How do banks and operators feel about mobile banking?

I had a surprising chat with mobile roaming provider at Mobile World Congress. Particularly with Abraham Punnoose, VP of Marketing & Business Development. You can see the first part of our interview here, but we went on to have a more in-depth conversation about different aspects of the mobile industry… in particular, the need for mobile banking.

Mobile banking?

There’s a definite different between mobile payments and mobile banking. Mobile payments are all about the secure transfer of money across mobile channels (don’t let my one sentence description there fool you – it’s a hideously complex and necessary service). But mobile banking is about offering full banking and financial services to people over their mobile phone. Early forms of this were focused on SMS notifications – banks would send you a text when certain things happened to your account (bills paid, large amounts taken out or put into an account, etc). But what a lot of people including myself have found is that we want complete control of our bank account from our mobiles.

This is something that is extremely convenient for customers both in the developed and developing world. Even more so in the developing world – the “unbanked” population of poor countries can be very high. Being able to do your banking over a mobile device, without needing to visit a bricks-and-mortar institution would open up new vistas of finance for people who currently live so far away from a bank that they’ve never had the chance to create a bank account.

So consumers are all for mobile banking. But how do the other institutions feel about it? This was the thrust of a lot of my talk with Abraham. Roamware has deals in place with over 400 operators world wide, and it is talks with banks and other financial institutions. I can’t think of a better company to give it’s opinion on this matter:

Mobile Operators:

“The operators are worried that they may not get a piece of this pie, to be blunt! They are worried about the “dumb pipe” scenario – they would simply be a channel through which your bank provides services. And operators want to avoid that. Over the internet, the carrier plays no part in the banking process. But on the mobile, the operator provides authentication. It’s a player. But operators can have a much bigger play in banking the unbanked. The number of people with mobiles is a little over 4 billion – the number of banked people is only 1 billion. You have 3 billion unbanked people with mobile phones! India, for example, has had banking for around 200, and there 95 million banked living there. Mobile technology is only 12 years old in India, and the mobile population is already approaching 500 million! This is a massive population that networks can make themselves an essential part of mobile banking for. It enables economic inclusion for a very large community at a very low price.

Banks

“The banks love the idea for a single reason. If people use their phone for banking, the banks save massively on both call centre costs and on bricks-and-mortar costs. Especially in 3rd world countries. For example, in Ireland, Permanent TSB liked mobile banking apps, but had an extra requirement. It asked “is there a way I can transfer cash to somebody without having a card? I wouldn’t trust my 10 year old kid with a debit card, but I’d love the ability to send 20 euro to him over mobile”. Well, this service is now live with Permanent TSB in Ireland. A customer can pick the amount of money they want to give to somebody else, and feed their mobile number into the app. That person then gets an SMS telling them they can withdraw that money from a TSB ATM. The recipient just has to enter a special PIN that’s in the SMS, and use it within 12 hours. No card is necessary! This one of the biggest challenges for banks – you have to enable people to “cash out” incredibly easily.