Say hello to mobile banking: conducting financial transactions by cellular telephone is a huge growth market. Within the next few years, it may surpass in volume any other single delivery channel, including branch, ATM, on-line or regular telephone. Yet only 10 percent of financial institutions currently offer a mobile banking service.

• Author: Stewart, Deb
• Position: New Technology - Cover story

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What if you could predict the next key to growing your market share? Well, look around you. Tweens, teens, Gen Y (and their parents) all texting hundreds of messages a month on their mobile phones. More households dropping landlines in favor of mobile-only phone access. An emerging ethnic population that relies primarily on mobile phone communications.

The customers who will drive your future growth have one thing in common--complete devotion to their mobile devices. In fact, research shows that a cell phone bill is the first bill that a consumer will pay--before their mortgage, rent or any other debt.

"Many ... banks find themselves with an aging customer population," says Lisa Stanton, CEO of Monitise Americas, a mobile banking and payments service with headquarters in Providence, R.I. "They need to take a close look at offering a mobile banking product--Gen Y and other important groups of consumers will have mobile as a requirement--it becomes a primary acquisition tool for the future. Look at desktop Internet penetration by segment--it varies widely. Mobility sees 85 to 100 percent penetration across segments."

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"Mobile will be the fastest adoption product in banking history," notes Virginia Garcia, senior research director, Cross Industry for the TowerGroup, a research and advisory service for the financial services industry located in Needham, Mass. She says it will dramatically outpace debit and credit card adoption, and even rapidly accepted nonbanking products such as PayPal and Facebook.

"No technology adoption has moved as fast as mobile, and banks have a huge leverage opportunity," says Garcia.

Of 17,000 total U.S. financial services institutions, less than 10 percent currently offer a mobile banking product. In top-20 institutions, 85 percent are offering mobile. The technology has rapidly moved down-market in the past 12 months as core banking vendors have started providing services and are rolling out technology in a big way.

"Mobile is compelling as the 'fifth channel,' the fastest growing channel today," says Stanton. It may well surpass the other four channels (branch, ATM, online and phone) in the next few years. Today's Gen M (teens and yound adults) may go directly to mobile and bypass online, a phenomenon we have already seen in Japan. Banks need to meet consumers' expectations for immediacy and the ability to respond. They want to know what is happening and do something about it real time."

Mobile personal financial management

There are three types of mobile banking: text message, that is, short message service (SMS) banking; smart phone application (or browse>based mobile); and near-field enabled (NFC) applications," explains Garcia. "For the most part, banks will have to take on all three modalities over time."

Text

Text message banking allows simple transactions, allows consumers to send questions and may provide alerts. Looking at the text function for...