Though mobile banking and payment systems have been developing separately, executives involved in these efforts say the projects are likely to converge as financial companies push the use of mobile devices as for conducting transactions.
Such a combination may not be complete for some time, but consumers are already using the mobile channel to check account balances and transfer funds, or to make payments, and bankers say they plan to watch closely as more people begin to use their mobile devices for banking, and to add features as the market develops. Related Links
On Tuesday, Wells Fargo & Co.
Wells and Visa U.S.A. Inc. announced plans last month to distribute cell phones with contactless payment capabilities to 300 to 500 Wells Fargo Visa cardholders by next quarter.
James P. Smith, executive vice president and managing head of Wells' internet services group, said in an interview Tuesday that the test relies on software that resides in the device.
That embedded software provides "tighter integration with the hardware for a contactless payment," offering enhanced customer authentication at the point of sale, Mr. Smith said. However, the browser "will probably remain the best way to access data from Wells Fargo."
He acknowledged that much is still unclear about how to integrate banking and payments in this very immature market.
"The mobile space feels to me a lot like 1995 with the Internet," when bankers were trying to figure out whether to customize their online offerings to work with America Online or with the personal financial management software Quicken, he said. "No one really knew the answer" until the generic Internet browser evolved as the software of choice.
Wells has a "carefully thought-out road map" for introducing additional features, Mr. Smith said, though he would not discuss details of those plans.
"What we don't know is the full set of features that customers will want to access," he said.
The key to success in the mobile market, both commercial and consumer, is to study how customers actually use the service. "It's important to keep customers as part of that road map," he said. "It would be a disaster if we introduced something that worked for Wells Fargo and Visa but didn't work for the customer."
Citigroup Inc. envisions a similar future for mobile banking and payments, according to Steven Kietz, the business manager of Citibank e-commerce. His company's Citi Mobile service, introduced nationwide in April, uses a downloadable application.
In December, Citi and MasterCard Inc. began testing contactless payment chips in mobile devices. That project is "an ongoing pilot," Mr. Kietz said. "We have good customer satisfaction. We have very good usage," though "the penetration of merchants is still not significant."
To participate, merchants must install point of sale systems that contain contactless readers, and carriers and handset makers must incorporate the contactless chips into their phones.
Celent LLC estimated Tuesday that 30% of online banking households would be using mobile banking services by 2010.
Red Gillen, a senior analyst at the Boston research and consulting firm, said it would take four to five years "before we get to critical mass" for mobile payments. "I'm viewing this as very much of an evolutionary process."
With online banking, customers used the services first to surf bank Web sites for information, then to check balances, and finally to pay bills, he said
Consumers are likely to follow a similar adoption pattern with mobile devices, Mr. Gillen said. "It's further away, but mobile payments are very important to banks." Mobile banking is currently a tool for customer retention and cost reduction, but with the addition of payments, and the interchange income it brings, "that converts mobile banking to a revenue-generating product or channel."
