Mobile Financial Congress 2010 in Miami, FL

I just got back from the 2010 Mobile Financial Services Congress in a surprisingly cold Miami.

I led workshops on Mobile Remote Deposit Capture and Mobile Security. I also hosted a track of sessions on Day 2 where mobile banking and mobile payments professionals from banks in the U.S., Canada, and elsewhere met to discuss the future of mobile banking and the industry.

The many NFC and mobile payments conversations were timely with the announcement of the Google Nexus S phone that will launch with support for NFC contactless payments. This launch is possibly the opening salvo in the mobile payments arms race.

Here are some other items of interest from the show:

• BBVA Compass demonstrated a stunning iPad application, setting the bar high for other banks
• SunTrust is doing a major mobile launch this weekend. Look for mobile web and other major functionality improvements
• Bank of America announced they have 6 million active mobile banking customers (browser and/or application) and 850,000 text bankers (the service just started earlier this year). Text banking supports offline customers (those that don’t use online banking).
• Scotiabank in Canada shared that 10% of OLB customers were using mobile within the first three weeks of launch.

During a panel session, when asked “What do bankers want from vendors?” Lauren van Heerden from TD Bank eloquently said, “Help me, as a banker, to not have to be an expert in every single mobile device and mobile payment technology.”

“Help me, as a banker, to not have to be an expert in every single mobile device and mobile payment technology.”

Wells Fargo’s Amy Johnston also shared a powerful anecdote on the value of commercial banking to corporate treasurers. Before commercial mobile banking, one treasury customer shared that she dedicated the first 30 minutes of every day to dealing with various exceptions and approvals at her desk. She now looks to see if she has any of these issues to deal with when she gets up. If not, she doesn’t have to rush into the office as fast. The customer said, “Amy, you give me 15 more minutes  with my kids in the morning. Thank you.”

“You give me 15 more minutes with my kids in the morning. Thank you.

You don’t have to calculate ROI on that.

Chase P2P Mobile Payments

JP Morgan Chase upped the ante in the big bank mobile banking feature fight.

In their July 1 release, Chase delivered both person-to-person payment capabilities (QuickPay) and mobile remote deposit capture (QuickDeposit).

USAA is the only other major bank with mobile remote deposit capture live. USAA recently announced that mobile remote deposit capture now accounts for 35% of all deposits after one year of service.

Chase’s decisive move into remote deposit signals that the feature provides opportunities to traditional brick-and-mortar banks and not just branchless banks like USAA (which has just one branch at their headquarters).

Bank of America also has announced it will have an offering. These features will likely be table stakes by the end of next year.

Jim Bruene at Netbanker reviewed the Remote Deposit feature but couldn’t get it to work. My guess is that camera on his older iPhone made it difficult to capture a readable image. Newer iPhones have solved this problem, older phones are notorious for not working well with apps like bar code scanners, etc.

As a credit card only customer, I was pleased I could log in and use the app. Not surprisingly, QuickDeposit wasn’t an option for me. I was again pleasantly surprised to see QuickPay as an option. QuickPay wouldn’t let me use my Chase credit card, but prompted me to connect QuickPay to an external account. I connected my QuckPay account to a bank account at BB&T and successfully performed all the necessary validations.

Unfortunately, when I tried to make a payment, it wouldn’t go through because “neither the Pay From nor Pay To account is a Chase checking or asset management account.”

The app must be working well for many people. The App Store rating is currently an excellent 4 stars with 940 ratings of this version so far. Looking through the reviews there were plenty of comments speculating on which customers are supported. Looking back over the App Store description and Chase’s web site, I didn’t see clear indications of exact eligibility for the various functionality.

Chase could have more clearly articulated who can use these features and what equipment is supported.

I give Chase points for aggressively moving mobile banking forward. Their entrance is likely to accelerate efforts already underway, and encourage institutions not yet considering mobile remote deposit capture and/or P2P payments to do so.

One of the risks of first mover status is oversights from rushing to market. Chase took a swing and at least hit a triple.

Full Disclosure: I own a small amount of stock in JP Morgan Chase and BofA. I also have accounts with all the institutions listed here.

Mobile banking adoption in the U.S. is grew by 20% last quarter according to research we have done on large and regional banks in the U.S.

USAA is a good published example of this industry growth we think is fueled by the proliferation of smartphones and a growing consumer comfort and familiarity with mobile technology.

Nielson: Smartphones to overtake feature phones in 2011

USAA reports having 17% mobile banking adoption at then end of Q1 2010 up from 14% at the end of 2009. Other banks for whom we cannot report numbers grew at a similar rate.

The key question is “When will mobile adoption level off like online banking did?”

Online banking usage has held steady around 40% for years now. So far, most U.S. banks have limited mobile banking to online banking customers. Wells Fargo is the notable exception.

Banks are considering options to support offline customers (non-online banking customers). However, many efforts are unlikely to be live until at least early 2011.

When will mobile adoption level off like online banking did?”

At 20% quarterly growth, mobile banking will catch up with online banking in 2011. Meanwhile Nielsen reports smartphone usage will catch up with feature phone usage in 2011.

Bank of America may be an example of maturing mobile banking. But if so, mature mobile banking isn’t moving much slower than the newcomers.

BofA reports having over 4 million mobile banking users up from 2.6 million reported in June 2009. That addition of 1.4 million users in nine months represents roughly 18% growth per quarter and nearly 54% growth overall.

