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Mobile BankingRaj Patel, PartnerPlante & Moran
Michigan BankersBankers Education Summit & Trade Show
April 2011
M o b i l e B a n k i n g Introduction & Overview
Customer channel evolution Landscape & trends Should you do it? Security & regulations Closing thoughts
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Customer Channel Evolution
M o b i l e B a n k i n g Customer Channel Evolution
Branch
Tran
sacti
on M
atur
ity
Customer Interaction(Size of Bubble = Relative Importance to Customer)
Low
High
High
2
M o b i l e B a n k i n g
Tran
sacti
on M
atur
ity
Customer Interaction(Size of Bubble = Relative Importance to Customer)
Phone
Branch
Customer Channel Evolution 2
M o b i l e B a n k i n g
Tran
sacti
on M
atur
ity
Customer Interaction(Size of Bubble = Relative Importance to Customer)
Phone
ATM
Branch
Customer Channel Evolution2
M o b i l e B a n k i n g
Tran
sacti
on M
atur
ity
Customer Interaction(Size of Bubble = Relative Importance to Customer)
InternetBanking
Branch
Phone
ATM
Customer Channel Evolution2
M o b i l e B a n k i n g
Tran
sacti
on M
atur
ity
Customer Interaction(Size of Bubble = Relative Importance to Customer)
PhoneMail
ATM
Branch
Internet
Mobile
Customer Channel Evolution2
Mobile Banking Landscape & Trends
M o b i l e B a n k i n g Terminology
Mobile Banking: Use mobile device to connect to a financial institution to view account
balances and transactions, transfer funds between accounts, pay bills, receive account alerts, deposit checks, etc.
Mobile Payments Use mobile device for purchase or other payment-related transaction at
point of sale (proximity) or via internet (remote) May be conducted via SMS, MMS, mobile Internet, downloadable
application, contactless or barcode technology Process and settle over traditional banking networks (credit, debit, ACH),
mobile carrier or other third party network
3
M o b i l e B a n k i n g Forms of Mobile Banking
SMS (Short Message Service): Send & receive text messages & alerts 90% of US phones Limited to 160 characters Uses existing carrier infrastructure Less security, no encryption
WAP (Wireless Application Protocol): Browser access via mobile phone to Internet content
60% of US phones No downloads required For online banking customers Small screen, slower data Transmission, expensive data plan
Downloadable Smartphone Application: User friendly apps customized to smart phone type
30% of US phones Blackberry, iPhone, Android Faster navigation, easy setup , more secure Involves custom application development
4
10.8 million users120% increase
18.6 million users58% increase
8.1 million users35% increase
Source: comScore
M o b i l e B a n k i n g Mobile Banking Landscape
All National banks, most regional and many community banks offer mobile banking services
National banks offer downloadable applications, SMS and WAP/browser-based mobile access (Triple Play)
Community banks and credit unions may implement their core processors’ mobile packages
Community banks usually start with basic, information-based services Branch & ATM locators, transaction history, balance inquiries
Payment or transaction services are usually Phase 2 Most banks do not charge for mobile banking
5
M o b i l e B a n k i n g 2010 ICBA Survey
The ICBA & Plante Moran Technology Survey results for Mobile Banking from 895 Community Banks from June 2010: 15% of Community Banks
already have Mobile Banking available to customers
Another 47% of the respondents plan to have it available within the next 24 months!
<$100 Mil $100<>$250 $250<>$500 $500 Mil +
6%10%
22%
39%33%
54% 55%52%
61%
37%
23%
9%
Yes Plan to No Plans
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M o b i l e B a n k i n g Features Offered by National Banks
Source: Javelin Strategy & Research, July 2010
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M o b i l e B a n k i n g Features used by Consumers
Source: Javelin Strategy & Research, July 2010
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M o b i l e B a n k i n g Mobile Remote Deposit
Use phone’s camera to capture front & back images of check & send to bank for deposit
Expected high adoption rate with consumers and small businesses that process low check volumes
Reduces Bank’s paper check process costs Less reliance on branch USAA first to offer m-RDS
(Deposit@Mobile for iPhone & Android) Chase Quick Deposit – July 2010 BoA to launch with iPhone in 2011
9
M o b i l e B a n k i n g Mobile P2P Payments
Mobile P2P allows bank customers to send funds to recipient accounts at another bank or to a PayPal account using a mobile phone
Senders register to activate mobile phone and send via email address or mobile phone number of recipient
Transactions usually settle through ACH
Very few banks offer mobile P2P A few are partnering with 3rdparties to offer online and mobile P2P (e.g.
CashEdge, PayPal or Obopay)
Replaces cash and checks for informal, low dollar payments between people you know
Popmoney by Cash Edge Popmoney allows bank customers to "Pay Other People" (POP) anywhere, at
any time, using only a recipient's email address, cell phone number or bank account information.
Offered directly from within the bank's current online or mobile banking applications, Popmoney provides simple, convenient and secure email and mobile payments directly from a customer's bank account.
