Banks are increasingly turning to text-messaging technology as a way to reach their customers.
Some banks have offered e-mail account alerts for years, but a growing number have begun sending messages to their customers' text-enabled cell phones. Some predict that customers could eventually use their phones to initiate transactions.
In fact, cell phones might even become more of "an access vehicle" than a communications one in financial services, said Stephen Schroth, the senior vice president for e-commerce strategy and planning at Wachovia Corp.
Alerts, an increasingly popular service offered primarily through online banking sites, notify customers about various events, such as when a deposit has been made or if an account balance falls below a certain level. They are typically delivered by e-mail or phone.
But Mr. Schroth said the information sent in these simple alerts can easily be converted into messages that can be routed to cell phones using the short message service format, or SMS; some customers even blur the line between the two channels by having e-mail alerts forwarded to their cell phones in text-message format.
Maggie Scarborough, a senior analyst at the Framingham, Mass., research firm Financial Insights Inc., said this customer behavior highlights one of the main advantages of delivering alerts to a cell phone instead of an e-mail account: "The world doesn't sit at their computers all day." (Her firm is a unit of International Data Group Inc.)
Catherine Palmieri, the director of Citigroup Inc.'s Citibank.com, noted that even customers who work at a computer all day may not have immediate access to e-mail alerts. "Some customers aren't able to check their personal e-mails at work" and rely instead on their cell phones, she said.
Also, customers who travel frequently are more likely to check their cell phone messages than their personal e-mail accounts, she said.
Ms. Scarborough said that text-message alerts could be a natural fit for retail and business customers, who often spend their day minding the store or making sales calls.
And George Tubin, a senior analyst at TowerGroup Inc., the Needham, Mass., market research unit of MasterCard International, said that even customers who do not travel might prefer to receive alerts by cell phone. Text messaging is "less intrusive than a direct phone call, but at the same time it's much more available than e-mail."
Mr. Schroth said Wachovia began offering e-mail alert services in 1998 and added a text-messaging service in 2000. Of the 1.5 million automated alerts the Charlotte banking company sends out every month, about 60,000, or 4%, are sent directly to a cell phone or pager. The number of customers who view their account alerts on a mobile phone actually could be higher, he said, since Wachovia does not track people who have their e-mail alerts forwarded to a phone.
About 400,000 of Wachovia's 2.3 million active online banking customers (those that have used the online services in the last 90 days) have signed up for account alerts, and about 3,000 more are signing up every month, he said. Wachovia also started using text messages last month in its student lending operations, for tasks such as notifying students if their applications needed additional information.
Ms. Palmieri said Citi sent 2.4 million alerts in August, including 865,000 that were sent to cell phones. However, that figure may represent an even larger number of alert-triggering events, because the New York banking company often sends a customer several messages in a single alert, she said.
About 30% of Citi's alert recipients receive messages on their phones; the rest receive alerts via e-mail, she said.
Citi, which has 1.9 million online banking customers, may begin to make its alerts interactive next year, so that customers can use them to perform transactions, such as moving money into an account that is low on funds, Ms. Palmieri said.
But the security of such features is a big concern, she said. "Any messages we send back and forth would have to be very secure."
Alert services are still relatively new at many banks. PNC Financial Services Group Inc., for example, introduced alerts only in April, and Roger DuBois, the manager of alternative distribution channels at the Pittsburgh banking company, said that so far it is offering only e-mail and voice alerts.
However, since cell phone text messaging "is being used all the time now, it's probably something we need to think about," Mr. DuBois said.
Kael Kelly, the director of market management at PAR3 Communications Inc., a Seattle vendor of automated communication software, said one large bank customer began to offer SMS alerts only after it realized that many customers were forwarding e-mail alerts to their cell phones.
"There's more of a demand for SMS than what they had expected," he said.
The downside of offering alerts is that banks can "feel like they're cannibalizing their fees" by warning customers about things like low balances, Mr. Kelly said.
Still, Mr. DuBois said alerts could also help a bank save money. In addition to reducing call-center volume, they could help a bank avoid the cost of handling a returned check from an overdrawn account, he said.
The approaches to alert services vary widely among banks. For example, Citi lets customers sign up for alerts only online, but PNC customers can sign up only at a branch or through a call center. Mr. DuBois said this is because of security concerns, and even though PNC delivers its alerts by both phone and e-mail, it encourages customers to use e-mail, because it is a more secure channel.
"We debated not doing the phone at all," because of the risk that an alert will go to someone other than the customer, he said.
While e-mail requires customers to log in with a password, PNC customers who receive voice alerts must enter a PIN when they receive the phone call, and PNC will not leave voice mail without advance permission from the customer.
Citi and Wachovia make sure their alerts have no confidential information, such as account numbers.
Mr. Kelly of PAR3 said his bank customers consider cell phones to be more secure than a customer's home phone. A traditional landline "is much more public," he said, while a cell phone typically stays in the customer's pocket or purse when not in use.
Mr. Tubin said alerts are still in their infancy and offer banks the opportunity to deliver much more than just account updates. For example, in the near future banks could use them to deliver advertisements, or a customer could ask to be alerted when the bank offers a specific rate on certificates of deposit, he said.
"It can be a very powerful mechanism," Mr. Tubin said.
