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Smart-Phone Users Drive M-Banking Demand

Denise Culver
1/31/2011

The exponential growth of mobile and smart-phone users has created a new kind of consumer that demands everyday products and services over any device, anytime, and anywhere. No longer are consumers – or many businesses – content with accessing information via the Internet on a computer; instead, they want features and functionality that address their needs and provide them with additional benefits only available for mobile customers.

Enter mobile banking (M-banking). Already, 17 percent of American adults use M-banking, a number that is expected to expand exponentially. Additionally, M-banking customers present entirely new challenges for financial institutions. Instead of simply recreating the applications and services available for online banking customers, M-banking customers demand services and applications that specifically relate to mobile phones and smart phones.

The market for such services is covered more completely in the latest Heavy Reading Mobile Networks Insider report, "Smartphones Power a Mobile Banking Surge in the US." Companies analyzed in this report include: ClairMail Inc.; hyperWALLET Systems Inc.; mFoundry Inc. ; Mitek Systems Inc. ; Monitise Americas, a branch of Monitise plc ; and Obopay Inc.

Two of the largest potential markets for North American M-banking are transformational (unbanked) consumers and small business owners. Statistics indicate there are roughly 40 million unbanked or under-banked consumers in the US alone. Additionally, less than 30 percent of US small businesses utilize any form of electronic transaction capability.

But under-banked consumers and small businesses have one important feature in common: They use mobile phones. Under-banked consumers are demanding the ability to send and receive money quickly and easily with mobile phones, something that is commonplace in emerging countries. Small-business owners want the ability to deposit checks, receive alerts, and pay bills without being tied to a computer. Also driving demand for M-banking are merchants that want to be paid as quickly as possible and consumers that want to pay them via mobile phones.

Financial institutions are aware of the need for M-banking. In a recent nationwide survey, 89 percent of community bankers said they are considering enhancing their existing platforms to enable M-banking, while more than 50 percent indicated they are designing mobile applications for smart phones.

Other studies show that SMS money transfers and mobile payments will be two of the top 10 mobile applications in 2012. For that to happen, financial institutions, M-banking application vendors, and mobile network operators (MNOs) have issues that must be addressed. One of the most significant is revenue sharing: who gets paid – and how much – for the slice of the service they provide.

But as M-banking continues to grow and become the de facto way people in developing countries send and receive money and make payments, the North American market will follow suit – providing a new, lucrative channel for M-banking providers and addressing the demand from mobile and smart-phone users.

— Denise Culver, Research Analyst, Heavy Reading Mobile Networks Insider






The report, Smartphones Power a Mobile Banking Surge in the US, is available as part of an annual single-user subscription (six issues) to Mobile Networks Insider, priced at $1,595. Individual reports are available for $900. To subscribe, please visit: www.heavyreading.com/mobile-networks.

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