This story is excerpted from “Mobile Banking,” a guide available for free download after registration.

Mobile banking can leverage existing channels such as ATM and online banking to deliver targeted marketing campaigns, as well as deliver functionality to make self-service transactions more convenient.

A survey by Nielsen estimates that by the end of 2011, smartphones will overtake feature phones in the United States. One in two Americans will have a smartphone by Christmas 2011, according to the survey.

The real value proposition of mobile banking is that it's an “always-with-you” device and can set the stage for services not previously offered on the online channel.

“Mobile goes beyond that, though, because of the fact that it is with us all of the time. It opens up this idea of real-time contact, of real-time alerting, so rather than me going to get a balance to see if I am close to being overdrawn, my phone will actually tell me,” said Donald MacCormick, vice president of product and engineering for Novato, Calif.-based ClairMail, a provider of mobile banking services for financial institutions.

According to a survey by CashEdge, a provider of intelligent money movement services, customers identified what they want from a mobile banking platform and ranked their needs in order of importance:

1. Access to account balances: 95 percent

2. Ability to transfer funds between accounts housed at the same bank: 79 percent

3. Ability to pay bills: 72 percent

4. Ability to transfer money between accounts housed at different FIs: 41 percent

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5. Ability to send money to third parties: 35 percent

Ultimately, the convenience of mobile banking is the selling point, as is giving customers the opportunity to take more control over their finances through transactional and informational services.

“We don’t want just to have these one-way informational alerts,” MacCormick said. “We want for people to be able to take action, so when you get an alert that says your balance has just dropped below $200 or whatever, you can click reply and have funds transferred from your savings account. So there is the ability not only to alert people but to take action as well.”

Benefits to financial institutions

More than 50 percent of calls to an FI’s service center involve balance inquiries, according to Greg Steffy, vice president of Diebold Integrated Services.

“Deploying a mobile banking solution can help financial institutions manage those costs by directing those inquiries to a more cost-effective channel,” he said.

With mobile banking, FIs can provide their customers with the means to track their personal financial information, such as 24/7 balance inquiries, transfers, branch locators and low-balance alerts at a fraction of the cost of a live call center agent.

“In many cases, banks or credit unions only have about 40 to 50 percent penetration of their account holders into their online banking products, so there is a whole section of the market they are not able to address with that approach,” said Calvin Grimes, product manager, mobile services, with Brookfield, Wis.-based Fiserv, a financial services company.

Top five features of an effective mobile banking solution

• Comprehensive. An effective solution should support customers regardless of their preferred mobile device, mobile network or access mode — text messaging (SMS), mobile browser or downloadable application. A solution also should incorporate a variety of services designed to appeal to different customer segments, including fraud alerts, account balance threshold alerts, bill payment reminders, ATM and branch locators, money transfers and mobile deposits.

• Secure. Mobile banking solutions should support the highest industry standards in mobile security at all touchpoints, including enrollment, data encryption, transaction auditing, reporting and regulatory compliance.

• Reliable. Financial institutions should look for a sustainable product from a financially secure service provider.

• Cost-effective. An effective solution should meet the needs of a particular institution in a cost-effective manner. Financial institutions should look for flexible deployment options such as ASP or out-of-the- box options when cost management is a priority.

• Adaptable. Financial institutions should look for mobile banking solutions that can accommodate future opportunities in the quickly evolving mobile channel, including mobile payments.

Where is mobile banking headed?

According to information compiled by research firm Javelin Strategy & Research, 12 percent of U.S. adults, or 24 million, used mobile banking services at some point in 2008. The next year, that figure rose to 18 percent, or 36 million people.

By 2010, 29.8 million Americans accessed financial services accounts via their mobile device, according to ComScore. That number is expected to grow. By 2014, that figure will top 45 percent, or nearly 100 million people.

And eventually, the mobile phone may serve as a replacement for the debit or credit card, enabling interaction with an ATM or point-of-sale system via a chip embedded in the phone. Such technology could drastically reduce losses stemming from lost or stolen cards.

“You know within 18 minutes if your mobile phone is missing,” said Paul Fisher, director of north area sales for Integrated Services for Diebold. “It may take 36 hours or more to realize you have a lost card.”

For more information on this topic, visit our mobile banking research center.