Payments Watch

I get the sense that mobile banking and mobile payments are hot topics lately, with a couple articles I have read seemingly offering very divergent opinions.

Let’s start with the announcement of Celent’s latest report on mobile banking released last week titled US Mobile Banking: Beyond the Buzz. The announcement is pretty bullish on the future use of mobile to access banking services:

The relevance of mobile banking and the likelihood of its success have been in question. But mobile banking is here to stay and will grow significantly faster than online banking, according to a new report from Celent, US Mobile Banking: Beyond the Buzz. By 2010, 35% of online banking households will be using mobile banking, up from less than 1% today.

It took me a second to differentiate between mobile banking and mobile payments. It is well known that mobile payments are considered cutting edge, and in North America at least, will require effort to surpass technological and consumer behaviour related barriers. The Celent report seems to be primarily focused on mobile banking, suggesting that banking services provided via telephone and internet today (e.g. balance inquiries, bill payments, etc.) will migrate to access via mobile devices. I can buy this, given that the cell phone is often replacing the land line as the primary voice channel. I know of many people who have eliminated their land lines and are now cell phone only. A call to the bank for such people would seemingly be considered “mobile banking” according to the Celent announcement. Likewise, I know of many people forgoing the laptop in favour of the Blackberry. If they access on-line banking from such a device, I suppose one could consider that mobile banking as well.

This doesn’t seem like earth shattering news to me, and on the surface speaks more to the evolution of the devices and technology we use to access voice and data networks than to an evolution in banking services. From the banking services perspective, using mobile devices for access to existing call centre and internet banking services is a natural progression from banking at any time to banking at any time, anywhere. So that is valuable, but again the consequence of the devices, not something special the banks had to do. The key question seems to be, given a surge in the use of mobile devices to access banking services, are there profitable new offerings that are only now possible given the mobile channel? The other report announcement I read, Jupiter Research’s Mobile Banking: Assessing Servicing Opportunities via Cell Phones, seems to address this question:

Banks should not offer mobile services that aim to mirror or duplicate the online experience…Online banking brought consumers the convenience of banking anytime. Mobile banking can add an anywhere element, but banks should identify where such ubiquity is crucial.

The Celent announcement also weighs in on this question:

New functionalities will make mobile banking distinct from online banking and attract users. For instance, mobile banking will eventually allow users to make payments at the physical point of sale.

Interestingly, this is exactly the thing I am not so convinced of yet - the value proposition of using a cell phone to make point of sale payments. What exactly are the incentives for the consumer, the merchant or the bank?