Retail-banking interactions take place through a variety of delivery channels that have emerged over time. What's the next step? With more than 225 million U.S. subscribers, the answer seems to be mobile phones, owned by an astounding 76 percent of the U.S. population. Just as the Internet began as a communication medium and evolved to become a customer-interaction channel via online banking, the mobile phone is likewise moving beyond voice communication, poised to change the landscape with mobile banking.
While bank customers have become increasingly mobile, customer interaction has not followed suit, as existing channels for phone-oriented customer interaction don't work well on mobile phones. Using an IVR on mobile phones is a frustrating experience, as is waiting on hold for a real person. Recent efforts to apply online banking services to the mobile phone through wireless access protocol failed due to numerous problems, including small screen size, too many keystrokes, unwieldy navigation between windows and difficulty inputting alphanumeric usernames and passwords.
Attempts at client-side applications for mobile banking face challenges similar to mobile Web applications in terms of use. These endeavors are further hampered by the operational nightmare involved with creating, deploying, updating and supporting client-side software for the complex matrix of multiple mobile-device platforms, carriers, manufacturers and operating systems. Imagine designing a software to accommodate configurations for the world's 12,000 different handsets.
Could text messaging be the key to unlocking the power of retail-banking transactions over mobile phones? According to CTIA, a wireless industry association, Americans sent 48.7 billion text messages in the last half of 2005, more than double the amount sent in the same period in 2004. Additionally, at $35 billion a year, text messaging accounts for 90 percent of carrier non-voice revenue, according to a 2005 Harris Interactive study.
New technology creates a new two-way channel between mobile phones and financial institutions via text messaging, enabling customers to directly access their accounts and empowering financial institutions to access customer accounts. No client-side software is required, and the technology operates on any messaging-enabled mobile phone, regardless of carrier, manufacturer, operating system or platform. This channel allows customers to securely retrieve account balances, transaction histories and other account information. Customers can also securely conduct transactions, such as fund transfers and bill payments, and can summon customer service.
The channel, with its multi-factor authentication capabilities, exceeds the FFIEC's regulatory requirements. Additionally, this channel can be used to actively involve customers in preventing fraud and identity theft. For instance, a potentially fraudulent activity, such as the creation of a new bill-pay payee or an unusual transfer, payment, credit card or check transaction, would automatically trigger an "actionable" alert to be sent to the customer's mobile phone. The customer would then send a text reply to approve or deny the transaction, or to request additional information. The transaction will not proceed without the customer's active participation and approval.
Bank customers want this. According to eMarketer, 40 percent of U.S. adults would access or manage bank accounts from a mobile phone. A 2005 Forrester study revealed that one in four customers would consider switching banks if offered free mobile banking. A Henley Centre study also showed strong customer demand for mobile banking: Over half of customers aged 18-24 wanted to receive text alerts about account balances; 39 percent of 25-44 year-olds wanted text overdraft warnings; 29 percent wanted to text requests to their bank, such as to transfer funds; and 26 percent wanted to receive text reminders for credit-card payments.
Clearly, with today's increasingly mobile customers and the requirements for greater security in the face of identity theft and online fraud, there will be no choice but to provide banking capabilities on the most pervasive platform in the world. Mobile phones are the logical next step in the evolution of retail banking customer interaction, and text messaging is the ideal vehicle for enabling mobile banking.
