I think another consideration into this whole SMS v. Mobile web discussion is going to lie in the hands of the service providers and the packages they provide to customers.

I'm interested to see how adoption is influenced by "unlimited text" and "unlimited data" packages. Will consumers categorically choose one over the other? How much will price make a difference in that choice? Will both become a standard part of your package?

I personally prefer a data plan that let's me choose how I get data (web, email, IM, even twitter) over a text plan. But that's just me.

I think the current demographics behind text plan v. data plan and the future predictions of these packages will play a major role in the look of mobile banking in the future.

This is an interesting debate. When we have these kinds of discussions around the virtual water cooler at Glenbrook, we usually end up concluding that the answer is that there is no one answer these days, and I think that could be the case here.

SMS seems best suited to quick bursts of critical information -- "What's my balance? Did check #354 clear yet?" -- which probably maps to more basic applications and markets. I think about the prepaid cardholder checking his balance as he moves to the checkout line or the young debit card user trying to figure out if he can buy the next round at the bar tonight.

On the other hand, when we talk about 30-55 year olds, that's the market where banks are working tireless to gain and service multi-product relationships, which will lead to more complex, iterative encounters: "Did my direct deposit hit yet? If so, I'd like to transfer $500 to ING Direct?" "If my DDA balance is zero, then I'd like to know the balance of my overdraft line, and then once I know that I'd like to move some money from savings to cover it."

I suppose such things can be done via SMS, but it seems to me that a mobile web interface is really designed to provide the "complete picture" of the relationship that these power users are seeking.

It also seems that these are many of the same people who have already plunked down $45 a month for mobile broadband. As they discover that providers like NewYorkTimes.com and Amazon.com increasingly deliver a pretty satisfying mobile experience, why shouldn't they expect the same from Citibank and Charles Schwab?

It's an interesting question, and my take is that the way we look at an issue (dividing between banking and non-banking when using sms) may hide a bit of reality. The payments market in the Netherlands for example has 4 billion bank-instrument payment transactions and about 2 billion non-bank transactions (via retailer cards sms, mms, wap-billing, internet-payments etc). The latter 2 billion (of which at least 60 % sms) are however hardly ever perceived by customers or poliy makers as banking/payments. And this means there's still statements around that mobile payments are not flying... which is true for the bank-issues mobile payments but completely untrue for the telco-based payments. As in the market technologies and players blend, merge and evolve, it will become increasingly difficult to distinguish what's precisely what. And we may have a tendency to underestimate the non-bank payments/banking domain.

Jim, nice to see that you’re bullish on SMS, naturally, so are we. Mobile banking is about taking advantage of the tools that are unique to the mobile channel in order to extend bank interactions to better serve customers when and where they want to be serviced. As your forecasts show, all channels are/will be used and it will be very interesting to see what adoption looks like when all three options are in the market. Banks recognize that their customers are different, technology and trends change, and that all of these channels need to be available to their customers.

ClairMail has publicly announced it is working with Bank of Stockton and is also working with a number of some of the biggest banks in the U.S. and Canada. As you’d guess, we're really looking forward to being able to announce these relationships very soon. One of the recurrent themes we’ve seen is that the banks are looking for sticky applications that are easy to use and that will gain interest immediately as opposed to those that require a lot of upfront time, effort and cost. For example, receiving a text message with details on an upcoming bill and having the ability to pay that bill with a simple text command is one of those sticky applications that will perpetuate more sweeping adoption of mobile banking in general. Messaging is at the core for mobile to be the best channel for two way customer interaction.

As you said, with the fast adoption of text messaging being driven by a lot of factors, I agree that SMS banking is poised to take off quickly. It’ll be interesting to see what the forecasts look like in six months.

Dear Jim,

In response to your discussion with Scott Loftesness about the evolution of mobile banking:

I met with Scott back in 2000 and proposed a method of creating a person-to-person payment system based on email address (yes, this was before PayPal). Scott told us that there was no future in P2P payments and declined to recommend us to investors. Less than 36 months later PayPal was bought by eBay for $1.6 billion.

In 2005 I met with Scott again and this time proposed a mobile P2P payment system (yes, long before OboPay) and again Scott said quote: “I don’t think that the banks will ever let a P2P payment be made with a cell phone.”

