Positive report on mobile banking

Juniper Research released a very positive report on the growth of mobile banking from now till 2011, today. According to the research, subscribers will grow tenfold from now till 2011 to ultimately be 816 million (this is very close to the predictions made by Edgar Dunn (see my comments on this here). In addition transactions will increase from 2.7 billion to 37 billion during the same time.

What I found particularly interesting about this report is that the analysts tried to not only predict number of subscribers, but also number of transactions. This is of course important because it is an indication of how much banking will be used. I have done some quick calculations of the findings and this is what I found:

• The prediction is that every subscriber would (on average) do more than three banking transaction per month on their mobile. I found this to be quite low based on the experience that we have had with Fundamo deployments. We have seen transaction volumes that is as high as three transactions a day (or even higher).
• The volume of transactions will have to more than double every year to grow to these volumes. If the hockey-stick is more steep, growth could even be more spectacular.
  

Seems like we should be expecting some very interesting times in mobile banking.

Regional Regulations

This is something that have always intrigued me. Everyone that knows would agree that none of the countries that constitute the Eurozone is the same. Especially if one were to consider the different payment solutions and customer orientation towards these, one observe massive differences. Some countries are still heavily dependent on cash payments, while others have installed sophisticated PIN-based payment systems. In some it is acceptable to do Internet payments and in others cheques are still in circulation.

Especially, if one were to consider mobile payments, differences are even more distinct. Initiatives in Nordic areas are not at all comparable to what is happening in Austria nor some of the great work happening in the Iberia peninsula. The challenges regarding money supply and cost of doing business are all different from one country to another.

So here is my question: "How can you regulate all these different countries with the same banking regulation?"

The Emperor without clothes

This is something about the Mobile banking and payment (MB&P - I have decided to acronymise this term now, because I use it such a lot) industry. We have more than our fair share of people and companies that make claims that is so far removed from what is possible and also what they are obviously capable of. This is possibly because such a lot of people have turned MB&P into something romantic - the next big thing...

One of the best know examples of a nude emperor were of course Simpay. While this organisation were busy with grand schemes in Europe, many were modeling their strategies on what Simpay was supposed to deliver. Many millions of dollars were spent on this grand plan that most of the industry was expecting to come true. I recall companies that were basing their whole product strategy on the assumption that Simpay would have dictated the standards for mobile payments. Yet for a lot of us (especially those that were intimately involved with the industry), we did not see any clothes. We did say so, but not too loudly, because others were looking strange at us.

There are other examples, I believe. Some with grand plans and ever more spectacular visions. Who will be brave enough to name them this time round. Well, let me give you a clue: A nude emperor this time round have a name that starts with F and have just been acquired by a company with a name that starts with Q.

What do you think?

Tridge Banking

The term “tridgets” made their debut in Barcelona, meaning mobile devices that depend 100% on the network for all controls and data. The term was coined (invented) by some-one in Accenture and it has been used in good slogans: "The first trillion tridgets".

As an aside, I was wondering where the inspiration for the name came from, when I found this little piece on the web:

"There were exactly fifty Tridgets, separated like stars on an American flag, perched upright, balancing skillfully on pegs that protruded from an angled board near the back of the booth. They looked soft, like chipmunks, no more than five inches tall. They had fur of variable designs. Some were spotted, some were striped, some were calico and some were patchy, with dominant colors of light grey, white or tan and accent colors ranging from bright orange to deep blue.

They had little pug, almost human faces, with little noses that curled slightly up. Their bulging eyes were blue, green or hazel. They all had tight, curly, tails that were similar, but fatter and much furrier than that of a pig. Perhaps the most adorable thing about these little fuzz balls were the large pointed ears, bent at different angles just below the tips. " see webpage

Little "fuzz balls"?

Anyhow, I tried to understand the implication of our banking software now not just being available on mobiles, but also on Tridgets. This means we can now start talking of Tridge banking?

Killer applications

Most would agree that doing payments or banking is not fun. It is not something that we would do if we could help it. (Well, maybe with the exception of receiving payments!). To provide sexy banking services is a contradiction in terms in my book. This is one of the reasons why mobile banking and payments will never prove to be successful unless it can be used for something, ... well sexy.

The mobile banking and payment industry refer to these things that you can do with mobile banking and payments as the "killer applications". Giving access to your consumers to "killer applications" that they can pay for easily on their mobile phone is the trigger (and key) to a successful mobile banking/payment implementation. In this blog-post, I list a few categories of what applications have been "killing" and which ones are likely to "kill" in the future.


The most frequently quoted killer application is the ability to buy pre-paid airtime directly from your bank account using a mobile phone. I have heard some observers talk of this as being not that sexy, but some of the case studies are immense and only thing I would say is:"ignore air-time purchases at your own peril"

Others that have already been implemented and have proved to be successful are bill payments (low margins are the biggest challenge here), cash on delivery (big money here), payment for parking (requires enough cars and less parking to work - not the case in many countries), some examples of retail payments, payments for content and other pre-paid (e.g. pre-paid electricity).

Payment for the purchase of lottery tickets and other gambling applications have been implemented by a few operators, but it is my opinion that this has not proved to be that successful. I am of the opinion that this is because we have not yet figured out how to do this effectively on mobile phones - so that it works for the new form factor. Many people have ideas on how to turn this into killing applications, but I have not seen them yet.

Others that should also be mentioned in this blog are of course money remittance. Many examples of this type of application have been deployed with good successes. The challenge in this area is working with regulatory constraints and to turn localised deployments into global deployments.

Other killers that I sense are lurking will come from micro lending, export/import, other financial services and many niche applications (like transport, medical, content etc.)

Once again, what do you think?

