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By Ron Fink
Mobile banking initiatives are gaining fresh steam after a lull early in the decade, according to a report published today. However, if the authors have their way, end users shouldn't expect much by way of innovation, but will get greater reliability. Still, customers can also expect low prices, the authors say.
The report, based on an examination by banking consultants Aite Group of 69 mobile transaction initiatives around the globe, found that developers are again bringing new services to market following a hiatus after an initial burst of activity around the turn of the century.
The technological evolution of mobile devices and networks, coupled with increased end-user savvy, has led to an increase in mobile transaction initiatives over the past five years after falling in 2001 and 2002 following the bursting of the dot-com bubble, the authors wrote.
Previous research by Aite found significant demand for such services among small businesses. According to a survey of 303 small businesses conducted by the firm last December, 35% said they were very likely to use mobile devices to check account balances, while 25% said they would use them to transfer funds and pay bills.
Another Aite survey of 50 of the largest financial institutions around the same time found that only 4% of their small business customers already used mobile devices to check balances, and only 2% used them to transfer funds or pay bills.
Forty-five of the 69 initiatives examined in the latest study involved payment services. The survey also found that all but 4% of the initiatives were designed for use by regular mobile devices as opposed to smartphones.
The report's authors warned that it was crucial for financial institutions and other service providers to focus on proven functionality when assessing the offerings that become available. They said such due diligence was entirely feasible because so many of the initiatives duplicate each other.
"One of the most critical questions that any [financial institution looking to provide mobile services] can ask of a 'new' mobile transaction initiative is this: 'Who has done this already and what was the outcome?'" said Nick Holland, a senior analyst with Aite, in a statement accompanying the report.
Despite strong overall demand for such services, the study noted demand is strongest in developing markets, which suggests banks won't have much pricing power in the U.S. and other developed markets.
"The current business case for mobile transaction services in developed markets is shaky since end users are well-served by a plethora of existing payment channels—credit and debit cards, checks and, of course, cash," the authors wrote. They cited the fact that Bank of America has only 2.4 million customers for its services, and that while that makes the bank what they called "the poster child for U.S. mobile banking services," M-Pesa has 5 million mobile banking customers in Kenya.
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