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highlights

 

Remaking the Branch

There are few topics that so engage the minds of retail bankers these days as the future of the branch. The continual migration of customer transactions from the branch to electronic channels can no longer be ignored, particularly in an era when profitability is under pressure and every expense must be scrutinized.



The Mobile Transformation

The mobile banking landscape has changed greatly in recent years as customers graduated from simply checking their account balances on the cell phone to actually making payments via the device. Increasingly, mobile banking is transmuting into mobile payments.



Why Mobile is Critical to Banking
Mobile payments is coming fast, spurred by the development of downloadable apps such as Angry Birds – little bits of money that soon add up to big money. by CHRIS SKINNER
Feb 28, 2011  |  2 Comments

There was recently a great gathering of the good and distinguished in all things mobile at the Mobile World Congress in Barcelona. It’s a big deal as all of the mobile operators and manufacturers announce their major news items for the year, such as Microsoft’s partnership with Nokia. This is why Steve Ballmer (CEO of Microsoft) was down there along with Dick Costolo, CEO of Twitter; Eric Schmidt, executive chairman of Google; and over 100 other speakers. In fact, to show what a big deal it is, you only need to consider that there are 50,000 attendees from over 200 countries with 1,300 exhibitors.

That’s big. So what was hot? The fact that mobile networks cover approximately 90% of the world’s population and that soon, we will have:

  • HD and 3D phones;
  • Phones you can dictate to and that translate calls, texts, mobile sites and emails in real-time;
  • Motion phones that recognize where your eyes or head moves and tracks your environment as required;
  • Perceptive phones that recognize what you’re doing and use push and pull technologies to fit with your needs and desires (!);
  • Analysis phones that monitor your heart rate, blood flow, blood sugar levels and more and alert as necessary; and
  • Haptic phones that use touch technologies such that a kiss from your partner on their phone screen can be relayed as data to your phone, so you actually feel a kiss if you put your lips onto your phone screen (must be Valentine’s Day!).

Mobile is taking over everything and that is why it is so important. In fact, it is now more important for banks than the Internet which, according to some banks, is more important than call centers, branches and ATMs. Some might say that mobile is just the Internet, but that’s incorrect. What sets mobile apart are the apps. For example, one app – Angry Birds – has taken over $70 million in revenues, most of which is for sales at under $1 per use.

It’s just downloading apps. And apps typically start at a price of just 90 cents to download. That’s the relevance to banking: money, little bits of money that, combined, make millions and billions of dollars. There are millions of sub-$1 downloads taking place worldwide every second now.

So that old idea of paying 50 cents to read a page of a newspaper was the fallacy of a decade ago when we talked about micropayments. That’s Rupert Murdoch’s dream, but it’s a lame one if you ask me. Paying 50 cents for a game that entertains for weeks ... now that’s real value.

So mobile is different from the Internet and is all embracing, ubiquitous, 24/7/365. It covers mobile payments, contactless payments, mobile banking, mobile financial planning and more. Although often breathed in the same breath, these are different areas which are converging as we speak as the line between contactless and mobile is now very grey.

For example, Orange has just committed to rollout contactless payments and NFC capabilities across its entire European network next year, while Google and Apple are committed to incorporate NFC into Android and iPhones. When Google and Apple made the announcements, everyone got excited by the fact that next generation Androids and iPhones are designed as payment systems.

This is incorrect. They do have NFC contactless payments functionality built-in, but it’s probably not why Google and Apple have incorporated NFC. Reading between the lines, I’m informed that they did this more to leverage simple communications between devices wirelessly without the need to use complex Bluetooth pairing. In other words, touch your phone to the car, TV, computer or payments terminal and forget having to go through a “set up” process, as you do with Bluetooth.

But, by incorporating an NFC contactless capability into every Android and iPhone, the smartphone suddenly becomes a powerful payments platform as it can now be used for contactless payments. More importantly, the phone can not only make contactless payments but potentially take them too. In other words, every Android and iPhone becomes a potential point-of-sale terminal.

By turning every mobile application into a point-of-sale, we are definitely in the era of simple mobile payments. And that is a revolution. It’s a slow revolution, however, as the fundamental issue is still not addressed: where can you use an NFC chip? Barclaycard has been pushing Visa Paywave for a couple of years now, and yet I hardly ever get a chance to use it. Sure, we may now have a few London taxis wirelessly enabled, but it’s hardly dense terminal acceptance or usability.

And here’s the rub: we need more terminals. Maybe they could learn something from Zapa in Ireland, where AIB Merchant Services has worked closely with them to rollout terminals that can use the tags. Half of all AIB’s merchant terminals are now Zapa ready: that’s 40,000 of their 90,000 terminals, with over 1.5 million contactless transactions in the year to September 2010. Compare that with Barclaycard, which has rolled out just 42,500 merchant terminals to date and is processing just over a million transactions by November 2010, and you can see the challenging dimensions they face.

Hmmm ... but there’s no doubt that this will grow... except that by the time it does, technology will have moved on and direct mobile-to-mobile, or M2M payments, will be the order of the day. Ah well, we always roll out three-year old technologies to meet three-year ahead needs. Even when we think about this, it is also a transient revolution, as mobile is not the future.

The future goes beyond mobile as the focus of all of this is actually the chip. The chip technology will converge over time so that EMV, RFID and SIM chips all become one. This means that consumers and banks no longer need to think about separating mobiles from cards from payments, but all of them become one and the same. The chip is just loaded with functionality, including banking and payments.

When you can take a chip and stick it anywhere to wirelessly communicate anything, including a payment, then the real next generation of payments will have arrived. And maybe, just maybe, by then it will mean just paying with a wave of the hand.

Mr. Skinner is chairman of the Financial Services Club, CEO of Balatro Ltd. and comments on the financial markets through his blog the Finanser. He can be reached at cskinner@balatroltd.com.

 

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comments

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ighodaro
3/22/2011 1:01 PM

Lovely! Good picture of the emerging payments space!

susan griffin
3/15/2011 3:56 PM

Excellent read.