Is Asia Ready for M-Banking?

With the complex processes involved in today’s financial and banking environment, one could scarcely imagine what the banking system would be nowadays without the power of the Internet.

Taking this a bit farther, in a world drastically changed by the mobile phone, one would reasonably expect that something as important as financial and banking services could be transacted through their mobile devices.

Until recently, when people hear the term mobile banking, what came to mind would be something along the lines of viewing their balances or their bank accounts through SMS messages. But advancements in mobile phone technologies have evolved these devices from being mere gadgets for calling or texting into pocket-sized computers, making them ideal tools for mobile personal banking, or even mobile enterprise banking.

But is the world, or more specifically Asia, ready for mobile banking, or M-banking? A recent survey form KPMG global indicated that more and more people are getting more comfortable about using mobile devices and technologies for banking and other financial transactions, prompting several financial institutions to forge ahead and adapt this technology.

Several financial institutions in Asia however, are still wary about fully implementing M-banking and offering this particular service to their clientele due to a wide variety of issues and considerations. One of these reasons is to first assess whether there is a real and proven need for it, in light of several conflicting views about the benefits of M-banking.

The following provides a brief look into M-banking in Asia and how it is affecting financial institutions and the Asian populace in general.

What is m-banking?

M-banking, or mobile banking, is basically financial or banking transactions (eg. transferring money from one account to another) through a mobile phone or device’s web browser. An application is provided which users can access through their webenabled mobile phones or smart phones and serves as the financial institution’s web frontend portal. Users can access their bank accounts through this application and conduct whatever financial transactions they require. Banks can also send account balances or financial statements to the users through this application.

Another variation of M-banking is where users access their bank’s online portal by typing in the proper address on the phone’s web browser. The user is then redirected to a secured gateway where users can gain access to their accounts. According to financial institutions already providing M-banking services, customer details will not be stored on the users’ phones for security reasons.

In some variations, the phone is registered with the bank and will require no additional password or account details upon gaining access. They can also perform transactions via SMS using specific keycodes. In case of lost or stolen mobile phones, the M-banking services will immediately be switched off upon user deactivation of their SIM cards.

Requirements for m-banking

There are certain issues and prerequisites that should be taken into consideration before a particular financial institution can offer M-banking to their customers. Still, banks and other financial institutions should implement innovative solutions that will provide their clients with the best user experience, and addressing these issues and challenges would be the first logical step in this regard.

The following highlights some of these considerations and financial institutions are now seriously looking into these items before finally making the switch to M-banking for their clients.

* Banks should make it clear to their clients that anyone availing of M-banking services and/or installing apps on their smartphones would still have to shoulder standard messaging and usage fees with their mobile carrier.

* Client phones should be enabled or support the M-banking apps as well as SMS banking services that the banks would offer. More advanced M-banking services require phones to be Java-enabled and preferably equipped with an active General Packet Radio Service, or GPRS, capability. GPRS is a high-speed packet-switched digital data service channel that uses GSM technologies, allowing banks and users to have a dedicated and circuit-switched channel for a more secured connectivity.

* Financial institutions should understand that their core business is not Information Technology or telecommunications. Given this fact, they may not be able to integrate M-banking to their services on their own accord. They should work with experienced experts from the mobile phone sector to help facilitate installation and implementation of M-banking.

* Maintaining high levels of security is a main point of focus. It is a proven fact that mobile phone users are faced with the possibility of losing their phones or having their units stolen during day-to-day use. In some cases, users tend to change phones and other mobile devices as fast as new models come out in the market and would often neglect removing or deleting vital financial information on their mobile devices. Financial institutions should address these potential concerns and establish plans that would ensure high levels of security for their clients.

* Customers going into various bilateral commercial agreements with multiple mobile network operators are a cause for concern that financial institutions should face. They should define and provide solutions that minimize this need and provide a better user experience for their clients.

* Financial institutions should also look into different outsourcing models that they could tap for their M-banking services. A service provider that specializes in telecommunications could provide them with the much needed expertise to handle technical support for their M-banking services.

* M-banking is a new concept for many Asian economies. This fact should be clear to financial institutions particularly when putting into considerations existing standard, regulations and other governance models.

M-banking trends in Asia

Currently, only about 5% of all mobile phone users are subscribed to mobile banking and a mere 0.5% of subscribers are actively using these services. This low usage arose from concerns about privacy and security in conducting financial and banking transactions through their mobile phones. But according to the KPMG Consumers and Convergence survey, an increasing number of consumers are rapidly integrating M-banking into their day-to-day lives, and 2011 may be the year when people choose to transform their banking habits and go mobile.

In the KPMG survey, the number of consumers using mobile phones for online retail has grown to 28% worldwide and 41% in the Asia Pacific - more than 3x the number from previous surveys. But what is notable from this survey is that 46% of respondents claimed to have used their mobile devices for M-banking, 44% of whom came from the ASPAC region and who indicated that they have used their phones for M-banking at least once a month. This is significantly higher than the number of respondents from the United States and Europe.

Accenture has also commissioned studies conducted on 20 financial institutions across the globe to assess the impact of M-banking, and the results were certainly laudable. The study highlighted one Middle Eastern bank that generated a 300% return of investment after allowing their clients to pay utility and other bills using their mobile devices. Similar results were achieved by another bank in the Asia-Pacific, which realized a 230% return of investment after launching their own mobile banking services.

According to KPMG, M-banking has a better chance of taking off and achieving success in the Asia-Pacific region as compared to Europe because of the inherent apathy and lack of trust from European banks. The potential for M-banking in Asia-Pacific is high because of the high levels of mobile phone usage penetration to a very large population base, such as the 60% mobile phone penetration that is expected to be reached in India by the end of 2011.

Asian banks are starting to roll out their M-banking services and have already initiated SMS banking by providing SMS alerts about credit and debit information as well as check status for their clients. Many of these financial institutions have already tapped mobile phone and cellular networks and have come up with a Memorandum of Understanding and other agreements for mobile financial and banking products and services.

The future of m-banking in Asia

Several financial analysts and experts are predicting a great future for M-banking not only in the Asia-Pacific but across the globe. Juniper Research is one such institution that predicted that mobile phone banking would revolutionize the banking and financial services in a similar manner that ATMs revolutionized the sector several years ago. The analyst firm predicted that by 2011, US $587 billion worth of financial instructions would be generated by over 612 million mobile phone subscribers worldwide.

A similar forecast was given by Berg Insight, indicating that mobile phone banking users will grow to 85 million in the United States and 115 million in Europe by the year 2015, while total worldwide usage will grow to 913 million by the year 2012 with a CAGR of 89%. Asia-Pacific will account for up to 65% of total users and will be the most important market. According to KPMG, M-banking will have the biggest opportunities in China, India, Indonesia and the Philippines, while strong adoption rates will also occur in Thailand, Malaysia and Vietnam.

These figures indicate that mobile phones and devices will be a primary digital mobile channel for banking and financial services and will usher in the next generation of the modern financial system, a trend that is fast becoming a reality in the Asia-Pacific region.