| By Jim Bruene on February 26, 2007 4:07 PM | Comments (2) |
We've finally wrapped up our latest report, Mobile Banking & Payments 2.0, published by Online Banking Report, our by-subscription research division (see note 1).
Work on this report started at BAI's Retail Delivery Conference in mid-November where we scheduled a series of briefings with the three mobile players in attendance: ClairMail, Firethorn Mobile, and mFoundry. As reported here previously, we were mightily impressed with the opportunities available in the mobile space.
After three months of looking at mobile banking, talking to more players, and trying to develop a reasonable forecast, we have slightly tempered our initial enthusiasm. While we remain optimistic that the mobile channel will someday eclipse desktop online banking in terms of pageviews and routine transactions, in North America mobile banking is NOT a new channel, but rather an extension of existing sales and service channels (see note 2). And with few fees expected, the business case must be made on the softer retention benefits and customer service savings.
The Forecast
Even with a challenging business case, most top-10 retail banks are headed to market in 2007-2008 with some form of mobile banking. We forecast that 25% of U.S. households will use mobile bank access by the middle of the next decade. The mobile banking adoption curve for the next 10+ years will be virtually identical to that of online banking from 1995 to the present (see inset above and note 3).
But we are much less certain on which method of mobile banking will cross the chasm. Unlike Web-based banking, there are powerful entities, called wireless carriers, that stand between the bank and its customers in True Mobile Banking. So it seems that text/SMS-based services will lead the initial wave, because they are less dependent on the carrier and most under-40 users are already using them. However, long term, we believe more complete one-button (see note 4) solutions will prevail. And while we do forecast the adoption for all three methods, there are too many variables to be certain. A year from now, things should be quite a bit clearer.
Subscribers, please post your comments about this report below, or email them directly to jim@netbanker.com.
End Notes:
1. For those of you that may be new readers, this blog is written by the publishers of Online Banking Report, an industry newsletter that began 12 years ago. Many of our blog postings are a by-product of the research we are doing for Online Banking Report, so you'll often see references to our more in-depth research published there, available by subscription only.
2. This is different in other countries where branch and PC-based banking is less pervasive.
3. U.S. adoption by household, +/- 25%. The underlying data and assumptions for this table are in the full report, OBR 138/139, as referenced in the opening paragraph.
4. One-button mobile banking is our name for banking functions that may be called up on the mobile screen through a link on the main menu. It could be a WAP-based mobile website or a downloadable application.
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Mobile adoption rates will be slower than web adoption rates because access to mobile devices is controled by the quadrolpoly of us wireless carriers and their evil data plans, while internet access was much more open competitively.
I agree with your assessment that SMS will come first since everyone has it and uses it. The interface challenges for internet on mobile phone will continue to slow adoption unless something like iPhone breaks through.
-- A top ten bank eCommerce exec who wishes to remain mostly anonymous :)
Anonymous...Thanks for the comment.
It's pretty hard to forecast adoption in Feb 2007....on the one hand we've had mobile banking for about 8 years or so and adoption is near zero so far. Then again we had online banking (pre web) for about 11 years and adoption was zero....so it took 17 years to get into 10 million households.
How fast it takes off depends on what you and the other big players do with marketing and education. And that remains to be seen. We should have a much better idea a year from now, or maybe a year and a half (end of 2008).