It’s time to put those offline user support projects into overdrive.

Bank of America Debit Card

There was a lot of information in last week’s Bank of America webcast. I think a key metric got buried.

Bank of America’s Doug Brown said that they had found a direct correlation between mobile banking and increased debit card transaction amounts. To my knowledge, this is the first time we’ve had hard evidence that mobile banking can drive higher transaction revenue in traditional payment channels.

Brown surmises that mobile bankers spend more on their cards because mobile banking gives them the confidence to make larger purchases because they have complete, always-with-them control of their account information.

Higher card spending by mobile banking users means that mobile banking is good for everyone: banks, merchants, card associations and consumers.

It’s good for consumers because they have access to more of their money when they need it. It’s good for merchants because mobile banking is driving higher sales. It’s good for bankers because of increased transaction revenue both on the consumer side of the transaction and the merchant side of the transaction. Furthermore, checking balances creates a positive brand experience that can generate strong loyalty to the bank.

Next, I want to know how much mobile banking increased spending…

Doug Brown of Bank of America provided an update today on the success of mobile banking at BofA in a webcast sponsored by InformationWeek and VeriSign. Brown provided his insight on mobile banking and shared key statistics from their experience with mobile banking.

Bank of America now has over 3.5 million customers and represents over a third of all U.S. mobile banking customers. They have seen adoption increase significantly since they first went live in the first quarter of 2007. It took them 13 months for the first 1 million customers to adopt mobile banking. The second million took 9 months and the third million took 6 months. This represents an acceleration rate of roughly 30%.

Brown describes general mobile adoption as historically faster than other technologies such as telephone landlines, televisions, etc. Roughly 10% of online banking customers (30 million) now use mobile banking (3.5 million). BofA attributes their mobile banking adoption success to two key factors:

First, mobile banking is made available to as wide a customer base as possible. BofA noted that they support over 850 handsets via their mobile web application while providing native applications on iPhone, RIM, and Android platforms in addition to SMS banking. While mobile banking is limited to online bankers and isn’t available to customers in Washington State or Idaho, Bank of America’s mobile reach is far broader than most or all U.S. implementations.

Second, Bank of America embarked upon a marketing and customer education campaign to share the value proposition to end users and to alleviate their security fears. BofA has tried to completely integrate mobile banking into their existing operations to reach all kinds of customers and provide consistency to the consumer regardless of what channel they use. For example, Brown noted that mobile banking customer service and technical support is handled by the same team as online banking.

Notably, Brown described the technical support impact of mobile banking as a “non-event” that was “seamless to support.” This statement should put a lot of prospective mobile bankers at ease. Many banks and credit unions considering mobile banking are concerned by the potential impact of mobile banking on their support operations. Many bankers will be relieved by BofA’s experience as the largest mobile banking implementation in the U.S., however results depend upon how mobile banking is implemented. For example, a bank implementing SMS balance alerts with no other form of mobile banking risks dramatically increasing calls to the call center.

Mobile banking has also provided significant ROI to Bank of America. In particular, Brown says mobile banking is directly responsible for attracting 150,000 new customers. Additionally, Brown describes the type of customer mobile banking attracts as a “very valuable customer segment.” Brown describes these customers as more deeply engaged and typically using more products than average. Brown also shared some customer comments indicating how deeply customers appreciated mobile banking which creates stronger loyalty and engagement with the bank.

Verisign also provided cost figures for various channels based on a study commissioned by MCOM. Banks can find significant savings by serving customers in the mobile channel ($0.08) rather than through the contact center ($3.75), IVR banking ($1.25), ATM ($0.85) or even online banking ($0.17).

Banking service costs and channel usage

Interestingly, Brown noted that mobile banking users tend to spend more on their debit cards providing additional revenue to banks and retailers. Brown surmised that consumers can spend more confidently knowing that they have ready access to their account balance — even when purchasing on a whim. Mobile banking customers have also moved over $9.5 Billion since 2007, presumably reducing bank and consumer costs to move money. Bank of America provides payment capabilities between user accounts, to any other Bank of America customer, and through bill payment functionality. Brown described future interest in supporting point-of-sale (POS) payments, remittance, and value-added marketing such as location-based coupons.

Bank of America also uses mobile to provide additional security in other channels. Specifically, Brown mentioned that all high-value transfers in other channels like online banking require confirmation from their SafePass product on the mobile phone. Brown described the mobile phone as a unique security tool because almost everyone has a mobile phone with them and it is almost always on. Brown stated that the same anti-fraud scanning algorithms used in online banking are also used on mobile banking activity. He described mobile security as having industry-wide importance to ensure overall consumer trust in mobile commerce.

In summary, this type of specific case study is what the industry needs. 48% of webcast attendees not currently doing mobile banking cited Lack of ROI as the primary reason. Most bankers I talk to know in their gut that mobile banking will have a huge impact on future banking. However, almost every banker is struggling to build a solid business case for moving immediately, especially during the recent financial crisis.

Bank of America’s experience validates many bankers’ expectations and provides fuel for further experimentation. While sharing this data is bound to increase competition, the metaphorical tide is likely to raise all boats by increasing overall customer comfort with mobile banking and mobile commerce in general which will lower costs and drive up profits through new customers and more profitable transactions.