After years of threatening to take off, mobile banking has finally arrived. But mobile operators and financial institutions have to learn to work together before it can truly deliver, writes Guy Clapperton
Mobile banking has finally arrived and it’s establishing itself very nicely. There are already banks which offer anyone with a smartphone the ability to handle transactions wherever they are, and so far it all looks very good.
Pankaj Kulkarni, associate vice president and group manager, financial services and insurance, Europe, at Infosys, puts it very well. “The ability to use our phones to get real-time, instant and secure access to all of our bank accounts is a very appealing prospect and one that gives us more financial control over our lives,” he says.
“Being able to instantly view and manage spending, while also allowing us to customise proactive and reactive SMS [text] alerts to tell us when we’re about to go over our limits means we’ll no longer need to worry about having to get to the bank or access accounts online to check our finances.”
Clearly, this enables a smartphone to become part of keeping someone out of debt and it’s something that can be done through commonly available apps. There are those who think this is only the start, though, and that a lot more still needs to happen. Martin Wilson, chief executive of Luup, for example, suggests the existing technologies have to get a bit more exciting before the thing really takes off.
The real interest comes when you can transact business, so can I make a payment, can I buy something, can I send my son at university some money?
“At the moment it’s kind of nice to be able to check your balance without going to an ATM or standing in a queue,” he says. “But really now that we’ve got internet banking, ATMs and a wide spread of branches, that sort of service can only be at the ‘mildly interesting’ level. The real interest comes when you can transact business, so can I make a payment, can I buy something, can I send my son at university some money?”
The US is often ahead of the UK in technology terms so it’s worth looking at what’s happening Stateside. First Annapolis is a management consulting company focusing on mobile payments, operating both in the US and Europe. Paul Grill, partner at the organisation, says the position is different in many of the markets but in a lot of cases the technology is already there. “You also have to form commercial relationships between mobile network operators, financial institutions and the like, so the business agreements have to be in place,” he adds.
So some of it is not about technology any more. It is frankly crazy that an individual can’t load a banking app on to their phone and transfer money to someone else’s account but they can set up a PayPal account to draw from their account and send money around that way. “There are different financial institutions and money transfer schemes that need to interact with each other,” says Mr Grill.
“There are different kinds of risks that are borne in these different transactions and they’re going to need a mechanism to identify the validity of the individual performing the transaction, then you have to agree an appropriate level of risk sharing if a transaction goes wrong.” Oh, and consumers expect this to happen at zero cost to themselves.
This is why the picture on your smartphone is so confused at the moment. The banks need to sit down and agree who’s responsible for what and the mobile networks and transaction agencies need to work out who can take responsibility for what.
The other thing that has to happen is that banks need to work together. Mobile banking aside, it’s possible to send a payment through Faster Payments from one bank to another and see it arrive in seconds; sending it back can take three or four days because one party isn’t playing the fast payments game just yet.
Negotiations to make banking and financial services interoperable are not exclusive to the mobile arena. There are undoubtedly some banks with slick apps like NatWest, although Mr Wilson has a point that the features are time and queue-saving, but usually restricted to one bank.
Longer term, though, it’s going to be making those apps work between banks which will make the difference and a social-media-savvy generation’s expectations are making that not so much a nice-to-have as an essential.