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January 31, 2011updated 04 Apr 2017 4:16pm

Is the industry ready for mobile banking?

Numerous analyst reports have recently highlighted what many in the industry already knew: 2011 will represent a tipping point in the mass adoption of mobile financial services. But is the financial services industry truly prepared for this game-changing event?, asks James Richards.

By James Richard

Numerous analyst reports have recently highlighted what many in the industry already knew: 2011 will represent a tipping point in the mass adoption of mobile financial services. But is the financial services industry truly prepared for this game-changing event?, asks James Richards.


Table showing results for a survey on the way mobile phone banking services may improve people's opinions of their banksJuniper Research recently predicted that one in five mobile users will use some kind of financial service on their device by 2013. However, this adoption will not be without its challenges and the risk associated with mobile, as perceived by many banking customers, is one of the most significant to overcome.

In order to ensure 2011 delivers on its promise, it is crucial banks offer mobile applications that deliver a high-quality customer experience within a secure environment.

The problem is the necessary security techniques often make a mobile application too cumbersome which turns away many potential users and dilutes the value of this interactive channel.


Drivers impacting mobile adoption

Proving the business benefits of delivering a mobile banking service, IE commissioned a YouGov survey that found that one in four of Generation Y (aged between 18 and 34) would improve their opinion of their bank if it offered mobile phone banking services.

A separate IE poll of the financial services industry itself demonstrated UK bank executives are tuned into these customer needs. 36% rated increased customer satisfaction as the primary driver for investing in mobile services.

However, banks and consumers are wary about the security challenges that must be navigated. According to KPMG, 79% of global consumers are concerned about potential unauthorised access to personally identifiable information (KPMG, Consumers & Convergence IV, 2010).

Financial institutions that are developing their mobile banking strategies must weigh up the different routes to market. Two approaches are ‘apps’ and mobile web – both of which have their own advantages and drawbacks.


Choosing the right format

Apps allow organisations to provide a highly tailored and valuable service to their customer base. Apps are viewed by many as the preferred approach for providing the richest mobile experience to the end consumer and one which represents the greatest potential for innovation.

On the other hand, the major benefit of mobile web is its wide range of accessibility – any device which can connect to the internet can access mobile web pages. This means it is easier to support from an IT perspective but the trade-off is a less rewarding end user experience.

When it comes to security, mobile applications can cryptographically secure your data which means that all a user needs to do is prove that they are authorised to use the app with a simple but secure password. This delivers a straight-forward and relatively rapid check for the consumer but one that is also very secure.


It’s not all about the App Store

Mobile security also varies significantly between different platforms. The most prevalent platforms that are driving the adoption of mobile apps are RIM (Blackberry), iPhone, Windows Mobile and Android.

Blackberry is more traditionally associated with the business user and is, therefore, subjected to the potential of usage restriction by corporate IT departments, whereas iPhone and Android are rapidly becoming the defacto choice for the consumer.

There are currently no mobile app security standards across the industry and as a result, each platform has its own requirements for banks seeking to launch financial services applications.

For example, applications being put forward for the AppStore for Apple undergo stringent security tests and can be cryptographically signed by both the vendor and Apple itself, whereas on the Android platform, there currently isn’t a trusted distributor of applications.

It is important to consider the various security requirements and factor them into the mobile development project timeline. Some financial institutions are opting to roll out one app at a time to make the process easier, reflecting the challenge that in-house teams currently have in terms of the right resource to deliver their mobile strategy.

However, this approach is not ideal as it means the service is not available to the widest pool of customers.


Balancing user experience with security

How a bank asks its customers to identify themselves and then check they are who they say they are is critical to both security and the user experience.

There are multiple approaches around customers supplying various inputted credentials but banks need to be careful that the process is not too complex as this increases the likelihood that customers will revert to other banking channels. Instead, security must be balanced with the end user experience; for example, relatively light authentication to simply check a balance but more additional layers added for tasks such as paying a bill or transferring money.

Maintaining customer security in the event that a customer loses their mobile device is also an important factor.


The future of mobile banking

It is clear the threat of malicious activities aimed at mobile consumers will never go away and that these threats should be tackled pro-actively.

However, mobile applications and services may be more secure than many realise and in the case of smart phone apps, they offer a degree of security in advance of the online world. Spreading this message will be crucial if the anticipated widespread adoption of mobile financial services in 2011 is to become a reality.

James Richards is director of mobile at IE

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