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MBA Best Mobile Banking Presentation

Mobile Banking - Should you do it or not?

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MBA Best Mobile Banking Presentation

  1. 1. Michigan Bankers<br />Bankers Education Summit & Trade Show<br />Mobile BankingRaj Patel, PartnerPlante & Moran<br />April 2011<br />
  2. 2. Introduction & Overview<br />Customer channel evolution<br />Landscape & trends<br />Should you do it?<br />Security & regulations<br />Closing thoughts<br />1<br />
  3. 3. Customer Channel Evolution<br />
  4. 4. Customer Channel Evolution<br />2<br />High<br />Branch<br />Transaction Maturity<br />Mail<br />Low<br />Customer Interaction<br />High<br />(Size of Bubble = Relative Importance to Customer)<br />
  5. 5. Customer Channel Evolution<br />2<br />Branch<br />Transaction Maturity<br />Mail<br />Phone<br />Customer Interaction<br />(Size of Bubble = Relative Importance to Customer)<br />
  6. 6. 2<br />Branch<br />ATM<br />Transaction Maturity<br />Mail<br />Phone<br />Customer Interaction<br />(Size of Bubble = Relative Importance to Customer)<br />Customer Channel Evolution<br />
  7. 7. 2<br />Branch<br />Internet<br />Banking<br />Transaction Maturity<br />ATM<br />Mail<br />Phone<br />Customer Interaction<br />(Size of Bubble = Relative Importance to Customer)<br />Customer Channel Evolution<br />
  8. 8. 2<br />Mobile<br />Branch<br />ATM<br />Internet<br />Transaction Maturity<br />Mail<br />Phone<br />Customer Interaction<br />(Size of Bubble = Relative Importance to Customer)<br />Customer Channel Evolution<br />
  9. 9. Mobile Banking <br />Landscape & Trends<br />
  10. 10. Terminology<br />3<br />Mobile Banking: <br />Use mobile device to connect to a financial institution to view account balances and transactions, transfer funds between accounts, pay bills, receive account alerts, deposit checks, etc.<br />Mobile Payments<br />Use mobile device for purchase or other payment-related transaction at point of sale (proximity) or via internet (remote)<br />May be conducted via SMS, MMS, mobile Internet, downloadable application, contactless or barcode technology<br />Process and settle over traditional banking networks (credit, debit, ACH), mobile carrier or other third party network<br />
  11. 11. Forms of Mobile Banking<br />4<br />SMS (Short Message Service): Send & receive text messages & alerts <br />90% of US phones<br />Limited to 160 characters<br />Uses existing carrier infrastructure<br />Less security, no encryption<br />WAP (Wireless Application Protocol): Browser access via mobile phone to Internet content<br />60% of US phones<br />No downloads required<br />For online banking customers<br />Small screen, slower data Transmission, expensive data plan<br />Downloadable Smartphone Application: User friendly apps customized to smart phone type<br />30% of US phones<br />Blackberry, iPhone, Android<br />Faster navigation, easy setup , more secure<br />Involves custom application development<br />8.1 million users<br />35% increase<br />18.6 million users<br />58% increase<br />10.8 million users<br />120% increase<br />Source: comScore<br />
  12. 12. Mobile Banking Landscape<br />5<br />All National banks, most regional and many community banks offer mobile banking services<br />National banks offer downloadable applications, SMS and WAP/browser-based mobile access (Triple Play)<br />Community banks and credit unions may implement their core processors’ mobile packages<br />Community banks usually start with basic, information-based services Branch & ATM locators, transaction history, balance inquiries<br />Payment or transaction services are usually Phase 2<br />Most banks do not charge for mobile banking <br />
  13. 13. 2010 ICBA Survey<br />6<br />The ICBA & Plante Moran Technology Survey results for Mobile Banking from 895 Community Banks from June 2010:<br /><ul><li>15% of Community Banks already have Mobile Banking available to customers
