The Evolution from Mobile Banking to Mobile Payments

by guest on November 29, 2007

in Jacqueline Chilton, Writings

by Jacqueline Chilton

mFoundry recently announced a new round of financing with a line-up of strategic investors including Motorola Ventures, PayPal, NCR, and a “leading wireless operator” – along with their existing investors. In their announcement, the company described its business as “a comprehensive and equitable solution for financial institutions, wireless operators and other mobile banking and payment providers”. This begs a question: Will balance across the players bring the most compelling solution to market, or will one of the constituents beat the others?

mFoundry is playing the role of mediator and neutral third-party platform provider as it enables mobile financial services across a variety of mobile phone operators and handset devices. The banks are the key beneficiaries as they gain an opportunity to develop their mobile services for less without building multiple versions to support each wireless operator and each mobile handset specification.

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A newly minted alliance with ClairMail that focuses on 2-way customer interaction for banks, takes advantage of the mFoundry platform. This solution extends ClairMail Systems’ mobile banking and payments platform and applications with mFoundry’s Spotlight client-based application- delivering mobile messaging, mobile Web and application solutions in a single integration.

The wireless operators seem intent on participating in the mobile banking and mobile payments space. A challenge for the operators is that consumers choose their banking relationship very separately from choosing their wireless provider. It is very unlikely consumers will switch banks because their mobile phone has an exclusive banking arrangement. Operators will most likely need to keep their ecosystems open so customers can get access to the mobile services they want. At the same time, operators expect to be compensated for their investments in infrastructure and that may be where the notion of balance comes in.

It’s still in the early days for bankers to try to figure out the return on investment in mobile banking. The top 10 US banks appear to be moving as they seek to compete for “inches” of incremental gain versus their rivals. Smaller banks, on the other hand, are still on the sidelines and benefit from the single installation approach offered by ClairMail and mFoundry together.

For banks, mobile services naturally target a younger demographic and some expect that banks will benefit from higher retention rates from those young customers – much like online banking and bill payment have already demonstrated. Institutions seeking to pursue those consumers want to know if mobile banking can demonstrate similar stickiness with that younger demographic.

While the race for mobile banking is on, and decisions are being made by the major US banks now, the opportunity for real profit more likely comes from mobile payments.

The banks have focused on bill payment as an extension of the services that drives stickiness in online banking. With text alerts to remind the consumer to pay the bill, a mobile interaction to pay the bill is also likely.

Given the profitability of supporting payments and the costs inherent in traditional payment mechanisms, new entrants have targeted the handset-to-handset, peer-to-peer money transfer space. Although the initial services began appearing almost two years ago with the launch of TextPayMe, Obopay, and PayPal Mobile, we’re still in the early days of mobile payments.

These new services require mobile-savvy participants willing to register their accepted handset on both sides of the transaction–and comfortable enough with the enablers to turn over their personal financial data to third parties that are not banks. These are big, incremental leaps for consumers used to texting messages to friends and passively using built-in mobile applications.

Payments is the next mobile horizon. As the college students of today become the business people of tomorrow, these solutions will have their day.


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