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Mobile banking: have we got it right?

I am struck by the
sheer number of announcements over the past 12 months related to mobile
payments and mobile banking.  Nothing wrong with this, but times change
fast and I’m already wondering how long mobile will be in vogue.

For example, just as the iPod is dead, so is the mobile.

What, you ask?  Heresy.  Immediately take him out and burn him at the stake.

OK,
so I’m being a little bit radical, but there is an awful lot of dead
electronics about to be chucked out of the consumer’s home including
DVD players (Blu-Ray and HD-DVD included), mobile telephones and iPods.

Let’s
take the DVD and TV stuff first.  On-demand TV sourced from high speed
wireless internet connections will deliver HD-Movies and live events in
real-time.  Bang goes the DVD.  This is why UK domestic suppliers, such
as BT, Sky and Virgin, are all fighting hard to be the domestic
broadband providers of choice and why they are continually seeking to
add new services around media and on demand programming. 

In fact, the vision they have is that we will soon be social networking whilst watching TV, e.g. you stick on Desperate Housewives and
begin picking holes in the script or bitching about how much more red
Bree’s hair has become to your friend who’s watching it 200 miles away.
And you do this through live video links to your pal through your TV,
not through your PC or on the phone.

Now, let’s take the iPod.
The iPod didn’t exist until 2001 and, as I often tell people, it didn’t
take-off to begin with.  For example, it was only 2003 when I tried to
buy one through the UK’s leading high street electronics store and the
assistant turned to me and said "we used to stock those but stopped –
after all, who wants to download music off the internet". 

That
store doesn’t exist today – it’s now just an internet site – and the
iPod sold the 100 millionth unit in April.  But already, the iPod is
morphing into a phone and wireless internet access device.  Equally,
many phones now have iPod style functionality.  The iPod is dead, long
live the iPod.

Now to the phone and, particulary, the mobile phone. 

The
phone is going to be killed by the internet.  All those big fat mobile
telephone firms are going to be zapped by internet communications.  All
those expensive 3G licenses will soon not be worth the paper they’re
written on.

Why do I think this?

Because I travel worldwide
and am getting increasingly angry with VODAFONE (there, so sue me)
because they charge me an extortionate rate for making calls home. 

First,
they lock you into what they advertise as a cheap rate Passport for 75
pence connection fee and then local call rates apply.  That’s fine if
you’re going to talk for 10 minutes or more, but my calls are short and
sweet.  Result: I pay over double the cost of calls thanks to that 75
pence connection fee.

Second, they charge a whacking great £1:50
($3:00) per minute when calling home from the USA or Hong Kong or other
territories oustide Europe.  That is hugely expensive and, when you ask
if they have a package designed for travellers like yours truly, the
answer is: NO.

So why am I blogging about this on a banking technology site?

Because
banks have finally woken up to mobile banking and are investing
big-time, even though there are serious questions about whether
customers want it, will use it, need it or will pay for it.  I’ve
already talked about this a couple of times recently, with a specific review of US mobile banking developments back in July.

That was the entry that quoted a certain J S Hurst as follows:

"I’m
a developer for one of the larger US banks and am currently in the
pilot for the mobile personal banking rollout … this is actually my
employer’s second rollout of personal mobile banking. They were the
first major bank to offer mobile services (over a decade ago) but
canceled the program because of lack of interest. Perhaps features
looming on the horizon like ‘contact-less payments’ will draw more
attention, but the response amongst most my coworkers on the pilot has
been pretty ho-hum: kind of neat, but I don’t think I’d use it very
often."

But this is not where I’m coming from when I say mobile is dead.

Mobile
is in a transient state and will soon converge with the internet.  It’s
already happening where I use my Nokia phone to google and surf.  But
here’s the rub. 

Due to Vodafone’s high overseas call rates, I
now make 90% of my calls from overseas using Skype.  My Skype calls are
about a penny a minute ($0:02) compared to Vodafone’s £1:50 ($3:00).  I
cannot now fathom how any firm could expect to compete in the future
based on a call charge that’s 150 times more expensive than the new
competition.  And the new competition is good.  For example, Skype just
did a deal with MySpace so you can integrate social networking with
calls.  Sounds like that fits with BT, Virgin and Sky’s ideas of social
networked entertainment.   

Vodafone have forced my behaviour to
move towards Skype and IP-communications as a consumer.  Soon, all
calls will be IP-networked and the mobile carriers will be dragging
their heels with high call charges.   The impact upon them will be a
similar impact to the one mobile originally had on fixed landline
firms, e.g. where are they now?

The result is that banks will
purely have two channels – direct and remote – human and IP-enabled –
physical and electronic.  Today, most banks think they have about five
channels – branch, call centre, mobile, internet, ATM.  This is the
change as we actually have just two channels: physical and electronic.

That
changes thinking because it means that all of the electronic
connections will be IP-enabled connections.  So if I were you, banking
strategists, I wouldn’t bet the farm on mobile banking as it could be
dead before it even got started.   Bet the farm on internet-based web
service instead.  That’s where I’m headed.

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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