Mobile Banking

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Mobile Financial Services (MFS) that are offered as a part of Mobile Commerce, can be divided into two categories: Mobile Payment and Mobile Banking.

Mobile Banking refers to "provision and availment of banking and financial services with the help of mobile telecommunication devices. The scope of offered services may include facilities to conduct bank and stock market transactions, to administer accounts and to access customized information.” [Buse/Tiwari, 2006]

Mobile Banking (also called as M-Banking or mBanking by some) consists of three inter-related applications:

• Mobile Accounting
• Mobile Brokerage
• Mobile Financial Information Services

Most services in Accounting and Brokerage are transaction based. The non-transaction based services of informational nature are however imperative to conduct transaction. For instance, balance enquiries might be needed before committing a money remittance. The accounting and brokerage services are therefore offered invariably in combination with information services. Information services, on the other hand, may be offered as an independent module.

Contents 1 Trends in Mobile Banking 2 Opportunities in Mobile Banking 2.1 Account Information 2.2 Payments & Transfers 2.3 Investments 2.4 Support 2.5 Content Services 3 Challenges for a Mobile Banking Solution 3.1 Interoperability 3.2 Security 3.3 Scalability & Reliability 3.4 Application distribution 3.5 Personalization 4 References 5 External links

[edit] Trends in Mobile Banking

The advancement of Internet has revolutionized the way the financial services industry conducts business. It has empowered organizations with new business models and new ways to offer 24x7 accessibility to their customers. The ability to offer financial transactions online has created new players in the financial services industry, such as online banks, online brokers and wealth managers who offer personalized services.

Over the last few years, the mobile and wireless market has been one of the fastest growing and most interesting markets in the world. It is still growing at a rapid pace. A recent study done by In-Stat/MDR claims that the number of mobile subscribers worldwide will reach 2 billion before the end of 2007. Mobile users have just started to fully utilize the data capabilities in their mobile phones. In Asian countries like India, China, Indonesia and Philippines, where mobile infrastructure is comparatively better than the fixed-line infrastructure and in European countries where mobile phone penetration is very high (80% of consumers use a mobile phone), mobile phone banking is likely to appeal even more.

This opens up huge market for financial institutions interested in offering value added services. With mobile technology, banks can offer a wide range of services to their customers such as doing funds transfer while traveling, receiving online updates of stock price or even performing stock trading while being stuck in traffic. According to the German mobile operator Mobilcom, mobile banking will be the killer application for the next generation of mobile technology.

Mobile devices, especially smartphones, are the most promising way to reach the masses and to create “stickiness” among current customers, due to their ability to provide services anytime, anywhere, high rate of penetration and potential to grow. According to Gartner, shipment of smartphones is growing fast, and should top 20 million units in 2006 alone.

In the last 4 years, banks across the globe have invested billions of dollars to build sophisticated internet banking capabilities. As the trend is shifting to mobile banking, there is a challenge for CIOs and CTOs of these banks to decide on how to leverage their investment in internet banking and offer mobile banking, in the shortest possible time.

The proliferation of the 3G (third generation of wireless) and widespread implementation expected for 2003-2007 will generate the development of more sophisticated services such as multimedia and links to m-commerce services.

[edit] Opportunities in Mobile Banking

Mobile banking can offer following services :

[edit] Account Information

1. Mini-statements and Checking account history
2. Term deposits
3. Loans statement
4. Cards statement
5. Mutual Funds / Equity statement
6. Insurance policy
7. Pension plan

[edit] Payments & Transfers

1. Domestic and international fund transfers
2. Micro-payments
3. Mobile re-charge
4. Commercial payments
5. Bill payment

[edit] Investments

1. Portfolio Management Services
2. Real-time stock quotes
3. Personalized alerts and notifications on security prices

[edit] Support

1. Status of origination of Mortgage, Insurance
2. Check book request
3. Exchange data message and email / Complaints

[edit] Content Services

1. General information such as Weather updates, News
2. Loyalty related offers
3. Location dependent services

Based on survey conducted by Forrester, mobile banking will be attractive mainly to the younger, more tech-savvy customer segment. A third of mobile phone users say that they may consider performing some kind of financial transaction through their mobile phone. But most of the users are interested in performing basic transactions such as querying for account balance and making bill payment.