  14. 14. Another 47% of the respondents plan to have it available within the next 24 months!</li></li></ul><li>Features Offered by National Banks<br />7<br />Source: Javelin Strategy & Research, July 2010<br />
  15. 15. Features used by Consumers<br />8<br />Source: Javelin Strategy & Research, July 2010<br />
  16. 16. Mobile Remote Deposit<br />9<br />Use phone’s camera to capture front & back images of check & send to bank for deposit<br />Expected high adoption rate with consumers and small businesses that process low check volumes<br />Reduces Bank’s paper check process costs<br />Less reliance on branch<br />USAA first to offer m-RDS<br />(Deposit@Mobile for iPhone & Android)<br />Chase Quick Deposit – July 2010<br />BoA to launch with iPhone in 2011<br />
  17. 17. Mobile P2P Payments<br />10<br />Mobile P2P allows bank customers to send funds to recipient accounts at another bank or to a PayPal account using a mobile phone<br />Senders register to activate mobile phone and send via email address or mobile phone number of recipient<br />Transactions usually settle through ACH<br />Very few banks offer mobile P2P<br />A few are partnering with 3rdparties to offer online and mobile P2P (e.g. CashEdge, PayPal or Obopay)<br />Replaces cash and checks for informal, low dollar payments between people you know<br />Popmoney by Cash Edge <br />Popmoney allows bank customers to "Pay Other People" (POP) anywhere, at any time, using only a recipient's email address, cell phone number or bank account information.<br />Offered directly from within the bank's current online or mobile banking applications, Popmoney provides simple, convenient and secure email and mobile payments directly from a customer's bank account. <br />
  18. 18. For Businesses<br />11<br />Banks originally focused on consumer mobile banking <br />Corporate/small business markets offer new bank opportunities<br />Businesses want ability to monitor transactions, transfer funds, receive account alerts, with assurance that system is secure <br />Examples<br />Treasury/Cash Management<br />Wells Fargo CEO Mobile<br />Wall Street Systems Treasury on the Move<br />Financial trading<br />e-Trade Mobile Pro<br />Small Business credit card acceptance<br />Business T&E<br />40% of executives surveyed in 2010 would consider mobile banking for their businesses<br />
  19. 19. Contact Less Payments<br />12<br />
  20. 20. What else ……<br />13<br />
  21. 21. Mobile Banking <br />Should you do it?<br />
  22. 22. Key Decisions<br />14<br />Why are you doing it?<br />To stay competitive<br />Customers are asking for it<br />What services are you going to provide?<br />SMS<br />WAP<br />Smart App<br />Demographic study<br />% of customers that would use this channel<br />Current statistics on mobile usage<br />Cost for implementing mobile banking<br />Evaluate current vendors<br />Existing core banking vendor<br />
  23. 23. US Mobile Banking Users Forecast<br />15<br />Source: Federal Reserve Bank of Boston<br />
  24. 24. Could you lose customers?<br />16<br />
  25. 25. Other Stats<br />37% of all applications downloaded on iPhone, Blackberry and Android were banking/finance related applications<br />In 2010, three out of four users are happy with their mobile banking experience (FIS study)<br />'We are seeing mobile deployments by banks accelerating in 2011, with our clients growing mobile users by 35% monthly,' said Douglas Brown, senior vice president of FIS. <br />In 4thQtr 2010, 30 million Americans accessed their bank, credit card or brokerage account from a mobile device. Up 54% from same quarter in prior year<br />17<br />
  26. 26. Demographic Analysis<br />18<br />Reference Group<br />Relatives & Friends<br />Sociability<br />Bank clerk / marketing<br />Usage Pattern<br />Speed of use<br />Ease of use<br />Contains all banking services<br />Independence from time and place<br />Demographics<br />Gender<br />Age<br />Marital Status<br />Education<br />Income<br />Profession<br />Technology Perception<br />Mobile phone services<br />E-mail<br />Internet<br />Security Constraints<br />Mobile banking is reliable<br />Electronic channels are reliable<br />
