Monday, December 03, 2007

Mobile Banking: Signal or Noise

Recently I wrote a case study titled >> Mobile Banking: Signal or Noise

It got rejected since It was not a new content. Anyways I don't want
to feel like this work goes to waste. So here it is for everyone who
would like to read the same.


Imagine a situation in which you are rushing off to the airport for an
important business visit to New York and you suddenly realize that
today is the last date for paying your credit card bill which you have
not paid till now. There are no internet kiosks around and there is no
way by which you can make your check payment. Would it not be
wonderful if you have the facility to make the payment via your mobile
phone and your payment is done in a jiffy with no hassles of late
payment fees, credit card charges etc? Well that is exactly what we
are going to discuss about in this document.

Internet banking has found world wide acceptance both by the financial
institutions and the customers respectively for the various benefits
that is being offered to the customer and the efficiency and the
simplicity by which various complex transactions can be done by
financial institutions. There was a time in which there were more
skeptics to online banking. The acceptance of online banking amongst
everyone has put all of the skepticism to rest.

Many financial institutions have gone gung-ho and is planning to adopt
mobile banking in a big fashion. Wells Fargo, Citi Bank, ICICI Bank
etc. are some good examples for the same. But is that the case with
mobile banking? Is it as efficient and useful as it is hyped to be? Is
it signal or mere noise?

2. Mobile Banking

But what exactly is mobile banking? Mobile Banking or M-Banking is a
method by which banking transactions like balance check, fund
transfer, bill payment etc can be done via mobile phones with the
actual presence of the account holder in the bank.

This can be done via SMS (or) Mobile Internet (or) by downloading
special programs into your mobile that will allow a customer to
interact with his financial institution for undertaking his

Some of the major functions that are provided by various financial
institutions using M-Banking are

1 Account Balance Enquiry
2 Alerts on Account Activity
3 Transactional History
4 Cheque status Enquiry
5 Stop Cheque Request
6 Cheque Book Request
7 Make Payment for your bills
8 View your presented payments
9 Last Payment details for credit cards
10 Payment Due Date for credit cards
11 Access to Credit card statements
12 Access to Loan statements
13 Access to Equity/MF statements for your Demat accounts
14 Domestic and International Fund Transfers
15 Mobile Recharging
16 Real time stock quotes

The above list only mentions some of the important functions which
plan to take banking for customers to the next level.

3. Challenges

The above services provided by Mobile Banking beckons the next
question. If Mobile Banking is as rosy as the picture provided above,
what are the factors that are stopping its growth?

This is still a nascent technology though financial biggies like Wells
Fargo, ICICI Bank are betting big on it. There is a huge gamut of
challenges that needs to be addressed for this technology to reach its
Tipping Point.

1) First and foremost, the medium of interaction between customers and
financial institutions to do mobile banking transactions viz. The
Mobile Phone and the technology that it depends on.

Namely GSM and CDMA. Each of these technologies are different to one
another and any Mobile Banking solution should cater to both these
technologies since customers don't decide on their phone depending on
whether they will be doing Mobile banking transactions on it or not.

2) On top of this complexity lies the barrage of different mobile
phone models – some that is very basic in nature that only allows text
messages and don't support application downloads

3) Another point of consideration is the different solution that
exists in the market place that has been conceived by various
technical platforms like Java, custom made solutions made of other

Any solutions should encompass all these problems before deciding on a
solution since all the financial institutions will want to delight its
customers by "Going Mobile" without disturbing the customer tastes.

4) Another point of worry for the customer is the Security aspect. How
secure is the mobile banking method of financial transaction? Is there
any uniform method by which the security of each mobile banking vendor
is verified? (E.g.Verisign for secure websites)? How do the financial
institutions convey to its customers that their mobile transactions
are secure?

5) Complexity of transactions: SMS is the only means to do mobile
banking for a customer who is having a basic mobile model. All the
transactions like balance enquiry, fund transfers etc. are done by
this mode using various codes. How does the customer remember these
various codes that need to be used for these transactions?

6) Can 24*7 services be provided by mobile banking?

7) What is the time line for a mobile banking service? Will it take
less time than Online Internet banking? If not, why should a customer
go for it incase better service is provided by Internet banking?

8) Regular upgrades might be needed for customers who are going to
download mobile banking applications to their mobiles? How can this be
done without intruding into the customer's space? Will he accept these
upgrades? Will the customer feel secure since something personal to
him is being accessed? What will happen if the customer decides not to

4. Opportunities

In spite of the various challenges, one of the main factors that need
to be considered is the phenomenal growth this technology will bring
to the financial services industry. The mobile market is one of the
fastest growing markets in the world.

According to the GSM Association and Ovum, the number of mobile
subscribers exceeded 2 billion in September 2005, and now exceeds 2.5
billion (of which more than 2 billion are GSM). This is especially
true for Asian markets like India, China, Indonesia and Philippines
where the mobile connectivity is more than the landline connectivity.
This in turn means that the reach of the financial institutions to its
prospective customers is immense.

According to a study by financial consultancy Celent, 35% of online
banking households will be using mobile banking by 2010, up from less
than 1% today. Upwards of 70% of bank center call volume is projected
to come from mobile phones. Mobile banking will eventually allow users
to make payments at the physical point of sale. <Mobile contact less
payments> will make up 10% of the contact less market by 2010. Just
imagine the situation where a gamut of services is provided to you on
the run without you ever having to visit the bank or the bank website.
The picture is pretty rosy.

The Reserve Bank of India (RBI) has recently made out a case for using
mobile phones to settle transactions. With barely 34% of its
population engaged in formal banking, India has the second-highest
number of financially-excluded households in the world, about 135
million but the real rate of exclusion, according to Boston
Consultancy Group (BCG), is measured not just by ownership, but also
by frequency of use of an account, which it terms as the `Next
Billion'. The `Next Billion' are discerning consumers, the report
says. They value speed, flexibility, simplicity and smaller product
sizes. Because of their experience with the informal financial sector,
most are accustomed to fast-processing and minimal paper work which
can be easily possible by the wide usage of mobile phones.

5. Conclusion

Majority of the challenges expressed are technical hurdles which does
haunt any emerging opportunity. Business Opportunities always leads to
technical innovation that will circumvent the various hurdles that is
encountered from time to time. Mobile Banking is definitely a "Signal"
that has a glorious future. What is required is to overcome our
skepticism and look forward for opportunities.

6. References

CTO Insight:,1217,a=207666,00.asp

Economic Times:

ICICI Bank Mobile Banking:

Wells Fargo:



Hope you liked it.

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