Even in mobile banking, traditions die hard. While smart phones get exponentially smarter and app stores burst at the seams like FAO Schwartz in December, banks and consumers are not only still using basic text messaging-the mode is maturing to mainstream status.
"Certainly the iPhone or the app store model is shaking things up a lot," says Nick Holland, a senior analyst at Aite Group in Boston, who adds text message alerts remain popular today, even though most phones are currently capable of broader functionality. But "text messaging is kind of a fundamental of mobile banking. It's the only way you can get an alert out from the bank to the end user" in a way the customer appreciates.
City Bank of Lubbock, Tex., for example, is planning offerings for Apple's iPhone and Research In Motion's BlackBerry devices, but has no plan to drop its interactive text message alert service.
"People want just a little bit of information, and they're going to make a decision on that," says Jim Simpson, vp of information technology for South Plains Financial Inc's City Bank. "They don't want the whole enchilada. If you try to give them the whole enchilada, they're going to back off."
City Bank uses software from ClairMail to provide text alerts to customers; people can respond by text message or through other channels. The Texas bank rolled out its mobile banking system in October after researching the channel for nearly two years, and found that it's best not to rock the boat when it comes to consumer comfort with modality. "At that time - this was before the iPhone took off - folks were into ringtones and texting," Simpson says. Rather than try to force complexity on the mobile environment, City Bank worked within mobile phone users' existing habits to "put banking into what's successful," he says.
City Bank has enrolled 3,400 of its more than 30,000 active online banking users (a customer who has banked online within the prior nine months) in the text message service. Mobile banking is currently only available to City Bank's online banking users, though Simpson says his company may expand to consumers active in other channels as smart phones' capabilities improve. "There's going to be a demand for the service from individuals who don't sit down at a PC," he says, but a more complex interface than text messaging is still needed to enroll in City's implementation of the service.
Smart phone usage is increasing - BTN reported earlier this year that about 70 percent of mobile banking logins com via smart phone, and that nearly 80 percent of the mobile vendors in North America will either have an iPhone offering or are planning to release one during 2009. But smart phone banking is still decidedly non-transactional. Bank of America told BTN that less than half of mobile banking users were taking advantage of functions such as bill pay or intra-account transfers.
Joe Salesky, ClairMail's founder, chairman and chief strategy officer, says banks' continued interest in text-messaging helped boost his company's revenue 200 percent in the second quarter from the year earlier, though the company would not give exact figures.
The appeal of alerts, compared to gaining access to a bank's site through a mobile phone's browser, is that texts are not "an extension of online banking but more the opportunity to proactively engage the customer," he says. "When I'm sending an alert, I'm now beginning a conversation with you."
ClairMail's growth suggests texting is maturing. "This is getting to the larger sector of the market," Salesky says. He adds mobile banking could appeal even to people who have not embraced online banking. Text message alerts are much more effective than e-mail alerts, even if the e-mail alerts are sent to a phone, he said. "Mobile e-mail adoption continues to go on, but the challenge you have is that the open rate of e-mail is still much lower than the open rate of texts," he says. "There's something very personal about a text message."
Aite's Holland says other modes lack the coverage of text message services or can be perceived by users as rude. "You could phone them, but that's a bit intrusive, and e-mail isn't ubiquitous on phone."
Though Holland says only so much can be learned from ClairMail's earnings because it has released almost no figures, he said increased demand at the company makes sense.
"Apparently it is growing," he says, which runs counter to the trend for technology budgets in most sectors to be frozen in response to the recession. Mobile banking investments may continue because, especially when focusing on text, "it is relatively cheap to deploy based on the complexity and the number of channels you want to have."