Evolution of Mobile Banking

Published on June 2016 | Categories: Types, Presentations | Downloads: 51 | Comments: 0 | Views: 411
of 7
Download PDF   Embed   Report

"Banks are constantly on the search for solutions which will help reduce their cost of operations and improve customer experience. In this continuous journey, the banking industry has seen several technology trends being adopted and several innovations delivered. Innovations in banking delivery channels dates back to theintroduction of ATMs as a self-service delivery channel."

Comments

Content


Evolution of Mobile Banking
Universal Banking Solution System Integration Consulting Business Process Outsourcing
Banks are constantly on the search for solutions
which will help reduce their cost of operations
and improve customer experience. In this
continuous journey, the banking industry has
seen several technology trends being adopted
and several innovations delivered. Innovations
in banking delivery channels dates back to the
introduction of ATMs as a self-service delivery
channel. The ATMs heralded a new era of
banking as the concept of self-service was
introduced for the first time. ATMs also marked
the entry of anytime banking as customers could
now access money from their bank accounts
at a time of their convenience. The wave of self-
service continued and the advent of Internet
banking introduced the concept of anywhere
banking as customers could now access their
bank accounts from the comforts of their home
or office.
The new wave of technology-led delivery
channels had caught up with the traditional
branch banking and the customer experience
from these new delivery channels had set new
standards. However, banks noticed a trend -
customers mainly visiting ATMs for simple
balance inquiry of mini statement transactions.
This trend began to add to the cost pressures
on the ATM channel. Internet banking was facing
its own battle as security issues loomed large
and customers restricted usage of Internet
banking to their home and office computers.
The time was ripe for a delivery channel which
enabled banks to solve the issues plaguing the
existing technology channels. This came in the
form of mobile banking as banks began to tap
into the potential of offering banking to the mobile
savvy new generation customers.
Over the years, mobile banking has evolved from
a simple information delivery channel to a
comprehensive banking transaction channel and
the journey has been fueled by both growing
business needs and progress in mobile technology.
Business Perspective
The business drivers which contributed to the
evolution of mobile banking are:
• Customer experience. The new generation
customers were getting accustomed to having
access to information at their convenience.
This demand penetrated into access to
banking information as customers started
demanding round-the-clock access to their
bank accounts. Customers were also
getting accustomed to the concept of self-
service and demanded access to bank
accounts at locations of their convenience.
• Cost savings. Customers were in the habit
of walking into bank branches and ATMs for
simple inquiry transactions. This added to
the cost of operations of these channel.
Customers were also in the habit of using
cheques for small value funds transfers,
bill payments. All these added to the
operational cost and banks began looking for
alternative solutions.
These business drivers contributed to the growth
of mobile banking over various modes of operation.
Account
Inquiries
SMS
Alerts
Payment
Services
Funds
Transfer, Bill
Payment
Loan
request,
Service
request
SMS alerts. One of the key concerns banks
were facing was that of customers did several
inquiry transactions on ATMs and this was
adding to the burden on the ATM infrastructure.
This traffic was particularly heavy during salary
days. Banks adopted a solution of proactively
communicating account balances and important
transactional activity on accounts to customers
through a simple SMS. Customers stopped
queuing up in front of ATMs for inquiry transactions.
Account inquiries. The SMS technology proved
simple enough for banks to adopt this as a self-
service channel. This model of operation
involved customers sending an SMS to a
published number of the Bank with a key word
and identification information. The customer
Evolution of Mobile Banking
experience for SMS-based inquiries was not
very good and this led to the introduction of
real-time communication channels such as
WAP and USSD.
Funds transfer and bill payment. As customers
experience from mobile banking improved and
the penetration improved, banks began to realize
the potential of offering financial transactions
through the mobile device. The first set of
transactions to be offered were funds transfer
between the customers own accounts and
payments to pre-designated billers such as
utility companies. These facilities vastly reduced
the use of cheques, hence contributing to the
cost benefit for banks.
Payment services. Mobile phones had caught
on much faster than all previous technology
delivery channels and banks were being forced
to offer new facilities. The mobile phone was
unique in that it was a personal device which
had computation power, storage ability and
occupied a greater mind-share of the customer
than the traditional money wallet. This triggered
new thoughts among bankers who wanted to
