This document summarizes a presentation on mobile banking given to Michigan bankers. It discusses the evolution of customer banking channels and the rise of mobile banking. It covers trends like the growing popularity of smartphone apps over SMS/WAP access. The presentation addresses whether banks should adopt mobile banking and considerations like costs, security, and demographic analysis. It provides tips on preventive security measures and discusses relevant regulatory guidance. The closing thoughts encourage banks to offer mobile banking to remain competitive despite implementation costs and security unknowns.

1. Michigan BankersBankers Education Summit & Trade ShowMobile BankingRaj Patel, PartnerPlante & MoranApril 2011

2. Introduction & OverviewCustomer channel evolutionLandscape & trendsShould you do it?Security & regulationsClosing thoughts1

3. Customer Channel Evolution

4. Customer Channel Evolution2HighBranchTransaction MaturityMailLowCustomer InteractionHigh(Size of Bubble = Relative Importance to Customer)

5. Customer Channel Evolution2BranchTransaction MaturityMailPhoneCustomer Interaction(Size of Bubble = Relative Importance to Customer)

6. 2BranchATMTransaction MaturityMailPhoneCustomer Interaction(Size of Bubble = Relative Importance to Customer)Customer Channel Evolution

7. 2BranchInternetBankingTransaction MaturityATMMailPhoneCustomer Interaction(Size of Bubble = Relative Importance to Customer)Customer Channel Evolution

8. 2MobileBranchATMInternetTransaction MaturityMailPhoneCustomer Interaction(Size of Bubble = Relative Importance to Customer)Customer Channel Evolution

9. Mobile Banking Landscape & Trends

10. Terminology3Mobile Banking: 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.Mobile PaymentsUse mobile device for purchase or other payment-related transaction at point of sale (proximity) or via internet (remote)May be conducted via SMS, MMS, mobile Internet, downloadable application, contactless or barcode technologyProcess and settle over traditional banking networks (credit, debit, ACH), mobile carrier or other third party network

11. Forms of Mobile Banking4SMS (Short Message Service): Send & receive text messages & alerts 90% of US phonesLimited to 160 charactersUses existing carrier infrastructureLess security, no encryptionWAP (Wireless Application Protocol): Browser access via mobile phone to Internet content60% of US phonesNo downloads requiredFor online banking customersSmall screen, slower data Transmission, expensive data planDownloadable Smartphone Application: User friendly apps customized to smart phone type30% of US phonesBlackberry, iPhone, AndroidFaster navigation, easy setup , more secureInvolves custom application development8.1 million users35% increase18.6 million users58% increase10.8 million users120% increaseSource: comScore

12. Mobile Banking Landscape5All National banks, most regional and many community banks offer mobile banking servicesNational banks offer downloadable applications, SMS and WAP/browser-based mobile access (Triple Play)Community banks and credit unions may implement their core processors’ mobile packagesCommunity banks usually start with basic, information-based services Branch & ATM locators, transaction history, balance inquiriesPayment or transaction services are usually Phase 2Most banks do not charge for mobile banking

13. 2010 ICBA Survey6The ICBA & Plante Moran Technology Survey results for Mobile Banking from 895 Community Banks from June 2010:15% of Community Banks already have Mobile Banking available to customers

14. Another 47% of the respondents plan to have it available within the next 24 months!Features Offered by National Banks7Source: Javelin Strategy & Research, July 2010

15. Features used by Consumers8Source: Javelin Strategy & Research, July 2010

16. Mobile Remote Deposit9Use phone’s camera to capture front & back images of check & send to bank for depositExpected high adoption rate with consumers and small businesses that process low check volumesReduces Bank’s paper check process costsLess reliance on branchUSAA first to offer m-RDS(Deposit@Mobile for iPhone & Android)Chase Quick Deposit – July 2010BoA to launch with iPhone in 2011

17. Mobile P2P Payments10Mobile P2P allows bank customers to send funds to recipient accounts at another bank or to a PayPal account using a mobile phoneSenders register to activate mobile phone and send via email address or mobile phone number of recipientTransactions usually settle through ACHVery few banks offer mobile P2PA few are partnering with 3rdparties to offer online and mobile P2P (e.g. CashEdge, PayPal or Obopay)Replaces cash and checks for informal, low dollar payments between people you knowPopmoney by Cash Edge 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.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.

18. For Businesses11Banks originally focused on consumer mobile banking Corporate/small business markets offer new bank opportunitiesBusinesses want ability to monitor transactions, transfer funds, receive account alerts, with assurance that system is secure ExamplesTreasury/Cash ManagementWells Fargo CEO MobileWall Street Systems Treasury on the MoveFinancial tradinge-Trade Mobile ProSmall Business credit card acceptanceBusiness T&E40% of executives surveyed in 2010 would consider mobile banking for their businesses

19. Contact Less Payments12

20. What else ……13

21. Mobile Banking Should you do it?

22. Key Decisions14Why are you doing it?To stay competitiveCustomers are asking for itWhat services are you going to provide?SMSWAPSmart AppDemographic study% of customers that would use this channelCurrent statistics on mobile usageCost for implementing mobile bankingEvaluate current vendorsExisting core banking vendor

23. US Mobile Banking Users Forecast15Source: Federal Reserve Bank of Boston

24. Could you lose customers?16

25. Other Stats37% of all applications downloaded on iPhone, Blackberry and Android were banking/finance related applicationsIn 2010, three out of four users are happy with their mobile banking experience (FIS study)'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. 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 year17

26. Demographic Analysis18Reference GroupRelatives & FriendsSociabilityBank clerk / marketingUsage PatternSpeed of useEase of useContains all banking servicesIndependence from time and placeDemographicsGenderAgeMarital StatusEducationIncomeProfessionTechnology PerceptionMobile phone servicesE-mailInternetSecurity ConstraintsMobile banking is reliableElectronic channels are reliable

27. Demographic Analysis18Source: a research study from Finland

28. Demographic Analysis18Reference GroupRelatives & FriendsSociabilityBank clerk / marketingUsage PatternSpeed of useEase of useContains all banking servicesIndependence from time and placeDemographicsGenderAgeMarital StatusEducationIncomeProfessionTechnology PerceptionMobile phone servicesE-mailInternetSecurity ConstraintsMobile banking is reliableElectronic channels are reliable

29. Operating Cost / Transaction19Cost per Transaction

30. Vendors20ClairMailClickatellFirethorn MobileFISFronde AnywhereHarland Financial SolutionsJack Henry - goDoughM-Com recently purchased by FiservemFoundryMonitise AmericasMshiftSybase 365TyfoneYodlee

31. Mobile Banking Security & Regulations

32. Preventive Measures21BanksSecure (encrypt) communication channels: SMS, browser based, downloadable appsAssign security levels & user authentication based on payment type, transaction value, number of daily transactions, etc.Set transaction limitsKnow your vendor: ensure mobile apps have built-in safeguards to limit security breaches in case device lost or stolenApply due diligence for new customers by authenticating account number and user nameEducate consumers on security policies and tools

33. Preventive Measures22ConsumersSet strong passwords, install anti-virus software on smart phonesKnow the developer before downloading applicationsHow well have they tested the app? Is it certified?Do not store sensitive data on mobile phoneReceive mobile alerts on potentially fraudulent transactions 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: The banks hadn't put them there."

34. Regulatory Guidance23What guidelines are regulators currently offering?FFIEC E-Banking, Appendix E: Wireless Banking

35. Risk Implications: Transaction / Operations risk and Strategic Risk

36. Message encryption