If They Can Do It, So Can Banks

March 31, 2009

fring2The other day my brother called me from his cell phone. Of course receiving his call from a cell phone is not really a big event. It happens all the time. Fifteen years ago it might have been a big deal. He probably would have been calling me to say “Dude, I’m calling you from a cell phone.” It would have been a big event because airtime was fairly expensive 15 years ago and mobile phones were mostly reserved for people driving BMW’s.

Today, a cellular call from my brother is about as exciting as watching the traffic crawl along outside of my office window. But this wasn’t a typical cellular call. This call was transmitted from an iphone to my computer via Google talk.  Among other things, Fring allows you to use your iphone to make calls to your instant messaging friends using an instant messager like Google Talk. Your data connection transports your voice over the internet.  Thus, Fring allows you to talk all day long without using minutes from your call plan.  Skype offers a similar service for Windows mobile devices.   Fifteen years from now, I might think a VOIP conversation that originates on a mobile phone is mundane.  Today, I am intrigued by the success of Fring despite a business model that competes with the mobile carriers that supply the bandwidth that on which Fring depends.

oystercardIf a startup like Fring can deploy its service without a partnership with mobile carriers, why can’t  banks do the same?  Do banks really need carrier cooperation to roll out mobile NFC payments?  As I mentioned in a previous posting, smart phones, cheap data plans, and mobile market places are enablers that make it much easier to offer mobile services without carrier cooperation. Fring is a terrific example of  those enablers in action.

Banks may not even need device manufacturer support.  A Hong Kong company is set to produce an NFC device (e.g. a sticker), that communicates with the handset via bluetooth.  Thus, users can turn their phones into a smart electronic ticket, rewards card, or payment device without buying a new phone or waiting for manufacturers to include NFC support in their next handset.

So it seems the chicken and egg problem has been solved.  We have some eggs. Now it is up to financial institutions to start making them hatch.


RFID: Share Your Personal Data with the World!

February 24, 2009

compass_card_fareboxA few weeks ago I wrote that contactless payments will help drive mobile banking adoption. What I didn’t say is that you can also use RFID to broadcast your personal information to the world.  Yes, RFID enabled passports can double as your personal radio station that keeps playing your same personal info over and over again.  The good news is it has never been more affordable to have your own radio broadcast.  The bad news is, it is apparently pretty easy to put together the equipment that will tune into your channel.

RFID  (Radio Frequency Identification) is not a new technology. The origins of RFID trace back to WWII and the first RFID related patent was issued in 1973. From supply chain management to toll tags, RFID is certainly useful in a variety of applications.  Still, RFID is not inherently secure.  The potential problems are apparent in the latest RFID enabled US passports. The US includes a metal sleeve and Basic Access Code with new passports to try and keep thieves from stealing your personal information as you walk by.

NFC technology extends the RFID specification. NFC enabled devices must be in very close proximity in order to communicate.  Thus, proponents assert that NFC is inherently more secure than plain old RFID.  Still, not everyone is ready to start replacing cash with wireless payment systems.  Despite an improved security profile, NFC enabled devices are vulnerable to a variety of attacks.

fastrak_transponderWhy does all this matter to financial institutions?  More now than ever, financial instituions must prove that they are safe.  The general perception of a bank’s commitment to cyber security can change very rapidly.

I believe NFC enabled payment devices will eventually become very popular. There is a signficant amount of utility in a phone that will consolidate my rapid transit passes, affinity and rewards cards, coupons, and payment cards.  However, this will only happen if mobile payments and the devices that make them possible are perceived to be secure.  A recent survey found that security concerns is the number one deterent to mobile banking adoption.

Most of the mobile payment news I read focuses on convenience and new delivery technologies. Mobile technology companies mention security but they certainly don’t focus on it.