Later that year we introduced “Scoot” one of the first P2P mobile remittance services in the US in partnership with MetaBank.

Clearly Scott is a “perma-bear” on P2P payments.

In my opinion Scott’s fundamental misconception is that mobile banking will be promoted by the big banks. It won’t. There is only marginal value to banked consumers to be able to access their bank account balance on their phones – and there is limited ability for the banks to turn it into a new revenue stream.

There is, however, a huge demand from the 40 million UN-banked in the US to be able to use their cell phones to send money to relatives in foreign countries cheaply, instantly, and securely.

Does this mean that OboPay will be the next PayPal – I think that is unlikely. Even though they are the clear market leader right now with $48 million of venture capital, we are only at the beginning of what will be a very long race.

I have outlined how I believe the mobile payments market will evolve from Version 1.0 (mobile remittances) to Version 2.0 (rich mobile applications with numerous value added features) to version 3.0 (full m-wallet and NFC capabilities) in a presentation I will be giving at Intelecard on September 18.

I would welcome the opportunity to meet you there if you can make it.

Best,

Chris Sorensen
Chris@m-Via.com
312.399.2101

Jim, great post and discussion. Some further thoughts...

In a post titled "All Hail The SMS", Om Malik posted over the weekend about SMS usage continuing to grow. He linked to "7 Ways to Text Message for Productivity" on the Web Worker Daily.

What's not currently in that list is "Check my bank balance" - the most commonly cited example of financial information needed while on the go. Assuming it's cheap enough for a bank to be able to offer that kind of basic information access via SMS, I'm sure there will be some consumers who find it useful - especially in the younger demographic who runs closer to the edge of their bank balance and wants to avoid embarassment at the local store checkout.

Like you, Om thinks the addition of direct-to-SMS functionality in Yahoo! Mail and elsewhere will help accelerate usage. Maybe so - but it feels unnatural to me - when I'm at the keyboard I'd frankly prefer to just send an email and let them get to it whenever.

When I think of SMS (which admittedly isn't very often!), I think of it mostly as a time shifting message tool - like email - not an interactive query/response tool like the web. I've tried a couple of the Google SMS services and while they certain do work for basic information retrieval, it's really not an interactive experience. For messaging on my Blackberry, I much prefer staying in email rather that switching over to the SMS experience.

I enjoyed reading Chris Sorensen's comments. I must have had a couple of bad hair days when I met with him - obviously sounded I like Dr. No! I do think mobile remittance is a real opportunity for the unbanked - there's a fabulous price umbrella (Western Union) below which to offer services and create a win-win for the consumer and the service provider. I hope Chris can crack that nut.

Scott

Hello gentlemen, this is an interesting discussion here about the appropriate channels for mobile banking and mobile payment services. I've been studying the same market in China, and can offer some insight from that perspective.

While SMS is widely used in China, there is a similar debate going on here between SMS and mobile internet-based banking and payment platforms. Given that we're still stuck with 2.5G mobile networks here in China (we've been hearing 3G licensing rumors for a few years now) and browsing on China Mobile's GPRS network remains tediously slow, SMS-based payment has so far been the technology of choice for the larger third-party payment companies and banks in China. In October of last year, I published a report about how SMS-based mobile top-ups would be the key to mobile payment adoption in China. A link to the report is available here: http://maverickchina.com/mobiletopup.html. I agree with Mr. Sorensen who mentioned in a previous post that mobile payment and mobile banking services would be most beneficial for the un-banked population. I believe that in China, mobile payment uptake will begin in the rural areas, and if so, SMS would be the way to reach them.

The m-payment and m-banking market remains very young in China, however, and a number of domestic and foreign third-party payment companies are jockeying for a piece of the market. Given the dominance of China Mobile in the Chinese telco market, their actions alone can shift the industry, m-payments included. Currently, through their m-payment subsidiary, UMPay, China Mobile support SMS-based payments.

I'd be happy to chat with you guys about this topic some more. If interested, please feel free to contact me at my email below.

Ed
edmund.hung@maverickchina.com

Yes, indeed. Some interesting insights here. Perhaps there are two approaches that could be followed simultaneously: (1) bridge the gap between the process and the person by enabling process interaction to the mobile phone in what ever mode; (2) enabling people to build and deploy their own financial services by giving them the tools to create services like billmonk, chipin, prosper etc. etc.