Wednesday, September 16, 2009

Every mobile banking vendor picking a big elephant?

During the past few weeks many mobile banking vendors aligned themselves with big brands. To mention a few: Obopay with Nokia, Monitise and Visa and the purchase of Macalla by Roamware. All of these alignments happened on the basis of an equity arrangement. Also in the past two weeks, Sybase/paybox announced deployment relationship with IBM and mCom a distribution agreement with Microsoft.

This flurry of activities could be on the basis of two possible reasons. Either this market is getting so attractive that the big elephants all want a piece of the action or it is getting so dangerous that the small elephants need protection. In aligning themselves with a big elephant these vendors receive numerous benefits, ranging from brand awareness to access to markets. But these transactions also come with a big downside: the relinquishing of strategic control and direction and the ability to dictate their own destiny. In the end it will be results and customer satisfaction that will dictate the ultimate leaders and not the label used to sell the solution.


Harveer said...

According to one point of view, the tie-ups may help ease the enterprise adoption of mobile banking systems.

Typically, any large banking organization would want its vendors to have good standing (strong balance sheet, proven track record, etc.) while picking & implementing critical systems - think of it as a risk mitigation strategy. Conversely, most of the cutting edge solutions in mobile banking/payments space have/are being developed by start-ups.

Adding the power of an established brand name to the agility & solution strength of a start-up might make the sales a little bit easier.

David Eads said...

Hannes, I agree with your assessment. I would like to offer two other possible factors:

1) Channel Distribution - In the U.S. there are around 8,000 banks. The vast majority are small (under US $1bn in assets). Mobile banking decisions have been made at large banks, vendors now have to reach the other 7,800 banks.

2) Integration - Start-up mobile banking vendors have not been successful in convincing bankers that they'll be successful in integrating into the collection of complex bank systems. Hearing "This time, it's different" from a software guy that's never seen the inside of a bank doesn't remove the skepticism. Vendors are aligning themselves with elephants that can credibly connect to the myriad of systems in use in the community banks around the U.S.

David Eads
Founder, Mobile Strategy Partners LLC
My Blog

Mauricio Bendeck said...

Mobile banking (MB) is a service channel that complements the consistency of the bank user experience amongst a multi-channel approach. MB is opex regardless how it is viewed by the business units as it needs to serve the banks' highly mobile customers. Once banks begin to embrace (redux circa 2002), they will figure out a cost structure to charge for services e.g. the ATM and i-Banking. Its these very large vendors who are moving to a SOA architecture to "modularize" the service components where they see MB as a "feature set" that they need to "add" to their banking platforms.