So to complete my answer to the question above, mobile payments represent a significant opportunity for financial institutions.  However, unless the industry begins to promote security with technology improvements and additional marketing, it might be a while before NFC payments move past the focus group stage.  Even worse, the big event that finally introduces NFC payments to masses might be news of a major NFC related fraud rather than a human interest story on NPR about how mobile banking is spurring commerce in Africa.

Mint’s Controversy, Mobile Loyalty Rewards, Opportunities for Mobile Advertising

February 20, 2009

It seems like Mint is in the news just about ever day now.

Javelin posted an article today titled “Will Mint’s latest upgrades leave an unsavory aftertaste?” The author addresses something that I have wondered for quite a while: does Mint really offer unbiased advice? They obviously are not afraid to rank products according to how much they could save you. However, the author points out that it seems like all of the credit card products that Mint recommends are sponsored products (Mint makes money by offering customers products from their sponsors). He also points out that the new real estate evaluation tools might not be that great of an idea. Mint’s valuation of my house is 16% lower than Zillow’s valuation. These types of estimates are never very accurate and could end up frustrating users.

TechCrunch reports that Mint has riled the mighty Inuit.  Intuit doesn’t believe Mint’s self reported user numbers so they sent Mint a letter demanding information that backs up Mint’s claims.  Mint complied and revealed that their user base is growing by at least 4,000 users per day.  They have a pretty liberal definition of user (anyone who has provided an email address, password, and zipcode), but 680,000 of their 934,000 users have added at least one bank account to Mint.  They did not mention how many of those users are active users (I would guess that about 340,000 of their users log in at least every couple of months).  The link above includes copies of the letters sent by Inuit and the response sent by Mint.

Aneace Haddad’s Taggo adds convenience and one step enrollment to loyalty programs

Taggo consolidates all of your loyalty rewards cards onto your mobile device. Actually, it consolidates them onto a small Taggo sticker that you can attach to your device. You register the sticker on the Taggo website and then tap it at NFC equipped retail pos devices. The divice sends a message to Taggo and Taggo responds with the unique rewards ID for that sticker/store combination. If the customer is not a current rewards member, they are sent a text message, and can apply for the rewards card by responding to the text. I think this is very clever idea with lots of potential. There just a couple of potential roadblocks. 1) The realive scarcity of NFC enabled POS terminals in the US. 2) Customers must pay $10.00 to get the Taggo sticker to put on their phone.

Economic Downturn Will Create Opportunities for Mobile Advertising, Says Analysys Mason

BARCELONA, Spain–(BUSINESS WIRE)–Prospects for mobile advertising in 2009 are promising despite the economic downturn, but realism is called for, says Analysys Mason, the global telecoms adviser during Mobile World Conference.

How Many US Consumers Use Mobile Banking?

February 18, 2009


A) 30,000,000 US Consumers Do Mobile Banking

B) A fraction of the 30 million potential mobile banking customers have signed up for the service

C) 10% of all online banking U.S. households used mobile banking by the end of 2008 (about 46 million households currently bank online).

D) 3.1 million

E) All of the above.

It turns out that this is not an easy question to answer. As I mentioned previously on MoneyMashup, Bank of America claims that about 1.9 million of their customers use mobile banking.  However, Celent asserts that there were only 400,000 mobile bankers in the US at the end of 2007.  As for the total number of US mobile bankers in 2008, there is a very wide range of estimates.

  • In its banking safety scorecard compiled in November, Javelin found that just a fraction of the 30 million potential mobile banking customers have signed up for the service.
  • Yet this month a CNET article quoted Javelin and said that “an estimated 30 million consumers in the U.S. do mobile banking.”
  • The January 2009 Mobile Marketing Overview quotes Celent and asserts that “10% of all online banking U.S. households will use mobile banking by the end of 2008”.  The company said that about 46 million households currently bank online.  I am not a math major, in fact I even forgot how to do long division the other day, but I believe that means Celent is saying that there are 4.6 million mobile banking households.
  • The Wall Street Journal quotes ABI research and says that the number of mobile bankers in the US climbed to 3.1 million in 2008.

