There are two things I believe very strongly about the future of mobile commerce:

• • Mobile commerce is here to stay
• • Mobile platform fragmentation will remain a serious challenge throughout the foreseeable future

Since mid-2009 we’ve built a very successful business helping nearly twenty name-brand clients in banking, retail, insurance, fast food and other verticals wrestle with these issues.

We’ve seen the questions change from “WAP vs. App” to bewilderment at the challenge of managing an exploding number mobile product lines while simultaneously managing a flood of customer adoption and increased competition.

The mobile challenge is to develop a roadmap of continual product improvements without knowing the exact technology mix that will be in users’ hands.

Fragmentation persists because of creative destruction. The iPhone created the industry. Then, Google eclipsed the iPhone with Android devices from a variety of OEM manufacturers. Apple did it again with the iPad. Now tablet salvos from Dell, RIM, Samsung, and others are incoming. Arguably, we’ve also already seen the rise and fall of many technologies like WAP, Palm, J2ME, Blackberry, and Symbian, just to name a few.

Organizations must support the mobile devices their customers have. As customers flock to the next great innovation, companies must reach their customers on the device they have right now — and in the way that works best for them.

The days are long gone where IT picks the technologies they’ll allow their customers to use. So, the mobile challenge is to develop a roadmap of continual product improvements without knowing the exact technology mix in users’ hands at rollout, versions 1.2, 1.3, and beyond.

Companies are burning resources porting to new platforms instead of innovating and staying ahead of the competition

Most companies are rolling out their first mobile product and in some cases extending variations to other platforms. Few companies have had to manage complex product lifecycles for the mobile channel. As new platforms are emerging, companies are burning resources porting to new platforms instead of innovating and staying ahead of the competition.

Few companies have the resources to manually manage multiyear product lines across a number of platforms including product management, revision control and infrastructure, quality assurance, and development.

Organizations won’t be successful picking and choosing platforms either. It’s not enough to only support iPhone or Android (or SMS, mobile web, RIM, Windows Phone 7, iPad, etc.). The playing field is changing too dramatically and too often. Companies picking and choosing platforms may find themselves investing in a dead-end product with few customers after a release or two (or even at the first release). Two years ago RIM seemed to rule the world. Five years ago Palm ruled the smartphone world.

Browsers aren’t a panacea either. Major mobile innovation is happening with native and hybrid application technology. HTML5 solves some problems but will not make native applications obsolete. Exposing native resources through the browser create unacceptable security risks in many situations (along the lines of Java applets and Active X). Furthermore, variations in HTML5 implementations likely will continue the testing nightmare that exists with the mobile browser, where tens of thousands of browser permutations exist.

Every company interested in mobile commerce has to face the device fragmentation issue and I don’t see it going away any time soon. In fact, it usually just gets worse. We just have to deal with it.

I’m going to be spending a lot of my time addressing these issues in the future.

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.

(This is a cross-post of the guest blog I wrote over at Jose HC’s “Mobile Strategy… understanding and navigating the mobile ecosystem” blog.)

Canada is still waiting for mobile financial services. Technology isn’t the problem.

Canadian Flag by Matt Bondy

Most of the big banks have offered mobile web based banking at one point or another. There have also been a number of mobile payment pilots, most notably at RBC. So far, long after the pilots complete, we’re still waiting for announcements of a broader rollout.

Canada has all the infrastructure in place. In many ways, Canada’s infrastructure is better suited to mobile financial services that in the United States, where mobile financial services is flourishing.

For example:

• Canada’s Interac Association provides a single, straightforward mechanism to connect financial institutions to merchant point-of-sale systems.
• Enstream is a consortium created by Rogers, Bell, and TELUS specifically to facilitate mobile financial services in Canada.
• Unlike the U.S., open lines of communication generally exist between the banks and wireless carriers. Nadir Mohamed, the CEO of Rogers, sits on the board of TD Bank Financial Group. George Cope the CEO of Bell Canada and the former CEO of TELUS is on the board at BMO.
• Canada leads the world in Blackberry smartphone ownership. Blackberry devices are well suited for mobile applications like financial services. In fact, Facebook just announced it has 12 million mobile users in Canada. Facebook usage is technically similar to mobile financial services.

So, why are we still waiting?

I personally think the market dominance of a few large banks is a major contributing factor.

Canadian banking is dominated by five large institutions: RBC, TD, BMO, CIBC, and Desjardins. In the U.S., there is more market fragmentation that encourages more competition. The U.S. behemoths like Bank of America, Wells Fargo, and Citibank must use their size to perform a preemptive strike on regional banks like M&T, PNC, and Huntington. Community banks and credit unions like Delta Community Credit Union with assets as small as US$1bn have announced plans for mobile banking. In Canada, the banks have the option to watch a handful of other banks and play wait-and-see.

Secondly, I think the iPhone delay is another major factor.

The long wait for the iPhone in Canada, the concern about data plans afterward, and Rogers-exclusivity, have also slowed the adoption of mobile applications. Mobile commerce consistently shows 2/3 of all usage coming from iPhones. First Canadians had to wait for the iPhone and now limiting iPhone usage to only Rogers subscribers limits the market to roughly 1/3 of the Canadian market at best.

iPhone users have a history of demanding what they want (like opening the iPhone to applications). The delay of iPhones in Canada simply put off the inevitable demands by consumers to their institutions.

The customer requests are visible on Twitter:

georgewenzel @RBC Any chance of you guys getting an iPhone-optimized mobile online banking site up and running? The current mobi site sucks on an iPhone.

stephenweppler @RBC any news on a iPhone app from RBC, the mobile banking site is horrible….?

fuzzylion Dear TD Bank – it’s seriously about time that you get a mobile app or at least a WAP version of your online banking website.

As the demands increase, banks will respond. And if the past is any indication of the future, once one bank releases a well-liked mobile application the rest of the banks will follow. Other financial institutions will join in once the market is tested and the benefits are proven.

Unfortunately, organizations that wait risk losing customers forever to the leaders.

Furthermore, followers that rush their efforts risk releasing failed applications which will likely result in:

• Further accelerating customer churn to their competitors
• Exponentially increase the difficulty and costs of adoption in the future; users that have had a bad experience are probably reluctant to try it again
• Costs associated with the having to do the work again (and again) and the lost opportunity.

These folks are smart people. I suspect we’ll see mobile offerings from these institutions soon.