Banking on the Device

Both mobile phones and interactive TV could help on-line financial services reach market segments that elude other devices for accessing the World Wide Web. In the past, financial services on the World Wide Web were available only to PC users. Not anymore. Two familiar devices--the mobile phone and the TV set--will greatly expand the market for the electronic delivery of personal financial services. Mobile data communication is already extending the Internet to people on the move; interactive TV could bring it to those who can't afford to have a PC at home. Financial-services providers keen to compete on the Web need to understand how these two new routes into it may evolve. Banking on the move Consumers like the flexibility a mobile device can deliver: for example, access to their money anytime, anywhere; instant notification of movements in a given company's share price; and the ability to transfer money into a bank account and to shop on the go. Not surprisingly, financial institutions are scrambling to develop mobile-banking services using the two main technical standards currently available: the Short Message Service (SMS), a simple but effective standard for brief text messages, and the Application Protocol (WAP), a more recently developed standard providing access to the Web, though in a less elaborate form than PCs do (see sidebar, Wireless protocols). Most mobile-banking services using these standards are still extremely basic, offering information such as account balances and stock prices or permitting customers to transfer money between accounts. But more complex transactional services are rapidly appearing. Customers of brokers as diverse as Fraser Securities (Singapore), Fidelity (the United States), and Fimatex (France) can now trade stocks using a mobile phone or personal digital assistant (PDA). Banks ranging from HSBC (Hong Kong) to MeritaNordbanken (Scandinavia) offer mobile bill-payment services. Yet in the rush to achieve a first-mover advantage (or to avoid being left behind), banks and brokers are in danger of overlooking the way they can create lasting value from mobile-communications technology. Since the basic services banks are putting together are mostly undifferentiated, a given bank's competitive advantage is likely to be temporary. And it isn't clear how much it will cost banks to provide such services. The lion's share of the value that even mobile personal banking creates could still go to other participants in the value chain--most probably consumers and network operators. Bankers won't be able to avoid supplying mobile services, but if they are to provide a return, it will be necessary to think hard about how to make the services distinctive. Mobile banking for beginners The first movers in mobile banking will undoubtedly acquire new customers. For example, the Barclaycard--BT Cellnet joint venture, offering a customized handset and mobile access to account information, has acquired about 500,000 customers since 1997--50 percent of them new to Barclaycard (Exhibit 1). But in some markets, the opportunity to be a first mover is long gone. Most of the major banks in Hong Kong, for example, now offer basic mobile information services and some transactional functionality (Exhibit 2). Like telephone banking, first-level mobile banking has become an admission ticket to the industry. To retain existing customers, to say nothing of attracting new ones, banks will have to keep up with the fast-developing capabilities of mobile technology. The breadth and complexity of the banks' mobile services will probably increase rapidly as they exploit the ability of WAP and the increasingly flexible SMS to support secure transactions. The nature of future mobile services will also depend to a large extent on the relative penetration rates of PCs and mobile phones (Exhibit 3, on the next page). In countries such as the United States, where Internet access via POs is well established, banks are likely to provide complementary mobile services. …