Bankers who were involved in the rollout of Internet banking a decade ago cannot be faulted for seeing similarities between that disruptive channel of the 1990s and the mobile devices of today. It is helpful to see what worked back then, what didn't and how we might envision mobile money rolling out in the coming years.
Many recall that when Internet use quickly grew, banks created static websites that provided visitors with some basic information.
Banks then transitioned through two successive phases — interactivity and transactional innovation. During the interactivity phase, banks replicated their voice response services on the web, giving their customers access to balance information and history. During the transactional innovation phase, new services were introduced, most notably bill payment via the web.
The movement from static to interactive to transactional was unstoppable in the web world, and the same thing is happening in the mobile world — except it's happening faster. Also, like the web, the mobile form factor presents its own unique challenges, and optimizing for mobile is different from mobile-enabling an existing application. This key point reminds us that there is danger when old processes are repurposed for new technologies. Again, the evolution of the web a decade ago provides us with some instructive lessons.
When banks moved their voice-response functions to the web, many replicated the dominant method for back-office integration found in most interactive voice response applications — screen scraping. This turned out to be complicated and costly to maintain, and eventually most banks built message-based services that enabled them to add functions quickly and maintain service. The conflict between sending an immediate bill-pay instruction via the web, combined with a paper check created and mailed on the back end, is just one more example.
The same is occurring today, as some banks try to combine the immediacy of the mobile device with the inherent delays in the ACH network. Just as we saw in the last decade, these will represent good-enough-for-now strategies for some banks, but will keep pace with neither customer expectations for speed, nor bank expectations for flexibility. To compound the problem, some banks will inevitably introduce solutions that do not cover the full range of mobile devices their customers use.
Currently many banks are focusing on the interactivity phase of mobile — enabling their customers to get balance information and recent history. The true innovators will focus on new processes and transactional innovation to drive growth and profitability.
Just as the web created huge competitive advantage for the early movers who focused on transactional innovation, the same is true for mobile; and this is particularly true when it comes to mobile money. Mobile money is a term that describes the process of moving money between people across network boundaries. Mobile money is not about near-field communication or other proximity payments; it is about replacing cash and checks with a ubiquitous device in a way that lets banks be in the driver's seat when their customers adopt new financial behaviors. It de-emphasizes boundaries — carriers, devices, geographies — and re-emphasizes immediate money movement and instant notification. Use case examples include providing "family money" services, where parents can send money to children anytime, anywhere. It also includes get-paid capability for cash and check merchants who will be delighted by banks that offer immediate receipt of funds to their deposit accounts via a simple mobile transaction.
One major difference between the internet of the late '90s and the mobile of today is the legitimacy of threats from outside the industry. The potential competitors to banks in the web world were a minor annoyance compared with the threats which exist today. One need look no further than the recent stories of a well-funded joint venture between AT&T, Verizon and others to provide a new payment path using NFC technology. For the average bank, this is as expected as it is unwelcome, and it demonstrates that when it comes to mobile money, consumers don't necessarily require that it come from their banks. Millions of people used their mobile phones to send money for Haitian relief efforts, and their banks weren't involved. This becomes an anchoring event for consumers and raises the urgency for banks to reassert the primacy of the bank account in consumers' minds.
Every disruptive technology carries its own threats and opportunities. By looking at the path traveled by banks during the web banking years, we can predict a similar evolution in the mobile space. The difference is that mobile time is even faster than Internet time, and for banks the clock is ticking.
