Ready, Set, Go ... Mobile: Key Issues for Banks Thinking about Jumping In

Since our January cover report on contactless and mobile payments, there have been several developments in the U.S., including Bank of America's announcement of a mobile service and an announcement by Online Resources Corp. that it would offer a mobile product. For bankers who are hearing the buzz, yet want a better understanding before proceeding with a mobile program of their own, we spoke with two experts on payments to amplify some points touched on in our earlier article. Dan Schatt is a Celent senior analyst who has written on mobile commerce and is familiar with trends in mobile banking. Richard Crone, founder of Crone Consulting, San Carlos, Calif., is also knowledgeable about the mobile payment field and has presented on the subject at major industry conferences. Answers here reflect comments from both. Several wireless providers offered additional clarification. Mobile commerce and mobile banking are emerging areas generating a lot of interest. What, at a basic level, are these features about? Mobile commerce today typically involves purchasing online digital content, such as ring tones, using an e-wallet, which could use the short message service (SMS) protocol or a proprietary application loaded onto the phone. (Margento, Tyfone, and iBreva are device- and carrier-independent options.) In Asia and Europe, mobile commerce also refers to contactless or proximity payments, using mobile phones as a wave and pay device at the register. This is much the way contactless cards are working here in the U.S. This proximity approach typically involves NFC--near field communication--capabilities, a different wireless protocol supporting data exchange. It's projected that about 30% of U.S. phones will be NFC capable within then next year or so. Contactless point-of-sale activity using both cards and phones has been piloted in the U.S. during the previous 18 months and may become more common soon. Mobile banking, which will probably get mainstreamed faster in the U.S., is using the mobile phone to access online bank account information and to perform transactions, including billpay--particularly making payments just as they are due. Some refer to this practice as panic pays. The mobile phone has moved way beyond talking ... Technologies are finally ready to support broader use of more advanced applications. You have better handsets--which continue to improve every year or so. Add to that the proliferation of wireless broadband and advancements in security. At the same time, consumer habits are changing, with increased adoption of online financial services and e-commerce. Finally, consumers have more critical content to access. Basically, all the building blocks are in place for more complex phone-based transactions. Still, there will be some struggle over who controls the customer, and banks and carriers will have to figure out how to partner together for future opportunities, particularly with payments--carriers, for example, will expect to share in the profits. Ultimately, in terms of user experience, the banking capabilities need to be easy to access. What the mobile phone user and the banks want is for the banking functions to be accessed on the official phone menu. That shared real estate will be an issue. There's a lot of interest in offering these services, but there's some confusion about how to proceed. Banks and telecomm providers want to create new markets, so certainly there's interest in the phone functioning as wallet or as a device for account access. But, yes, there is a complex ecosystem of carriers, application providers, and other middlemen that can be a challenge to learn about. Executives at banks that aren't early adopters, while eager to get involved, are still hammering out their RFP specifications. They also need a better understanding of the technology partners and what they offer. There is also competitive pressure. …