Bank of America: Question #1 - Mobile Banking Industry Development

In Germany, the mobile banking market has been changing. There is a nice case study showing that some german banks already set up mobile banking before 2003. However, between 2003 and 2006 the number of banks having mobile banking services was reduced by 8 to 14 banks. The main reason given was that the market was not yet ready for mobile banking. This supports the statement from gregoire.schiller (Do It Show: Question #1 - Marketing), that timing and market readiness is very important.

gregoire.schiller wrote:
What was key in STK success is the timing of the launch of the innovation as much as the feature in itself and the marketing approach!

Currently many banks that had closed down there mobile banking in Germany now offer mobile banking again, such as the Sparkasse and Deutsche Bank.

In Germany more and more banks are offering mobile banking apps, but only a few allow real financial transactions. My bank (Comdirect) for instance started to introduce a mobile app last year, but only for the iphone and you can only check your balance.

Personally I think that a lot of Germans doubt that m-banking is very secure. This is proved by a study (http://helsinkimobility.aalto.fi/papers/Mobile%20Applications_1_2.pdf) that found out that during 2003 and 2006 15 banks have closed their mobile channel because lack of success.
I think this is due that most Germans rely on traditional banking although mobile networks are well developed in Germany. This argument is backed by (Forrester, 2005). Also online banking significantly time to get established compared to other countries.

With the wide use of Smart Phones I think the banks see the opportunity to extent their channels by offering a banking service. This can be explained why only limited functionality are available. For the future I think banks will closely watch their competitors and market research and only offer if pilot projects prove success.

I think Mobile banking is more about consumers than enterprise. And I think bank is always not a risk taker. So evaluate about invest amount and bringing benefits, maybe banks are rather than getting some more enterprise customers?
For safety issue, they can develope near banking searching APP, or lining time announcement APP, but if about money, they need to concern more about security issue.

In the Netherlands, since ING launched its mobile banking app last week, the largest banks are now providing mobile banking apps. These include ING, Rabobank and ABN which, when added up, represent over 70% of the Dutch savings market. I should add that internet banking is very popular and common in the Netherlands. Internet banking adoption is the highest in Europe, and forecasts say that in 2013 81% will use internet banking.

I feel that all banks should implement some way of mobile banking on smartphones. Soon, people will expect that they will be able to use a mobile device to handle all of their banking. If they find out they cannot with their current bank while other banks do provide handy mobile access to banking, they might switch. So, it is very important for banks to have some way of providing mobile banking.

For the second part, in the Netherlands all large banks have built their own app. It is the most logical option, but not the most user friendly. If banks would collaborate to provide one app which could access all of your accounts, it would reduce total developing costs a great deal while providinga better service to the customer.

Except a couple of first movers, I really doubt banks have the capacity and the innovation spirit necessary to address alone the development of mobile banking. Whereas the technologies to offer mobile banking services have been available for some time now, very few offer mobile service beyond the classic SMS service for weekly balance.
BOA is for me an exception. Other players are relying on smaller and innovative players who take care of the development of such service. We for instance talked about Mint in class which is already surpassing what BOA offers (including in its apps some personal finance management tools and targeted content).
The case of Mint is all the more interesting since it highlights a limitation of the mobile banking by banks alone: fragmentation of accounts.
Nowadays, seldom are the consumers with only one bank account, they will hence always prefer a unified service aggregating all their accounts more that using 3 different services.
Third parties and partnerships will lead the trend in my opinion.

C.

In terms of to what extent, i think one major reason why it would expand is that this mobile solution is worth a lot of money.

In 2005, according to the United Nations, global migrants remitted $232 billion. Up to 20% was lost on the way, mostly in bank charges or fraud !!! If cellular transfers can slash that figure, mobile banking would prove to be a good call !
Some have already seize the opportunity : about a million South Africans (2010) now use their mobile phones as a bank.

However, i reckon self banking is not that easy. It takes time to become 'financially literate' as some say.

Therefore i am convinced that mobile banking will expand, not only because it is easy but also because it saves risks and chances. Nevertheless, the pace at which it'll expand remains uncertain to me.

Mobile banking, as we see from the figures you showed us, is expanding fast.

With the advent of mobile phones and new internet technologies, it's far so easier to always have access to online stuffs and banks won't be hardly less so.

Since banks security system (every-day changing passwords, password generating devices..) avoid an easy access to their websites from smartphones, many banks have launched their own app in order to facilitate it.

Talking about apps, nowadays it's very easy to develop an app, so banks don't need so much expertise to create their own app. As a matter of fact in my personal experience I saw that in Italy almost every bank (big or small) launched its own app.

Personally I think that mobile banking players have to face strong competitors such as digital paying systems, like PayPal or the new Google Wallet. Indeed they work to assure that we digitally pay through their systems, registering our credit card.

A next improvement that can be made by the banks may be the implementation of a payment system inside their own app, so that you don't need to register your credit card and pay fee to PayPal anymore.

“In 2009, an estimated 10 million consumers used mobile banking in the U.S; by 2014 this number was expected to grow to 37 million, representing 30% of the total expected online banking users in the U.S. Total annual transactions for mobile banking services were expected to increase from about 180 million in 2008 to 2.4 billion in 2014.”

Considering this quote from our case study, our question is to what extent and how do you think will banks integrate mobile banking? Please justify your answers (by relying on your own opinion, statistics or other external sources) and make clear the difference between SMS, websites and apps services if necessary.

In the first part of the question (i.e. “to what extent”), you might for example discuss whether mobile banking is and will be a local or global phenomenon (i.e. what is the situation in your country, does mobile banking concerns a wide range of banks or only the few “big” ones, etc.) and why (e.g. evolution of the technologies, of the supports like smartphones and tablets, of consumer’s habits, etc.).

In the second part of the question (i.e. “how”), you might for example discuss which kind of approaches would mobile banking industry participants better take in order to develop their mobile banking. To help you, here is a quote from a quote from a Bain&Company’s study:

“Industry participants are pursuing three approaches.
1.Go it alone where, for example, telecoms take the lead in aligning the value chain, providing the investment capital and even expand into financial institutions like NTT DOCOMO did in Japan. The financial sector also has seen several go-it-alone attempts, with banks launching virtual network operators, like the Dutch Rabobank Group.
2.Collaboration within the industry such as the Global System for Mobile Association's (GSMA) initiative, which is promoting a unified approach by the mobile industry to unlock some of the barriers to mobile banking and payment.

3.Collaboration across industries is exemplified by the French Pegasus project, where multiple banks, telecom and technology providers joined forces to establish a contactless payment solution. Value-added service providers such as Bharti Telesoft or Qualcomm's Firethorn are using independent mobile banking platforms to link themselves with consumers, telecoms and banks. And telecom companies like MTN Banking in South Africa have formed exclusive partnerships with a single financial service provider.”

The whole study can be found here.

Hope you will have an interesting forum!