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.
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.