leverage these capabilities to offer newer set of
transactions on the mobile phone. This came in
the form of enabling payment transactions
through the mobile phone. The mobile-based
payment comes in two basic forms:
- Proximity payments – these are payments
which are made using the mobile phone as a
transaction instrument. The transaction
authorization is communicated to specialized
devices at the merchant establishment using
a mode of communication known as Near
Field Communication (NFC). The proximity
payments through mobile phone heralds a
new era as mobile phones can now replace
many popular transaction instruments such as
credit cards, debit cards and transport cards.
Non-proximity payments – these are payments
in which the mobile phone authorizes
the transaction using a standard mobile
communication mode such as SMS/ GPRS.
The merchant establishment and customer
are not in physical proximity. The non-proximity
transaction enabled through mobile phone
is a secure out-of-band authorization for
e-Commerce transactions. The non-proximity
payment services also provides for peer-to-
peer payments where customers can transfer
money to peers within bank and outside bank.
Loan requests and service requests. As mobile
phones evolve into smart phones and the
usability is improving, banks are finding it easier
to offer more complex services on the mobile
phone. The latest trends include offering loans
through requests placed from the mobile phone
where pre-registered customers can provide
details about the loan and avail instant approval
of loans.
Today, mobile banking spawns various types of
users and offers a bouquet of facilities tailor
made for each customer segment. A brief snap-
shot is as depicted in the diagram below:
Corporate
Customers
• Transaction
Alerts
• Account
Inquiries
• Funds Transfers
• Bill Payment
• Mobile Top-up
• Service Requests
• Proximity
Payments
Retail
Customers
• Transaction
Alerts
• Account
Inquiries
• Transaction
Approvals
• Servce
Requests
• Risk Alerts
• Pattern
Breach Alerts
• Transaction
Approvals
• Inquiries
Technology Perspective
The progress in mobile banking features was
matched by the technology progress on mobile
communication platform and mobile devices
and this fueled a different kind of evolution in
mobile banking.
The key technology drivers that contributed to the
evolution of mobile banking are:
• Security. The mobile banking delivery channel
relied on a communication layer provided by
the mobile phone. The early forms of mobile
banking used SMS as the communication
mode which offered minimum protection
against hackers and message interceptors. In
time, mobile banking progressed to WAP and
browser-based banking, which improved the
security on sophisticated handsets to some
-
Evolution of Mobile Banking
Bank Staff
extent, but excluded the basic devices
altogether. The arrival of downloadable
mobile applications circumvented many of
the earlier issues – since apps could be used
on most handsets, they made mobile banking
more inclusive.
• Customer experience. The mobile device
technology progressed at a rapid pace
and consumer expectations on usability
of began to progress. Mobile banking
progressed to offer enhanced customer
experience and adopt the latest technology
trends in communication to offer real time
exchange of data.
customer experience as information access was
now real time and secure.
USSD. WAP banking, while quite popular, was
restricted to a specific set of devices and the
use of Unstructured Supplementary Service
Data (USSD) came into practice which permitted
a real-time interactive access to bank accounts
on basic handsets.
Mobile web. The mobile communication
technology progressed and mobile devices
began supporting full-fledged web pages. This
vastly enhanced customer experience on smart
phones and sophisticated handsets which
provided an almost desktop like experience.
Mobile banking began progressing in this
direction by providing an almost Internet banking
kind of experience on the mobile phone.
Application on mobile phone. The mobile
devices became advanced and it was possible
to have applications installed on the mobile
phone to provide a rich user interface. The new
generation mobile banking applications offer
several comprehensive features such as:
- Pre-stored customer relationship information
to improve response times and customer
experience
Enhanced communication layer security
through use of encryption algorithms
Richer user interface and mobile device specific
user interface enhancing customer experience
Richer user experience leads to more
comprehensive features being offered on
mobile banking
These technology driven progress of mobile
banking can be depicted as in the following
diagram:
USSD
Mode
WAP
Banking
SMS
Banking
Mobile
Web
Banking
Application
on Mobile
Phone
-
SMS banking. The early generations of mobile
banking were powered by SMS communication.
Using SMS banking, banks could alert
customers about activities on their bank
accounts and customers could request for
information by sending an SMS to a published
number. This mode of banking was quite popular
but had the following limitations:
- SMS communication was not real time and
customer experience started deteriorating
Security issues around SMS transmission was
another bugbear
-
-
Current Trends
These developments marked the evolution of
the mobile phone into a transaction instrument.
According to a research, there are over 4 billion
