Adoption of mobile payments and banking has a long way to go, despite industry hype. At least that's the way a number of industry insiders closely watching the mobile landscape see it.
Opinions about the direction mobile banking and mobile payments will take vary — with some suggesting banks and credits unions are better served managing their programs in-house, while others say an outsourced model makes more sense — but most agree adoption has a long way to go. From one side of the country to the other, at industry trade shows over the last several weeks, the message has been clear: U.S. consumers overall have been slow to adopt mobile banking and payments.
Doug Brown, the senior vice president of e-commerce channels for Bank of America, in early November told attendees of BAI's Retail Delivery Conference & Expo that despite B of A's mobile strides, the bank has a lot more expansion to do among its customer base. According to a B of A U.S. consumer survey, 44 percent of those who do not use mobile banking cite security concerns as the primary reason. Another 47 percent say they don't see a real use for mobile banking.
And during the FinTech 100 awards presentation Nov. 4, Daniel Reubens of Atlantic Southern Bank said mobile banking is the future, even if it is not quite the present. The FinTech awards are given annually to financial-technology companies that report high year-over-year annual revenue growths.
Mark DeCastro, a journalist with American Banker, which hosts the FinTech event, writes in "Mobile takes a breather," an article in the FinTech 100 insert, that despite strong publicity surrounding mobile deployments at B of A and USAA, credit unions and community banks are leading the mobile charge.
"These days," DeCastro writes, "many community banks are leading on mobile banking, taking advantage of their faster decision-making cycles and freedom from worry about scale. For example, many of the institutions that have adopted the Monitise mobile payments system offered by Metavante Technologies Inc. are community banks or credit unions."
The line between mobile banking and mobile payments, however, is a bit blurred. While most agree that mobile payments fall under the umbrella of mobile banking, the opposite is not true. Mobile banking is not payments, and pieces of mobile banking, such as account access, etc., should only be handled by a user's FI, whether the platform that enables the mobile app is insourced or outsourced by the FI.
"Social networking, which is exploding in popularity, will continue to drive smart-phone adoption," DeCastro writes. "And when it arrives in full force, the global economic recovery is likely to help kick-start sales of mobile devices and data plans. Combined with the maturing of browser-based and text-message-based mobile banking, the industry will have the conditions for rapid adoptions. Banks should prepare themselves for the inevitable mobile wave."
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Mobile will take some time to catch on in a big way, but adoption is inevitable.
Strategy will be key
DeCastro reiterates sentiments shared in September at the Credit Union Conferences event in San Diego.
During that show, Gary Hess, a Web-based software expert and consultant, and Barbara Cure, an e-commerce consultant for NCR Services, urged credit unions to be strategic with their mobile moves, and not be tempted to simply repurpose Web content or online bill-payment services on the mobile channel.
Cure says credit unions should use the ATM and mobile channels to push financial information out, as well as to pull personal user information in — to enhance customer relationship management and target marketing efforts. "It could potentially offer a way to collect new members, too," she said.
During RD, a number of industry players and experts supported Cure's findings.
Dan Schatt, a former industry analyst now charged with pushing PayPal's mobile payments services to U.S. banks and credit unions, says he sees partnerships between financial institutions and technology providers, rather than in-house mobile solutions, paving the way to the mobile-payments future.
Schatt, senior director and head of financial innovations for PayPal, says rather than competing with banks and credit unions, PayPal is interested in collaborating. Through its partnerships with S1 and FIS, PayPal is facilitating international P2P payments that can be integrated with an FI's banking accounts. Schatt sees the collaboration as a way for domestic FIs to capture and drive global money transfers — a space that is currently dominated by money-transfer providers such as Western Union and MoneyGram. Others, like ACI Worldwide and Fiserv, see a mix of opportunities in the mobile space — some that are managed in-house, some that are not.
ACI's Bruce Parker says the Agile Payments Solution is ACI's "new vision" for the industry, and it includes mobile banking.
"This is a solution that works across channels. Banks have kept things in silos for so long to cut costs, they've handicapped themselves," Parker said. "Here, we are partnering with companies that specialize in different channels, like the mobile channel, and packaging it in a way that will be easy for the institution to use."
Fiserv, with its MobileMoney solution, sees mobile in similar way. Steve Shaw, director of strategic marketing of Fiserv's Electronic Banking Services, says Fiserv has launched an ASP version of MobileMoney, enabling smaller FIs to leverage the technology without the overhead associated with managing an in-house mobile platform. The platform also leverages person-to-person payments through the ACH network, eliminating the need for a third-party to facilitate the payments.
But the avenue an FI pursues, whether it includes mobile payments or simply mobile banking through SMS/text messaging, must be based on consumer preferences and demand.
"Banks should not focus on a solution that only works within their online banking platform, but rather should look for solutions that can be used by any customer, particularly when it comes to payments," De Castro writes. "With penetration rates for online banking hovering below 50 percent, banks miss out on a significant portion of their customer base by focusing on a solution just for online customers."
