Bankers Watch for Cues in Mobile Banking Rollout

By Steve Bills

Bankers say that this is the year when they hope to get a look at how, or whether, consumers are using mobile banking services.

Some expect adoption will be similar to the pattern for online banking, when people looked first for information, then used the service for transactions.

But others say the comparison is not apt, emphasizing the differences in the needs of people on the go from those parked at their desks. And since mobile handset technology is evolving rapidly, they say, so will the capabilities of mobile banking.

Banks are already using several approaches to turn mobile phones into financial tools: offering banking services through phones' built-in browsers (as Bank of America Corp. has done); text messaging for inquiries (JPMorgan Chase & Co.); specialized, downloadable applications (Citigroup Inc.); or some combination of these options (Wells Fargo & Co. for browser and text messaging, and Wachovia Corp. for browser and a downloadable application).

According to Javelin Strategy and Research, about 6% of U.S. adults had access to mobile banking services at Dec. 31.

Benjamin Ensor, an analyst at the technology research company Forrester Research Inc., said that incorporating payments capabilities could drive the adoption of mobile banking, if people can be made comfortable with the idea of using phones as payment systems.

"Changing the payment patterns of millions of consumers and merchants is a huge undertaking," he said. "This is all going to take many years, probably as long as a decade," though most bankers are willing to wait for their investments to pay off.

One pioneer said the nascent mobile banking market is unfolding pretty much according to expectations.

BancorpSouth Inc. in Tupelo, Miss., tested a downloadable application from Firethorn Holdings LLC of Atlanta in 2006 with 500 customers. It began a broader commercial introduction in 2007, giving it a head start of almost a year over most competitors, according to Michael Lindsey, a senior vice president at BancorpSouth and its manager of electronic delivery services.

As expected, monitoring balances is the most common use of this mobile service, followed by account-to-account transfers as customers move funds between accounts to fund transactions.

"Inquiry is our highest-used transaction for people using mobile banking now," Mr. Lindsey said. And though only a few people are paying bills with their mobile devices, the banking company has observed a few early trends.

Mr. Lindsey said the people who pay bills using their phones are typically business travelers who want to avoid the hassles of finding a "hot spot" to use their laptop computers and the discomfort of making private banking transactions in a public place.

Some customers are comfortable enough to make mortgage payments on their handsets, he said. "We thought that showed the ultimate trust in a payment mechanism, when you're willing to make a mortgage payment through a mobile device."

In addition to its own marketing efforts — online, in statement stuffers, and through handouts at branches — BancorpSouth also is benefiting from promotions by competitors, including Wachovia and Regions Financial, which also offer services on Firethorn's platform through the carriers AT&T Corp. and Verizon Wireless.

BancorpSouth's mobile service got a boost in November, when the nation's top phone company, AT&T, began selling handsets preloaded with Firethorn's banking application. Mr. Lindsey said the carrier's marketing efforts, and those of competitors, are catching his customers' attention.

"Especially early in the process, marketing plays a big role in adoption," he said. "Even advertising from the big nationals like Citi and Bank of America will prompt our customers to ask us, 'Hey, do you have that service?' "

In markets where it is going head-to-head with other Firethorn client banks, BancorpSouth is pressing its longer experience with mobile banking, Mr. Lindsey said. "We don't want to lose the bragging rights in the markets we're in that we were first."

Financial companies are pushing ahead not only on the banking front but also on payments.

Both MasterCard Inc. and Visa U.S.A. Inc. are working with U.S. banks to test handsets featuring contactless chips. Both also are in trials worldwide. Visa, for instance, is testing mobile remote payments in Brazil and mobile transactions at the point of sale using contactless technology in Canada and Malaysia.

Mr. Ensor said that mobile banking will probably find its place in the market eventually and that bankers may want to take a measured approach to learn from the early adopters. "It's difficult to construct a business case for mobile banking in the shorter term," he said.

The use of mobile banking could also be slowed by the success of other electronic banking channels, he said. For example, in regions where telephone banking was more sophisticated, the uptake of online banking was slowed because customers were comfortable with the alternative.

Consumers also must come to view their handsets as general-purpose tools, not just communications devices, he said. "It's unlikely users are going to adopt mobile banking before they adopt other mobile applications."

Innovations such as Apple Inc.'s iPhone demonstrate the potential to use a handset for functions beyond voice and text, opening the way for mobile Internet and location-related online search, Mr. Ensor said.

But progress is likely to take time, he said. "It took people a lot longer to learn how to use the phone as an information device rather than just as a communication device."

Jean M. Garascia, a Javelin research associate, said that demand for mobile services is outpacing banks' ability to deliver it. As bankers get feedback from their customers, she said, they will be able to tailor offerings to deliver what customers actually want.

The rapid evolution of handsets makes mobile banking a moving target, said Ms. Garascia. "That should work to the banks' benefit," she said, by making a wider range of services available sooner.

But it also can confound short-term planning. Mr. Lindsey said one of BancorpSouth's top three customer requests was for location services, such as where to find a convenient automated teller machine.

He said his own handset — a BlackBerry smart phone from Research in Motion Ltd. — includes a global positioning system so he can pinpoint his location in an unfamiliar city.

But not all handsets have such a feature nor a full-function keyboard to input an address, so BancorpSouth is still studying the question, he said. "We're trying to figure out the most customer-friendly way of making it available."

Corrected August 11, 2016 at 12:57PM: This post is part of a recurring series of classics from our archives. The story below appeared on Jan. 4, 2008, and looks at banks' interest in whether mobile banking would take off.