, and some began working on specialized applications to reach customers even before carriers had shown much interest in supporting the technology. But experts said that this early approach, where applications were designed to reach customers of a single bank, failed to get broad consumer acceptance.
The new model has carriers trying to put as many financial services — and providers — as possible in front of their customers to ensure their lineups appeal to just about anyone.
The latest example is Sprint Nextel Corp.'s MyMoneyManager application, which can be used to manage funds at BB&T Corp. and International Bancshares Corp. of Laredo, Tex., and to initiate transfers through the PayPal Inc. unit of eBay Inc. mFoundry Inc., which developed the software, said it will soon support accounts at Citigroup Inc. and at least one other bank, and that it expects other carriers to introduce versions of the application within three months.
Nick Holland, a senior analyst at Aite Group LLC of Boston, said the fragmented mobile banking offerings have hindered their use. Some carriers are preloading some mobile banking applications on some of their phones, some let users download certain applications, and other users can reach their banks through the browsers built into their phones.
The result is a hodgepodge of applications that may or may not reach the right customers, Mr. Holland said. Letting carriers take over is "the model that has to work," he said, because they are the point of contact when consumers have problems, and the carriers would rather focus on a single application that supports many financial companies than deal with many individualized ones.
Such collaboration was inevitable, and the next wave of mobile banking technology will resemble Sprint's, Mr. Holland said. "There really isn't any option."
Using one application to reach many banks is "a step forward," Mr. Holland said. "It's good to see there is a mixture of players who are bringing this to market."
mFoundry's mobile banking software rival Firethorn Holdings LLC has also tried to offer consumers access to different financial companies. People with accounts at multiple companies that use its software can use their phonesreach each of the companies.
Sprint began offering the software in March but has not formally introduced it.
Drew Sievers, a co-founder of mFoundry and its chief executive, said that Citi and another mFoundry bank customer, which he would not name, would be included in the application by the time the telecom company announces the service, which is expected this month. He said that agreeing to work with mFoundry on a unified application shows that many big banks are serious about trying to attract more customers to mobile banking. "Some of these bigger players are finally turning their battleships in the direction of mobile payments. I don't think there's going to be any stopping those guys," he said.
Red Gillen, a senior banking analyst for the Boston market research firm Celent LLC, the financial research arm of Marsh & McLennan Cos. Inc.'s Oliver Wyman consulting unit, said that Sprint's application, and others that follow this model, would likely boost use of mobile banking services because they make it much easier for consumers to begin banking with their phones.
But the model requires some compromises from the banks, he said. "This model doesn't allow the financial institutions to brand themselves the way they would like to," he said, though the upside is a marketing boost from the carriers. "Telecoms spend a lot of money on promoting their services."
It remains to be seen whether specialized applications are the correct model for mobile banking today, he said. Most mobile banking activity is done through mobile Web browsers, he said, and the specialized applications can run only on carrier's top-end phones. "If it's an app, you're really limiting your user base," he said.
It just as notable, he said, that some major financial companies are pursuing multiple strategies.
Besides the Sprint application, Citi and PayPal each have three separate mobile banking and payment services. Citi offers its own retail banking application, using mFoundry software, and supports person-to-person transfers with software from Obopay Inc., and its credit card unit offers access to account details with Firethorn.
PayPal has a text message payment service, a mobile browser payment service, and a service integrated with eBay's mobile offering. PayPal has said this fragmented approach reflects the state of the market; most handsets cannot support robust payment applications, and even the Sprint mobile wallet works on fewer than half of the phones the carrier sells.
Menekse Gencer, PayPal's director of business development for mobile in North America, said this multipronged strategy is aimed at reaching as many users as possible. "You really do need to cater to different ways people are going to use PayPal," she said "Handsets are getting more and more sophisticated in the U.S. market, … [but] with client applications, it's very difficult to have 100% coverage."
Ms. Gencer said Sprint approached PayPal last year with its proposal to work on the mobile wallet. The underlying payment system is no different from what PayPal offers online.
Ms. Gencer said that while PayPal has not announced any work with other carriers, it does not plan to stay exclusive to Sprint.
PayPal's president, Scott Thompson, said in March that he did not think the U.S. market was ready for mobile payments, largely because few handsets can support the types of features he thinks people want to use.
Though PayPal's mobile strategy has been somewhat fragmented, it said mobile payments tend to be higher than average. According to eBay's first-quarter earnings report, the average PayPal transaction is under $70; Ms. Gencer said that for mobile, that average tops $100.
Mr. Gillen said PayPal "sees mobile as something that must be closely watched. They're kind of placing their bets on all the horses right now." And PayPal is not alone. "Everybody's trying everything at this point," he said.