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M o b i l e B a n k i n g For Businesses
Banks originally focused on consumer mobile banking Corporate/small business markets offer new bank
opportunities Businesses want ability to monitor transactions, transfer
funds, receive account alerts, with assurance that system is secure
Examples Treasury/Cash Management
• Wells Fargo CEO Mobile• Wall Street Systems Treasury on the Move
Financial trading• e-Trade Mobile Pro
Small Business credit card acceptance Business T&E
40% of executives surveyed in 2010 would consider mobile banking for their businesses
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M o b i l e B a n k i n g Contact Less Payments
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M o b i l e B a n k i n g What else ……
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Mobile Banking Should you do it?
M o b i l e B a n k i n g Key Decisions
Why are you doing it? To stay competitive Customers are asking for it
What services are you going to provide? SMS WAP Smart App
Demographic study % of customers that would use this channel Current statistics on mobile usage
Cost for implementing mobile banking Evaluate current vendors
Existing core banking vendor
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M o b i l e B a n k i n g US Mobile Banking Users Forecast
2007 2008 2009 2010 2011 2012
Javelin 10 27 47 67 88 108
Juniper 9.2 14.5 23.9 42.4 69.2 NaN
AITE 1.68 9.5 21.1 34.9 NaN NaN
Mercator 2 6.4 15.7 24.2 33.1 NaN
Tower Group 1.1 5.7 11.4 19.9 30.3 42.3
Celent 1.38 5 10.8 16.8 NaN NaN
10
30
50
70
90
110
Num
ber o
f Use
rs
(mill
ions
)
Source: Federal Reserve Bank of Boston
15
M o b i l e B a n k i n g Could you lose customers?
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M o b i l e B a n k i n g Other Stats
37% of all applications downloaded on iPhone, Blackberry and Android were banking/finance related applications
In 2010, three out of four users are happy with their mobile banking experience (FIS study)
'We are seeing mobile deployments by banks accelerating in 2011, with our clients growing mobile users by 35% monthly,' said Douglas Brown, senior vice president of FIS.
In 4th Qtr 2010, 30 million Americans accessed their bank, credit card or brokerage account from a mobile device. Up 54% from same quarter in prior year
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M o b i l e B a n k i n g Demographic Analysis
Technology Perception Mobile phone services E-mail Internet
Reference Group Relatives & Friends Sociability Bank clerk / marketing
Usage Pattern Speed of use Ease of use Contains all banking
services Independence from
time and place
Security Constraints
Mobile banking is reliable
Electronic channels are reliable
Demographics Gender Age Marital Status Education Income Profession
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M o b i l e B a n k i n g Demographic Analysis
Source: a research study from Finland
18
M o b i l e B a n k i n g Demographic Analysis
Technology Perception Mobile phone services E-mail Internet
Reference Group Relatives & Friends Sociability Bank clerk / marketing
Usage Pattern Speed of use Ease of use Contains all banking
services Independence from
time and place
Security Constraints
Mobile banking is reliable
Electronic channels are reliable
Demographics Gender Age Marital Status Education Income Profession
18
M o b i l e B a n k i n g Operating Cost / Transaction
Cost per Transaction
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M o b i l e B a n k i n g Vendors
ClairMail Clickatell Firethorn Mobile FIS Fronde Anywhere Harland Financial Solutions Jack Henry - goDough M-Com
recently purchased by Fiserve
mFoundry Monitise Americas Mshift Sybase 365 Tyfone Yodlee
20
Mobile Banking Security & Regulations
M o b i l e B a n k i n g Preventive Measures
Banks Secure (encrypt) communication channels: SMS, browser based,
downloadable apps Assign security levels & user authentication based on payment
type, transaction value, number of daily transactions, etc. Set transaction limits Know your vendor: ensure mobile apps have built-in safeguards
to limit security breaches in case device lost or stolen Apply due diligence for new customers by authenticating account
number and user name Educate consumers on security policies and tools
21
M o b i l e B a n k i n g Preventive Measures
Consumers Set strong passwords, install anti-
virus software on smart phones Know the developer before
downloading applications How well have they tested the app? Is it certified?
Do not store sensitive data on mobile phone
Receive mobile alerts on potentially fraudulent transactions
About a year ago, owners of Android smart phones began downloading mobile banking apps from Google's Android Market. The apps cost about $1.50 each and connected users with about 40 major banks, including Bank of America and Wells Fargo. There was only one problem: The banks hadn't put them there."
22
M o b i l e B a n k i n g
What guidelines are regulators currently offering? FFIEC E-Banking, Appendix E: Wireless Banking
Risk Implications: Transaction / Operations risk and Strategic Risk
Message encryption Password Security Wireless Vendors Product & Service Availability Disclosure & Message Limitations
Other related guidance includes:• FFIEC - Remote Deposit Capture Risk Management Guidelines• FIL 84-2004 Guidance on Instant Messaging • FIL 8-2002 Wireless Network Risk Management• ATMIA - Best Practices for Mobile Phone Banking Security Guidance
23Regulatory Guidance
M o b i l e B a n k i n g Closing Thoughts
The demand for Mobile Banking is growing at a rapid pace Two biggest deterrents to enter Mobile Banking
Cost to implement Security unknowns
Given the current economy, now might be the best time to invest Mobile banking will keep you competitive, increase deposits, decrease cost to service and increase
margins
If implemented properly, Mobile Banking can be more secure than Internet Banking Take advantage of your branches to provide customer training – the more
comfortable they are, the more they will use it. Do expect to see guidance (and regulatory auditors) soon Make sure you optimize your web pages for the mobile web!!!!
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