Remember the days where a bank was an inconvenient place you went, often at inconvenient times for banking services? Those days are long gone. Fierce competition among banks to acquire and retain customers continues to drive banks to invest in creative ways to provide consumers with improved conveniences and access to bank services.

Before the dawn of the Internet, banks largely tweaked business models, offered free services, giveaways and extended hours. The inconvenient truth for banks became clear – to survive they had to put the customer first. The notion of “banker’s hours” died. The notion of customer hours was born. Bank branch locations, including bank presence in retail stores grew exponentially, while bank-owned and third-party ATM locations exploded.

Despite all the brick and mortar investments banks made in delivery methods for better interaction with customers, banking call centers were still jammed. People were calling to inquire about deposited checks, account balances and other non-critical queries. Banks now faced escalating costs to maintain existing customers with little prospect to actually increase the total value of each customer. Banks were compelled to find a solution.

The Internet arrived with a fury. And consumers began to become more self-service oriented. These two events did not go unnoticed by banks. Banks seized this opportunity to create a new self-service delivery channel for consumers. The solution brought the potential for banks to reduce their customer maintenance costs, while creating a new set of conveniences for their customers. Internet banking was born. Banks were now open, 24 hours a day, 7 days/week.

Customers could now quickly and easily log in to view their balances, manage their checking account, transfer funds, and pay their bills anytime. The use of online banking for such simple transactions has eased the load (and expense) of managing customer care. Adoption of online banking has been a tremendous success, with 75 million people in the U.S. now using the service, according to TowerGroup, a research and advisory services firm focused on the financial services industry.

However, just as in the Serengeti where the lion must be ever ready to compete for food and territory, so too must banks seek more and more convenient ways to serve their customers. The new frontier in banking may lie in extending the online user experience to a device held in the hands of 243 million users in the United States of America – the mobile phone.

“Consumers have an insatiable demand for convenient access to their banking and related services,” said Bob Egan, chief analyst at TowerGroup. “Internet banking and stock trading successfully opened those institutions 24x7. This capability added to mobile phones extends banking services to consumers “right here, right now”. For banks this is becoming a market mandate, no less important then the dawn of Internet banking was in the late 1990s.”

A number of banks have taken the step to extend customer access to banking services from their handsets. Users can check account balances, transfer funds and pay bills from their mobile phones. The service is free and the end-user’s only charges will come from the normal use of their wireless data plan.

There are many parallels between the banking and the wireless telecommunications industry. Proliferation has created a saturated market where competition for customers is ferocious. Wireless carriers continue to introduce ingenious mobile handsets, but they are equally aggressive in making something that is cool, also useful. The wireless providers have responded to the demand for content and capability beyond voice and now millions of people daily push away from their computers and check their email, text message, download music and surf the Internet from their mobile phones.

“We believe there is a cooperative framework developing between mobile operators, device manufacturers, financial institutions and applications providers,” said Charul Vyas, an analyst with TowerGroup’s Emerging Technologies Service. “If this positive momentum continues, more than 22 million people in the U.S. could be actively using mobile banking by 2012.”

The race is on to provide wireless customers with the means to not only be entertained through music, games and text messaging, but to improve quality of life through applications that provide mapping and directions, access to news, weather and traffic. For the wireless providers, extending banking functionality to the handset acknowledges the growing demand from customers to be able to use their cell phones in many of the same ways that they use their computers at home.

In addition to providing a user-friendly delivery channel for people to interact with their bank and money, mobile banking has the potential to relieve cost pressures associated with other bank-based transactions. Managing software upgrades is simple and largely transparent to the consumer. Updates can be sent over the air to users’ handsets. This improves customer experience by not requiring them to manually download software updates.

Even when a bank application may not have been preloaded on a consumer’s handset, getting started is quite simple. Customers enroll online via their bank’s Internet banking site; provide their mobile phone number, wireless carrier and mobile phone model. Based on this information, the integrated intelligence built into the mobile banking solution will automatically determine the required application version for the consumer. A link to this application will be sent via text message to the customer to initiate an application download. Once loaded, customers need only enter a passcode for entry to their account information.

Security and consumer privacy are paramount. To ensure that account information is protected, no personal information or account data is ever stored on the phone. The phone merely acts as the interactive window to view and make transactions.

Customers are likely to use their mobile phones for account management knowing that their data is secure and backed by identity theft and fraud services. During the holidays, mobile banking could become a tool that helps a shopper review her checking account to determine whether she has funds and should use her debit card or opt for the credit card. All this can be done within 30 seconds. Or she may elect to initiate a funds transfer from a savings account to a checking account to fund a debit card purchase.

The real excitement to this brave new mobile frontier is not in the rather mundane ability to check one’s account balance, but rather to combine common banking features with the purchasing potential of wireless contactless payments where the mobile phone itself can be used to pay for items. In this instance, the phone becomes the mechanism to not only pay for purchases (whether credit card or debit) at the physical point of sale, but to verify the transaction through the mobile banking features being made available. Such capabilities are widely used throughout European and Asian countries, but in America, adoption of these more complex capabilities within mobile phones has been slower.

As banks continue to extend their portfolio of services across a widening array of consumer offerings, Service Oriented Architectures (SOAs) are becoming critical. SOAs provide an extraordinary opportunity for financial institutions to leverage and re-purpose generic back office services into relevant and contextual services that are welcomed by consumers. The importance of the intersection between a consumer’s preference for convenient, relevant and contextual services designed specifically for them and mobility, cannot be overstated. By definition, mobile phone applications are a personal communications service - the emphasis being placed on the word personal. Without it, consumers will be frustrated and see little or no value.

The mobile banking race is on and you can rest assured that the top-tier wireless service providers are angling to provide this capability to millions of wireless subscribers. It is too soon to tell if mobile banking capabilities will create more customer stickiness, but it is likely to become a capability that is merely expected and assumed available. "

Laura Mildon Xideris is a Market Development Manager at Sprint with a focus on the finance industry. Phone: 832-754-4430;
email: laura.m.mildon@sprint.com;
web: www.sprint.com.