To sum it all up, we have three different research and four wildly different estimates (two different estimates by Javelin) that range from 3.1 million to 30 million. So, if you answered “E) all of the above,” you get a cookie.

Apparently determining how many US consumers use mobile banking is more of an art than a science. Some of the disparity might be explained away by how the different research reports are defining mobile banking. Perhaps some reports include any money related function – including applications not provided by traditional banks.  Even so, I am not sure semantic differences can explain the whole gap.  Bank of America only has 29 million online banking users.  In order for Celent’s estimate to match Javelin’s, we would have to assume that each mobile banking household is made up of a little over 7 mobile banking customers. To confuse you even more, Tower Group estimates that 4.6 million consumers – not households – used mobile banking in 2008.

Does anyone have any insight into why these numbers are so far apart?

Delicious Money Mashup: Enterprise web2.0, Tree.com + Thrive…

February 7, 2009
  • MoBank © The wherever you go bank
    MoBank is a mobile focused bank in the UK. It will be interesting to see how this works. I imagine that they will rely primarily on interchange and premium services that they sell on top of their regular services. I think in the US this concept would work on college campuses. Community banks, and especially credit unions should consider similar initiatives.  Financial institutions could create mobile brands the same way many of them have created online only brands.
  • NACHA Group Close to Proposals for Mobile Payments on the ACH
    It looks like NACHA will be formalizing something that has already been happening anyway: Mobile ACH transfers. PayPal allows you to send P2P payments via your mobile device (text messages or mobile app/site). If you do not have stored funds with PayPal, they pull money from your bank account via ACH. It seems like there is an opportunity for banks to take advantage of any new NACHA guidelines for mobile ACH. It will be interesting to see what NACHA comes up with. Given the wide reach of NACHA and the the participation level of banks, the potential is huge.
  • Security experts warn of online banking Trojan
    These types of threats are still present even with the mandated implementation of dual factor authentication. It seems this is a version of a man-in-the middle attack that intercepts information on its way to or from your computer. This could allow the criminal to take over your session and conduct some transactions on your behalf. This is a problem for Online Banking sites because it is difficult to stop these types of intrusions since they are result of something on the client’s computer and not the Online Banking site. One way banks could help with this would be to offer virus detection software or even hardware (i.e. USB keys) that runs the browser session from a “vault” that is walled off from the operating system.
  • Web 2.0 and the Enterprise: A Symbiotic Relationship
    This presentation lists five reasons why the relationship between the enterprise and web2.0 sites is symbiotic. 1. “The Facebook Affect” Work and personal lives continue to blur. 2. People share with each other if they trust each other. Obviously the workplace fosters that trust and is conducive to sharing ideas online. 3. Big ideas and little ideas matter. It is much easier to gather and manage little ideas via social networking. 4. Social graphs serve as a bridge. Social graphs allow you to combine and aspects of social sites. Linkedin can be used in the enterprise, and I can share these delicious posts on Facebook. 5. The enterprise is changing. Some companies are letting their engineers comment in forums. A broader group of employees is engaging with customers via social tools such as blogging, twitter, and forums.  Although my five reasons would probably be a little different than the author, I agree that social collaboration tools could greatly improve productivity in the workplace.  How many times have you worked for weeks on a project only to find out that someone else in the organization is doing something very similar and much of your work overlaps?  Web2.0 could solve those types of problems and it could create an environment where new ideas are shared more freely and efficiently.
  • Tree.com Acquires Thrive
    Thrive is a financial transaction aggregator in the form of Mint and Wesabe. Tree.com owns several real estate and lending related sites including LendingTree.com. It will be interesting to see how the combine the services of their different sites. Particularly how they combine the services of LendingTree with Thrive. As I mentioned in a previous post adding lending, account opening, bill payment, and transfer services is probably the next step for sites like Mint and Wesabe.