Mobile Banking – A Transformation of Traditional Banking


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How comfortable are we with Mobile Banking? Not very much, it seems. Even today, most of us who use mobile banking do so merely to check account information, transfer funds or pay bills. How many of us are aware of mobile technologies like Near Field Communication (NFC) and Remote Deposit Capture (RDC), which have evolved in response to customers’ need for a mechanism to make quick in-store/ transit purchases and check deposits without visiting a branch or an Internet banking site?

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Mobile Banking – A Transformation of Traditional Banking

  1. 1. Mobile Banking – A Transformationof Traditional BankingUniversal Banking Solution System Integration Consulting Business Process Outsourcing
  2. 2. How comfortable are we with Mobile Banking? NFC is already well established in Japan andNot very much, it seems. Even today, most of South Korea and is on its way to becomingus who use mobile banking do so merely to mainstream in the U.S. and Western Europe.check account information, transfer funds or pay Although developing markets have favorablebills. How many of us are aware of mobile conditions for mobile payments, their servicetechnologies like Near Field Communication providers are yet to adapt their strategies to the(NFC) and Remote Deposit Capture (RDC), local market.which have evolved in response to customers’need for a mechanism to make quick in-store/ While on the one hand banks and FIs aretransit purchases and check deposits without upbeat about these mobile technologies, on thevisiting a branch or an Internet banking site? other, consumers are wary of using them on account of security concerns.As per a recent report from Javelin Strategy &Research, consumer mobile banking has So far, banks and FIs have managed the risksjumped from 19% to 30% in 2011 after two associated with commercial RDC services byyears of flat growth, thanks to an increase in offering them to select commercial clients whoboth, the number of mobile banking offerings have been thoroughly vetted, or by putting aand Smartphone ownership. Approximately ceiling on the value of allowable remote37% of consumers who downloaded applications deposits. Three trends, namely, the impendingfor their Smartphones, downloaded banking maturity of the commercial RDC market,applications, making them one of the most competitive pressure, and a growing preferencepopular applications. By 2012, Asia Pacific and for self service channels have led banks andJapan will have the most mobile payment FIs to look at extending the RDC service tousers followed by Eastern Europe, Middle East, consumers. However, this may result in aAfrica and Latin America. The U.S. and Western dilution of security procedures, examinationsEurope will lag these regions. and standards, and consequently increase the risk of fraud.The advent of technologies like RDC and NFChas expanded the portfolio of mobile payments / One of the common problems associated withbanking services. Although check usage is RDC technology is the poor image quality ofdiminishing globally, it is still significant enough deposit instruments, which may hinder anfor both banks and consumers to want to adopt institution from detecting alterations, forgeries,RDC technology, which enables checks to be missing endorsements and counterfeit items.“deposited” by a Smartphone application that Some of the other potential risks leading totransmits their photographic images to the fraudulent activity include identity theft, failurebank. Already 6 of the top 10 Retail Banks and of customers to retain or destroy paper copiesmore than 80 Financial Institutions (FIs) in the of a check and consequently depositing itU.S. are providing this value-added service to multiple times at one or multiple institutions.their customers. RDC can also be misused for money laundering, especially in the case of checks that areNFC is a fast growing wireless technology, deposited from foreign locations.which allows communication between twodevices over short distances through short Though NFC technology is gradually replacingwave, tap or touch. There is no need to whip plastic cards with chips imbedded inside mobileout the wallet at a store to make a payment; phones, it is still riddled with data securityrather, the customer has to only wave/tap the issues. NFC allows fraudsters an easy way toNFC-enabled Smartphone at a POS terminal. trace and hack personal information. The longerMost major credit card companies are rolling out the operating distance of NFC instruments, theNFC technology to enable contactless payments greater the risk of data theft and unwantedusing a mobile device. At Mobile Asia Congress, transfer of personal and financial information.nearly 45 of the world’s largest mobile providers Also, long exposure to NFC radiation may lead tocommitted their support to NFC technology. medical problems including cancer. Mobile Banking – A Transformation of Traditional Banking
  3. 3. As mobile banking matures, mobile payments the positive side, banks and FIs have alreadywill become a necessity for millions of people made efforts to tide over security issues, whicharound the world. Using mobile payment services, has imparted momentum to mobile banking.these people can access both traditional andmodern financial services required to meet their Referencesdaily banking needs. Hence, it is imperative that 1. application developers, wireless service summit-mobile-wallet-idUSTRE74Jproviders and banks’ IT departments together 49Q20110520address all their security concerns. 2. d g u i . w o r d p r e s s . c o m / 2 0 11 / 0 6 / 0 6 / t h e -By exercising due diligence and restricting the undeniable-disadvantages-of-nfc/deposit value, banks and FIs can mitigate 3. risks. Investment in superior quality newsitemid=23187devices and a secure system of storage andback-up may also minimize the risk of fraud. 4. b0edb649422587f87d5e7abbb80c/15f4146bThe introduction of security measures, such as -0fe5-44ad-80f1-f1e43bd6aefc.pdffacial/fingerprint recognition or a secured firewallmay help in maintaining the security of data 5. NFC-enabled mobile phones. Like in the 32659-massive-adoption-sim-based-nfc/case of infrared, the NFC operating distance 6. be kept short and confined to a straight 162/mobile-remote-deposit-capture-line of sight to reduce the possibility of malicious 1024491-1.htmlattack, data corruption and “eavesdropping”during wireless data exchange. 7. between-rfid-and-vs-nfc/The financial industry’s desire to reduce branch 8. w w w. c o m p u t e r w o r l d . c o m / s / a r t i c l e /maintenance/ service costs as well as footfalls 9133633/Gartner_Users_of_mobile_paymenhas hastened the transformation of traditional ts_to_double_by_2012branch banking into a self-service online avatar.But before traditional banking as we know it, 9. w w w. e h o w. c o m / l i s t _ 6 8 0 9 2 7 1 _ d i sdisappears altogether, mobile application advantages-remote-deposit-capture.htmldevelopers, wireless service providers andbanks’ IT departments must together addressthe critical challenges of scalability, reliability, Authorperformance, handset operability and application Pooja Agarwaldistribution. Improved security protocols and a Consultant – Finaclesafer financial transaction environment will play Infosys Limiteda vital role in the success of mobile banking. On Mobile Banking – A Transformation of Traditional Banking