Mobile Banking:
Boldly Go “WNOHGB”
Regional & Community
Bankers Conference
October 16, 2008
Mike Stewart, Assistant Vice President
Business Development & Customer Services
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Discussion Topics
• Some Definitions
• The Mobile Landscape
• Why Offer Mobile Banking Services?
• Risks and Regulations
• What the Future Holds
• Your Mobile Banking Strategy
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Mobile Banking Definitions
Mobile Banking:
Use of mobile device to connect to a financial institution to conduct
customer self-service (CCS).
Includes viewing account balances, transferring funds between
accounts, paying bills or receiving account alerts.
Mobile Payments:
Use of a mobile device to make a purchase or other payment-related
transaction.
Payments initiated in physical or virtual worlds, and can be conducted
via SMS, MMS, mobile Internet, downloadable application, and NFC
chips.
Source: NACHA . Mobile Channel Terminology .August 2008
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Mobile Banking Definitions
Mobile Commerce
Extends e-commerce to mobile devices to buy and sell goods and
services.
Includes use of handheld devices such as cellular phones or personal
digital assistants (PDAs).
Mobile Wallet
A secure location on a mobile device to store information and make
payments from multiple credit, debit, membership or loyalty cards, and
any other current forms of card-type transactions.
Wallet can store multiple addresses for delivery purposes.
Information is typically protected by a PIN, code or token.
Source: NACHA . Mobile Channel Terminology .August 2008
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U.S. Mobile Banking Landscape
All large banks, most regionals, and many mid-tier FIs now offer
mobile banking services
There is little real “hard” usage data
– Most FIs limit announcements to percent of online users
Offering browser-based services that mimic home-banking functions
is most common, except among largest banks
Functions offered are chiefly information-based
– e.g., branch & ATM locators, transaction history, balance inquiries
Payments are “phase 2” services
– Remittances appear to be an area of new opportunity
Finding a ROI model is difficult
– FIs offering mobile services appear to be absorbing the expense for strategic
reasons
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Building Blocks of Mobile Banking &
Payment Services
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WHY OFFER MOBILE
BANKING SERVICES?
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U.S. Mobile Phone Population Shows Steady Growth
Mobile Phone Subscribers as a Percentage of Total U.S. Population
95% 96%
93%
80%
75%
70%
65%
61%
2004 2005 2006 2007 2008 2009 2010 2011
Source: Celent, Sept. 2008
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Value Propositions for FIs
• Attract a growing number of younger consumers, as well as
remittance and underbanked market segments
• Use the mobile phone (etc.) as an authentication device
• Keep up with the Joneses – maintain competitive position relative to
larger FIs
• “Create a new user experience” – offering a new value proposition to
customers
• Ability to move to fee-generating services
¾ Payments
¾ Real-time information
“If all we do is replicate Internet banking on this mobile device, it will
just be yet another cost to the financial institution.” Tripp Rackley, CEO, Firethorn
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An Illustration . . .
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Financial Institutions Business Model
9 Growth in mobile
payments sector 9Customer retention and new
9 Relationships with segments
MNO through an Opportunities 9Reduce operational costs.
integrated approach. Objectives 9Deliver new products and
for growth services
9Customer awareness and
convenience
View mobile banking as a
new channel to create
customer value
Concerns
•Managing fraud and payment
risk
•Handling compliance and
regulation
9 New product development
9 Rising industry and services
competition Industry 9 Online banking reach
9 Online banking is Revenue limited
Competition 9 Mobile payments will
already consolidated,
differentiation is key bring revenue in the long-
9 Customer retention term
9 Branding
Source: Boston Federal Reserve
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Roll-out by Major Financial Institutions by Year
2006 2007 2008
Wells Fargo Bancorp South PSCU Financial Services
350,000-550,000 users
Wachovia Citibank Washington Mutual
175,000-225,000 users 20,000 users
Bank of America U.S. Bank
1 million+ users
JP Morgan Chase HSBC (USA)
15,000-90,000 users
SunTrust Capital One
America First CU
Source: RBI, Crone Consulting estimates, June 2008
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Mobile Banking Features Offered
To Consumers By U.S. FIs
Check Balances (Savings, DDA) 100%
View Recent (Savings, DDA)(Tran) 100%
View Any Other Account 91% Basic
Functions
Move Funds Between Accounts 91%
Check Balances (Credit Card) 87%
View Recent Credit Card (Tran) 83%
Pay Bills 70% Intermediate
Functions
ATM/Branch Locator 57%
Transfer funds to others 48%
Opportunities for
SMS/Text Alerts 43% Improvement
View Current Rates 39%
Transfer funds between FI 17%
Open Account 17%
0% 20% 40% 60% 80% 100% January 2008, n=23
Source: Javelin Strategy & Research. Report: “2008 Mobile Banking Benchmark Study”
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Mobile Banking Profile – Bank of America Example
Snapshot
Access Platform: WAP/Browser
Launch Date: March 2008
Handset: All mobile devices internet enabled
Carriers: Not carrier dependent
Vendor: In-house Implementation
Functions: View account balance, review
transactions, pay bills, transfer funds
Mobile Banking “Success”
BofA WAP BofA WAP
Access Browser Access Browser ¾ “> 4 Mn M.B. customer sessions (May 2008)
(iPhone) (All mobile devices) ¾ 224,000 activations reaching 840,000 active
customers.
