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Bank branches and the next gen mobile

Spent a lot of time yesterday talking with folks about the future of money, payments and banking.

The conversation got interesting in two particular areas: branches and mobile services.

This is because I realised some things.

Take branches.

There appears to be an evolution of branch usage from underbanked economies through emerging economies to developed economies.

In the underbanked economies, the issue is often a mixture of a lack of infrastructure and investment combined with low income and low prospects.

In these instances, banks don’t make investments in branches as there is only going to be profitability from clients in major urban areas where there’s population density, wealth and work.

As a result, these countries have had little banking prospects, availability or access, but this is changing due to the introduction of mobile wireless infrastructures.

Even so, these communities will still remain underbanked as full bank services have limited availability in rural communities.

You then move to emerging economies, and find the massive urbanisation of these economies is creating new wealth and new communities. You only have to look at the urbanisation of China, with the rural population to urban population changing from 74% to 26% in 1990 to a major switch in 2009 of 53.4% rural to 46.6% urban to realise such change.

And with such change, comes branches and branch banking. China has seen a revolution in banking during their change process, and today’s Chinese banks hardly reflect those of two decades ago in service and style.

In this instance, mobile services range from simple to complex, and the mobile channel is everything from basic payments to full service banking depending upon which consumer segment the bank serves.

Then you look at developed economies, and the bank branch is already inbuilt to their model from the past. The branch may be an asset or liability, but the criticality is that new channels and technologies – internet and mobile internet specifically – are offering additional and alternative capabilities for these banks to reach their consumer.

This also varies by culture and language. For example, Spanish bank customers much prefer bank branch access than UK customers, who would rather call their bank than visit a branch.

So you cannot generalise too much about these services.

Nevertheless, and this was my other realisation, you can also see big changes in mobile.

I’m no mobile expert but in banking, I’ve seen five phases of mobile channel access and usage.

The first was basic payments processing and transaction services using SMS text messaging.

Then there were additional bank account services based upon Wireless Application Protocol, WAP.

Third generation mobile bank services offered a more multimedia rich interaction, based upon smartphones. This was OK but limited by the fact that you had to design your apps for each phone operating system and, in some cases, model of phone. Hence, it was very limited.

Fourth generation is where we are today, and I recently blogged about the killer apps offered by iPhones and Androids. The beauty of this generation is not only that we now have phones that can offer idiot proof bank services, but apps that can be developed and deployed for mobile internet. Therefore, the design is no longer for a specific phone model or operating system, but for easy access to multimedia rich banking services using Open APIs.

Finally, there is a next generation mobile service appearing on the horizon … the chip-neutral device.

Today, we have EMV chips for cards, SIM chips for phones and RFID chips for contactless services. This is all going to change in the next few years as Visa, MasterCard, the GSMA and mobile operators work together to develop chip enabled services that are device-neutral.

Hence you could stick your communicating wireless payments chip into any machinery, gadget, tool or technology you want … a telephone, a watch, a television, an iPad, a laptop, a pair of sunglasses … anything and everything can become a wirelessly communicating, interactive payments device.

Roll on the next generation.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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2 comments

  1. Couldn’t agree more about the business points you’re making.
    However, from a technological point of view, there is not one but multiple mobile banking channels. Each device has it’s own operating system and you basically need to build a fat-client application for each device. Therefor it’s important to go for a solution that offers this capability. Basically a good gateway that will interact with the core banking systems and deal with security, … and on top of that channel specific technology.
    I still hear people asking about whether mobile banking is the next new thing, is it something new or a rebirth? Questions people have been asking for a while now. The thing is that mobile banking has kind of creeped up on us. It’s not whether it’s upcoming, no, it’s here already and it’s here to stay.

  2. Thanks Erik
    Big point I’m making is that the new generation of mobile internet phones means the development for ‘each device’ has gone away. Build once and offer Open API interfaces, and off you go …
    Chris

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