Much has been made of phenomenal increase of smartphone usage in every facet of British society, so why isn’t mobile phone banking taking off like it is in overseas markets?
Smartphones are rapidly becoming essential tools in our day to day lives, often replacing computers for online tasks. In overseas markets dedicated banking apps mean bills can be paid, money transferred and goods bought online, all at the flick of a touchscreen. Why haven’t UK banks embraced this technology over here?
Courtesy of scottchan
Serge Van Dam from Fiserv believes that 2012 will be the year when the UK banks ‘wake up’ to the potential of mobile banking.
"2012 will be the year when they realise that mobile is changing the way people bank. You’re going to have a significant level of adoption and the executives will start seeing it as more than a hobby project," he said.
"It will be more than something they talk about to ‘seem innovative in the market’. It will cease to be a ‘nice to have’ and become an essential. This in turn will push a desire for investment and drive innovation."
2012 will be the year where, in certain markets, mobile banking overtakes all other forms of banking combined. He says Fiserv is already seeing this occur in emerging markets, such as with Cambodia’s Acleda and Thailand’s Bangkok Bank.
In this sense, he finds it easier working with the emerging markets’ banks, rather than the hyper-conservative EU and UK ones.
"The business case is much more obvious. Acleda nearly doubled their customers last year. So they ask, is it cheaper to build 150 more branches, or build a decent mobile network infrastructure to interact with their customers? It’s not even a choice for them. It’s the only solution that makes financial sense," he said.
"Banks in developed markets aren’t terribly humble, but there’s actually a lot they could learn from developing these developing markets."
Van Dam describes the UK market as being nascent, in the ‘foundational stage’ of mobile. A lot of the banks dipped their toes into mobile, didn’t see much in the way of results or return on investment and left it alone.
It didn’t really move beyond ‘convergence’ – the same regular online banking, just on a mobile device.
The phenomenal growth of smartphone adoption, now at around 50% in the UK, is forcing banks to look at it again.
Fiserv has a much stronger presence in the US, where it provides the online banking systems for 100s of financial institutions, from community banks through to the nationals. Van Dam estimates that between 20 and 30% of US online banking customers are already active in the mobile space.
By comparison, our banks have a more protective in house culture when it comes to software development. Van Dam says the US companies look at mobility more like a traditional business problem that, if the business case is sound, can be outsourced.
"It’s no different than farming out a business’s payroll to SAP. We’ve deployed in 12 countries 100s of banks. We know what we’re doing not because we’re smarter, but because this is what we do for a living.
"We do it cheaper, faster and provide a decent return on investment. We have 70 dedicated developers working on our product. If you’re a bank and you have 70 people working on a project that you don’t have any experience with – that’s quite a financial commitment."
So far the UK banks have focused on pure web solutions for mobile banking, with a smattering of ‘lite-apps’. There are a few exceptions in Europe, such as RBS’ rich-app, but as a whole the market is stagnant.
Around 70% of mobile banking sessions are made through apps, and Van Dam sees a general trend away from the general web here. Even though HTML5 has been gathering steam as a ‘cross platform’ solution that can save banks having to develop separate apps for iPhones, Android devices and Blackberrys, Van Dam still believes apps are the future.
He believes that HTML5 will have little impact in the second wave of mobile banking, due to ‘specialisation’. While HTML5 is useful to a point, its lack of tight integration with the mobile device its running on, is a critical flaw.
For example, one of the popular applications in the US is a mobile app that allows companies to deposit cheques by using the smartphone’s inbuilt camera. The app image audits and deposits the cheque virtually, without the customer having to visit a bank at all.
The proof is in the pudding. Van Dam says that in the US 65% of all branch business is customers depositing cheques. 20% of these are now using an app to deposit them. As a result, this part of bank branch business is in decline.
Another popular tool that is emerging is ‘push billing’ – where a message pops up on your phone to tell you that payment for a bill is due. You then click ‘pay’. No further interaction is required, as your bank details are loaded into the phone. This push notification also becomes useful for fraud detection – a message might pop up and say ‘there has been a suspicious transaction on your account – is this you?’
"It reverses the client relationship – previously it was up to you to go and take control and responsibility for your bank account, then you contacted the bank," said Van Dam.
"How many times have you been annoyed at having to tell the bank you’re overseas so they don’t lock your bank account down? Or you have to contact the bank after you’ve checked a statement and found some strange transactions? This puts it all back in their court, and provides better customer service."
Van Dam boasts that Fiserv’s security measures, the main excuse banks use to explain their slow move to mobile, are better anyway.
"Security is a key focus for us for obvious reasons – our entire business hinges on it. Our security and risk management is better than every bank in the world. App based mobile banking is much more secure than all other types of banking.
"With apps you can embed security certificates. Then you have an additional layer of protection. To access the bank account you then need the right phone, the right verified app, then the user name, password and security questions… You already have more control factors than other mediums," he said.
"Even if my phone was being keylogged and a thief had obtained my user id and password – they still aren’t on my phone, in my unique app. The transfer would be rejected. The software can then challenge them with further security questions."
HTML5 quite simply can’t match this kind of ‘push security’. HTML5 will still have a role to play in terms of content delivery for banks, but it is less secure and useful than specialised apps.
"I’m not saying HTML5 is dead – we use it quite heavily in our products across the board. I’m just saying that people who think HTML5 is the total panacea are quite misguided. In banking anyone who’s sticking to web or HTML5 exclusively is still thinking in that foundational phase."