mobile phones in the world, covering over 70%
of the population. Another research predicts
that by 2014, half of the mobile subscribers
will use their mobile phone for physical and
digital purchases. It has been predicted that by
2012, money transfer will be the top consumer
mobile application.
-
WAP banking. In time mobile banking progressed
to WAP banking which allowed customers to
access their bank accounts using a real time
data communication mode. This improved the
Evolution of Mobile Banking
Some of the other key trends which are driving
the present day mobile banking and mobile
payments are listed below:
- Barclays took mobile financial transactions
up a notch, pioneering a third-party payment
service as well as tying up with the Oyster
transport ticketing card to enable their
customers charge payments made at Oyster
terminals using an NFC–enabled mobile
phone, directly to their Barclays debit or
credit card. The success of this tie-up
prompted the U.K transport authority to
think about how, in future, mobile contactless
payments could be made the preferred
mode of transaction authorization, replacing
RFID technology
Wonga, a U.K-based online credit start-up
launched an instant short-term loan facility
allowing customers to apply for small-ticket
loans of up to £1000 over the mobile
phone, without going through an elaborate
application and authorization process. They
claim that the money is paid out within
15 minutes
Last year, wireless telecom provider, O2
entered the mobile banking space with the
launch of prepaid cards
Mobile device manufacturer Nokia is planning
to offer mobile banking services in a new
device manufacturer led model
mobile banking platform which will provide
interoperability among various devices and
various communication technologies without
compromising customer experience.
Security. The security issues of mobile banking
are multi-fold as it concerns protection of data
on the device, authentication of the device,
authentication of the customer and security of
transmitted information. As mobile banking
progresses into mobile payment, the concept of
security gains more importance. The time is ripe
for emergence a mobile banking model which
can be made available on all mobile devices
ranging from the simplest device to the most
sophisticated device without compromising
technology. The concept could be based on a
thin client model which expects minimum
capabilities from the mobile device.
Application distribution. Today several mobile
banking solutions are available as applications
installed on mobile device. The distribution
of these applications to customers is a
cumbersome activity and this is one of the
reasons for the lower uptake of mobile banking
in many regions. New models of application
distribution such as over the air distribution of
mobile banking applications, automated upgrade
of mobile banking applications will emerge which
will take away the application distribution hassles.
Personalization. Mobile banking is very popular
among Generation Y users and the demand for
personalized applications is also quite high. The
personalization demands could be in the form of
language, facilities, color schemes, messages
and many more. The need for personalization
may be addressed by providing a mobile
banking platform on which various mobile
banking applications/ features can be developed
and customers can choose the features to be
installed on their mobile phone. Such a model
which is similar to the Apple iPhone model will
provide for a global sourcing of developers to
cater to every individual customer.
References
Mobile World Celebrates Four Billion Connections -
http://www.gsmworld.com/newsroom/press-
releases/2009/2521.htm
-
-
-
What can be Expected in Future?
Mobile banking has an evolutionary path which
has been triggered by business needs and
subsequent growth has been fueled by a race
between business and technology as each
battled to keep pace with the other. However, to
predict the future it is essential one looks at the
present day issues and concerns. The key ones
which would determine future trends are:
Device disparity. The mobile space is filled
with a wide variety of devices each offering a
different set of capabilities such as SMS, WAP
Browser, Mobile web browser, J2ME capabilities,
USSD capability, among others. Interoperability
among these various devices and a common
technology is a clear need. The time is ripe for a
Evolution of Mobile Banking
UK plans to ditch paper transport tickets
for mobile phones and bank cards -
http://www.finextra.com/news/fullstory.aspx?news
itemid=20393
Juniper Research: Nearly half of mobile phone
users worldwide will pay with their devices by
2014 - http://www.intomobile.com/2010/04/23/
juniper-research-nearly-half-of-mobile-phone-
users-worldwide-will-pay-with-their-devices-
by-2014/
Gartner Identifies the Top 10 Consumer Mobile
Applications for 2012 - http://www.gartner.com/it/
page.jsp?id=1230413
Other References on http://www.finextra.com
Author
Kiran K S R
Consultant, Finacle
Infosys Technologies Limited
Evolution of Mobile Banking

Join us on Twitter, LinkedIn and Finacle Whiteboard at www.infosys.com/finacle/networking.asp

Sponsor Documents

Or use your account on DocShare.tips

Hide

Forgot your password?

Or register your new account on DocShare.tips

Hide

Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in

Close