Security is in the eye of the bank

It is a common saying that security is only as secure as it is perceived to be. It is quite possible to develop many different security solutions that can protect what it is supposed to protect economically. (The cost of the system is less than the fraud that could be committed in the absence of the system)


Unfortunately this is not the criteria for a successful security solution that will be deployed and used. Rather it is if the security solution is perceived to be secure. In the case of mobile banking, the question should be asked "perceived by who?" and "what will convince them that it is secure enough?"

In the case of mobile banking, I would like to argue that it is not end-consumers that are the primary evaluaters of security. The key is not to ensure that end-consumers perceive mobile banking as secure, but rather bankers. In my experience, it is the banking fraternity that are uncomfortable with mobile banking security more often than not. Only if they are made to be comfortable with the security is it possible to launch a mobile banking solutions. Even when the end-consumer would have been happy long-ago, or even if the security solution can be proven to be economically sound, bankers will still resist.

So what is it that banks look for in a mobile banking solution:

• Conforming to banking standards. Banks are comfortable if some-one else says something is secure (VISA or the PCI etc.) Problem is that few of these standards exists that can be applied directly to mobile banking. Also read this blog-entry.
• Bankers like security if it looks like the security that they know and understand. They like PIN-blocks that are never stored and is never in the clear. They like digital security keys where the master keys are well-managed (preferably by a bank or a banking body)
• Bankers like security where the liabilities are clearly defined in the case if something do go wrong.
• Bankers like security systems where all of the functionality/components are under the direct control of the bank

Generally bankers are not enthused by maverick, sharp and innovative solutions to manage security, but rather using tried and tested approaches that can be mapped to existing procedures and internal banking rules.

In deploying mobile banking solutions, it is critical to keep this in mind.

Where is the money?

Mobile payments is an interesting concept. I have heard a lot of people talking about how making payments from a cellphone could be earth-shattering - how it would change the way that people shop and do business for ever. And I believe that they are right, but in order to make this vision happen we have to solve a difficult problem... where is the money?

No, I don't mean, how we are going to make money by running a mobile payment scheme. I mean, what are people going to use as money to pay with. If they complete a transaction and they hit "send" (or "pay") where will the money come from to do this payment. To put it in another way: "which account will be debited". Many different solutions have been suggested and implemented, but all have significant challenges. Below is a summary of some of the Value Stores that could be used as the money in mobile payments:

• Using an existing credit card as the source for doing a mobile payment would seem to be the most obvious approach. This has successfully been implemented, but suffers from the following challenges: A relatively small percentage of people with mobile phones have credit cards globally, the transaction can be expensive as credit card fees must be paid before any other revenue can be generated and the rigid (but sound) rules regarding fraud places a very big risk on such an approach.
• Using the mobile operator's billing engine as the source for payments have been proposed, but this approach can even be more expensive than credit card transactions. (See one of my previous blogs) . In addition, expect regulatory problems and significant challenges to extract cash out of the system. It is also unlikely that the mobile operator would be happy with sharing money earmarked for telecommunications with other retailers.
• Utilising existing bank accounts could be interesting, but integrating telecommunication systems to core banking systems can be expensive and time-consuming. Also the strain on a banking system when millions of small transactions starts hitting it, can be outside the design limits of such a system.
• A new dedicated mCommerce account may be the way to go. Remember that when credit cards (a new payment system) were launched in the 1970's, it came with its own dedicated account management system. Why should that not be the case for mobile payments?
  

Interesting Architectural Problem

ABSA is a leading retail bank in South Africa with a good mobile banking solution deployed. They were one of the first companies that have deployed mobile banking solutions in the world and have managed to grow their subscriber based to a substantial size. The solution has been developed and is supported by and internal team and is a very advanced deployment compared to world standards.

In order to improve security, ABSA recently deployed an SMS alert to their Internet Subscribers whenever the subscriber logs into the Internet Banking site. This means that a subscriber gets a SMS as soon as a successful login has been done.

An interesting side-effect of this deployment is that subscribers to their mobile banking service now gets multiple SMS's confirming that the user has logged on whenever a transaction is done on the mobile phone. This leads me to the following conclusions:

• The ABSA cellphone banking application sits on top of the Internet banking application and requires a login for every transaction
• The benefit of dual channel confirmation for an Internet login with mobile confirmation, turns into an irritation when the same confirmation is utilised for mobile banking
• Security techniques for the Internet (especially when utilising the phone) is not directly applicable on mobile banking
• It is a risky architectural design to bolt mobile banking onto an existing Internet banking application
  

As always, to stimulate debate... What do you think?

Mobile Banking and Usability

We have all lived through an amazing journey to see how fast mobile phones have grown in popularity. Many reasons for this massive growth have been given, ranging from the communication needs to fashion-awareness. One of the reasons for this growth in my opinion is that phones are so easy to use. I know that some people will disagree with me, but fact is that the majority of people use phones without (ever) reverting to a manual, having to go on mobile phone usage training or requiring assistance from family or friend. (Very different to what we have got used to in the Personal Computer Space).

So why is it that phones are so easy to use?

Usability design and testing has around as a formal discipline for the best part of twenty years. Mobile phone manufacturers (all of them) take usability very serious. Every design and every model usually go through rigorous usability testing cycles. Results are fed back into the design and never will a phone be released without a green light from the usability guru's. Industry advances and standards have made big leaps in this space. Techniques like the Mobile Phone Usability Questionnaire (MPUQ), the Usability Checklist for Mobile phones and many others are utilised in the design of mobile phones

Just a thought: how frequently have your mobile banking application and solutions been tested (or designed) for usability? have you contracted a supplier with a track record and capability to build mobile banking solutions that are usable?

I believe that this is the single most important reason why mobile banking applications are not being used as extensively as they could/should be. Most mobile banking applications have not been designed with due insight in and proper application of mobile usability techniques.