[edit] Challenges for a Mobile Banking Solution

The challenges in developing a sophisticated mobile banking application are :

[edit] Interoperability

There is a lack of common technology standards for mobile banking. Many protocols are being used for mobile banking – HTML, WAP, SOAP, XML to name a few. It would be a wise idea for the vendor to develop a mobile banking application that can connect multiple banks. It would require either the application to support multiple protocols or use of a common and widely acceptable set of protocols for data exchange.

There are a large number of different mobile phone devices and it is a big challenge for banks to offer mobile banking solution on any type of device. Some of these devices support J2ME and others support WAP browser or only SMS.

[edit] Security

Security of financial transaction, being executed from some remote location and transmission of financial information over the air, are the most complicated challenges that need to be addressed jointly by mobile application developers, wireless network service providers and the bank’s IT department.

The following aspects need to be addressed to offer a secure infrastructure for financial transaction over wireless network :

1. Physical security of the handheld device. If the bank is offering smart-card based security, the physical security of the device is more important.
2. Security of the thick-client application running on the device. In case the device is stolen, the hacker should require ID/Password to access the application.
3. Authentication of the device with service provider before initiating a transaction. This would ensure that unauthorized devices are not connected to perform financial transactions.
4. User ID / Password authentication of bank’s customer.
5. Encryption of the data being transmitted over the air.
6. Encryption of the data that will be stored in device for later / off-line analysis by the customer.

[edit] Scalability & Reliability

Another challenge for the CIOs and CTOs of the banks is to scale-up the mobile banking infrastructure to handle exponential growth of the customer base. With mobile banking, the customer may be sitting in any part of the world (a true anytime, anywhere banking) and hence banks need to ensure that the systems are up and running in a true 24 x 7 fashion. As customers will find mobile banking more and more useful, their expectations from the solution will increase. Banks unable to meet the performance and reliability expectations may lose customer confidence.

[edit] Application distribution

Due to the nature of the connectivity between bank and its customers, it would be impractical to expect customers to regularly visit banks or connect to a web site for regular upgrade of their mobile banking application. It will be expected that the mobile application itself check the upgrades and updates and download necessary patches. However, there could be many issues to implement this approach such as upgrade / synchronization of other dependent components.

[edit] Personalization

It would be expected from the mobile application to support personalization such as :

1. Preferred Language
2. Date / Time format
3. Amount format
4. Default transactions
5. Standard Beneficiary list
6. Alerts

[edit] References

• Buse, Stephan and Tiwari, Rajnish (2006): The Mobile Commerce Prospects: A Strategic Analysis of Opportunities in the Banking Sector, Research Project Mobile Commerce, University of Hamburg
• Tiwari, Rajnish; Buse, Stephan and Herstatt, Cornelius (2006): Customer on the Move: Strategic Implications of Mobile Banking for Banks and Financial Enterprises, in: CEC/EEE 2006, Proceedings of The 8th IEEE International Conference on E-Commerce Technology and The 3rd IEEE International Conference on Enterprise Computing, E-Commerce, and E-Services (CEC/EEE'06), San Francisco, pp. 522-529.
• Tiwari, Rajnish; Buse, Stephan and Herstatt, Cornelius (2006): Mobile Banking as Business Strategy: Impact of Mobile Technologies on Customer Behaviour and its Implications for Banks, in: Technology Management for the Global Future - Proceedings of PICMET '06.
• Owens, John and Anna Bantug-Herrera (2006): [1] Catching the Technology Wave: Mobile Phone Banking and Text-A-Payment in the Philippines

[edit] External links

• Research Project Mobile Commerce, University of Hamburg (Germany)

• [2] Video on Mobile Phone Banking in the Philippines, Microenterprise Access to Banking Services (Philippines)