  27. 27. Demographic Analysis<br />18<br />Source: a research study from Finland<br />
  28. 28. Demographic Analysis<br />18<br />Reference Group<br />Relatives & Friends<br />Sociability<br />Bank clerk / marketing<br />Usage Pattern<br />Speed of use<br />Ease of use<br />Contains all banking services<br />Independence from time and place<br />Demographics<br />Gender<br />Age<br />Marital Status<br />Education<br />Income<br />Profession<br />Technology Perception<br />Mobile phone services<br />E-mail<br />Internet<br />Security Constraints<br />Mobile banking is reliable<br />Electronic channels are reliable<br />
  29. 29. Operating Cost / Transaction<br />19<br />Cost per Transaction<br />
  30. 30. Vendors<br />20<br />ClairMail<br />Clickatell<br />Firethorn Mobile<br />FIS<br />Fronde Anywhere<br />Harland Financial Solutions<br />Jack Henry - goDough<br />M-Com <br />recently purchased by Fiserve<br />mFoundry<br />Monitise Americas<br />Mshift<br />Sybase 365<br />Tyfone<br />Yodlee<br />
  31. 31. Mobile Banking <br />Security & Regulations<br />
  32. 32. Preventive Measures<br />21<br />Banks<br />Secure (encrypt) communication channels: SMS, browser based, downloadable apps<br />Assign security levels & user authentication based on payment type, transaction value, number of daily transactions, etc.<br />Set transaction limits<br />Know your vendor: ensure mobile apps have built-in safeguards to limit security breaches in case device lost or stolen<br />Apply due diligence for new customers by authenticating account number and user name<br />Educate consumers on security policies and tools<br />
  33. 33. Preventive Measures<br />22<br />Consumers<br />Set strong passwords, install anti-virus software on smart phones<br />Know the developer before downloading applications<br />How well have they tested the app? <br />Is it certified?<br />Do not store sensitive data on mobile phone<br />Receive mobile alerts on potentially fraudulent transactions <br />About a year ago, owners of Android smart phones began downloading mobile banking apps from Google's Android Market. The apps cost about $1.50 each and connected users with about 40 major banks, including Bank of America and Wells Fargo. There was only one problem: <br />The banks hadn't put them there."<br />
  34. 34. Regulatory Guidance<br />23<br />What guidelines are regulators currently offering?<br /><ul><li>FFIEC E-Banking, Appendix E: Wireless Banking
  35. 35. Risk Implications: Transaction / Operations risk and Strategic Risk
  36. 36. Message encryption
  37. 37. Password Security
  38. 38. Wireless Vendors
  39. 39. Product & Service Availability
  40. 40. Disclosure & Message Limitations
  41. 41. Other related guidance includes:
  42. 42. FFIEC - Remote Deposit Capture Risk Management Guidelines
  43. 43. FIL 84-2004 Guidance on Instant Messaging
  44. 44. FIL 8-2002 Wireless Network Risk Management
  45. 45. ATMIA - Best Practices for Mobile Phone Banking Security Guidance</li></li></ul><li>Closing Thoughts<br />24<br />The demand for Mobile Banking is growing at a rapid pace<br />Two biggest deterrents to enter Mobile Banking<br />Cost to implement<br />Security unknowns<br />Given the current economy, now might be the best time to invest<br />Mobile banking will keep you competitive, increase deposits, decrease cost to service and increase margins<br />If implemented properly, Mobile Banking can be more secure than Internet Banking<br />Take advantage of your branches to provide customer training – the more comfortable they are, the more they will use it.<br />Do expect to see guidance (and regulatory auditors) soon<br />Make sure you optimize your web pages for the mobile web!!!! <br />
  46. 46. Thank You!<br />Raj Patel, Partner<br />Plante & Moran<br />Tel: 248-223-3428<br />E-mail: raj.patel@plantemoran.com<br />

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Mobile Banking - Should you do it or not?

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