¾Customer Base:
•Two- thirds are under 35 years old
•Four out of five under 45
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Corporates Look for Other Services
Today
Alerts
Balance and account data
Payment transaction history
Future – Static Features
Viewing check images
Balance reporting
Future -- Interactive Features
Customer self-service
Positive pay tools
Payment initiation with approval functions
Investments
Source: Celent, NACHA teleseminar , Mobile Banking Way Stations, Sept. 2008
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Risks & Regulations
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Risks and Barriers to Mobile Banking
• Carrier/vendor technologies incompatible, lack standards
• Business models not yet standard
• Complexity using device
• Entering passwords, commands difficult
• Applications can be tricky on handset
• Customer ownership unresolved
• Bank or carrier?
• Responsibility for customer service, fraud prevention, billing
• Revenue sharing
• Regulation emerging – liability issues unresolved
• Security
• Authentication and Fraud, especially cross-channel
• Lost/stolen phones
• Secure access via wireless network
• Customer demand – is it there? Will it be?
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Will Regulatory Issues
Impede Growth in Mobile Banking?
• Numerous regulatory agencies touch payments and/or wireless
transactions
• e.g., Federal Reserve, FTC, FCC, SEC, NACHA, FDIC, OTC, OCC, NCUA
• No legal framework specific to mobile banking today
• Financial services’ and telecoms’ regulations differ significantly
• Telecoms have limited liability
• Cost of regulatory compliance may be too high
• e.g., KYC, BSA/AML, state MSB licenses
• Mismatch between potential regulatory requirements and mobile
payment standards
• Participants might take “wait and see” approach
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Possible Oversight / Regulatory Requirements
Mobile banking services should be ubiquitous – fair access for all
consumer segments
Interoperability among networks and handsets
Protect against unauthorized transfer of funds at any point in the
process
Establish grievance procedures
Ensure customer data privacy
Identify recourse for technical failures
Customer Notification - Provide adequate and timely disclosure of
risks, responsibilities and liabilities of mobile transactions to
customers
Ensure security requirements met for authentication
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Outlook
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Outlook
• More FIs will offer mobile banking -- with continuing evolution and
enhancement of services offered
• Businesses will adopt mobile banking services more readily
• Payments (especially for bill pay) and NFC will be levers for value-
added, priced services
• International remittances will foster mobile payment transfer offerings
… at least by selected (larger) FIs
• Cell phone will act as “authentication device”
• Vendors will continue to consolidate
• Alliances of top FIs and carriers, vendors, or other third parties will
proliferate
• U.S. market will follow other markets in the near future
• The market will be driven by standards and technology – carriers
remain a wildcard
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Developing Your
Mobile Banking Strategy
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Four Steps to Determine your Financial Institution’s
Mobile Banking Strategy
Step 1: Step 2: Step 3: Step 4:
Identify your Define your Choose an Select a vendor
customer base mobile strategy access solution
• Demographics • Budgeting • SMS • Different
• Implementation • WAP packages
• Infrastructure
• Desired mobile • Support
• Downloadable/ • Implementation
banking • Mobile Banking Embedded costs
functions • In- House vs Application • Vendors target
vendor your specific type
• Preferred • Long-term vs of FI
mobile access short- term • Vendors aligned
platforms investment with your mobile
banking strategy
Source: Javelin Strategy and Research. Mobile Banking Vendor Analysis,
August 2008, Boston Federal Reserve Internal August 2008.
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