Mobile Banking Comes of Age

Mobile banking is here. Citibank launched its mobile banking service recently. Other large banks have either made mobile banking announcements or are already running pilots.


Mobile Banking Comes of Age

Mobile banking is here. Citibank launched its mobile banking service recently. Other large banks have either made mobile banking announcements or are already running pilots.

Now is the time for credit unions to develop their own mobile banking plan.
Roughly 50% of credit unions offer home banking. Having the ability to access and control personal finances 24/7 is a definite hit with members. There are very few, if any, skeptics left. Mobile banking extends home banking, making it more truly “anywhere anytime.” For mobile banking, members need only a cell phone, a signal and a credit union that offers the service.

As with every new technology, credit unions must decide how soon to jump on board. At the two ends of the spectrum some credit unions will wait until their members are clamoring for it, while others will jump as soon as they identify a solution that is reliable, affordable, easy to maintain, and ready to go.

Cell Phones
We all know that cell phones are nearly universal. Almost 80% of all households own at least one cell phone. What is less well known is that the computing power of cell phones has increased as rapidly as their popularity. The cell phone in your pocket today may be more powerful than the computer on your desktop six years ago.

The functionality of cell phones has also been expanding rapidly. Your cell phone is a camera, a computer with Internet access, a watch, a music player and (soon) a GPS, all rolled into one. Today, 4 out of 10 cells phones have the ability to access the internet and this is increasing at a rate of over 50% year. And the cost of cell phones is plummeting. What was once an expensive high-end phone is now free with a service subscription.

The rate of new cell phone technology penetration far exceeds that for desktop computers. This is a result of one simple fact: the turn over for cell phones is much faster than for desktop computers. The average life of a cell phone is about 16 months. How many people toss their desktop computer after a year and a half? Very few. This means that any member not ready for mobile banking today will be soon.

Trends Collide
The rapid proliferation combined with rapid technological innovation of cell phones is one of the most important trends in the telecommunications industry. The rapid spread of home banking and online services is one of the most important trends in the financial industry. The telecommunications industry and financial services are two of the largest sectors of our economy. Mobile banking, as the collision of these two trends and these two industries, is certain to shake things up.

Mobile banking opens up a new and fundamentally different channel of member communications. Essentially the key differences are: voice contact, frequency of contact, immediacy of contact, small screen size and limited data entry. For example, if you send an alert to a member’s home banking inbox, the member may not login for a month. You cannot rely on timely receipt of the communication. In contrast, if the alert goes to the member’s cell phone, you can be sure you will get the information to your member in a timely fashion.

With the advent of mobile banking, credit unions will need to examine what new online services can be offered to a mobile outlet that could not be offered to the desktop. And, to best serve their members’ interests, credit unions will need to reconsider not only how and what they communicate to their members, but also privacy, security and many other home banking fundamentals.

Today’s Solutions
There are a number of mobile banking solutions available today. In general, a mobile banking application should have all the functionality of home banking, including account balances, transaction history, transfers, bill pay and secure one-to-one communications. The most likely exceptions to complete home banking functionality are check images, online account opening and anything involving extensive data entry.
The technology used to create mobile banking solutions fall into three categories: SMS, WAP, and downloadable applications.

SMS. Short Messaging Service is the use of text messages to send data to and from the cell phone. This is a convenient service for customers because there is nothing to install and no slow web-based browsing to do. But, the data is not encrypted, either in transmission or on the phone. Credit unions should look hard at this to evaluate if SMS complies with the FFIEC guidance for Multi Factor Authentication (MFA).

WAP. Wireless Access Protocol based solutions are, essentially, just websites accessed by mobile browsers. The web pages must be formatted for small screens and compatibility with all the various device browsers. Speed is a concern for this solution. Browsing is done over 128-bit SSL, making security much better than SMS. MFA compliance remains an issue, however, to investigate carefully.

Application. In this approach a small program is downloaded to the phone. While this approach offers the best security, for it to be convenient, the download process must be very simple for members and easy for MSRs to support.

Pilot Study Results
Data from pilot studies suggest the following:
1. Mobile banking has a high “cool” coefficient. People talk about it and show it to friends. Word of mouth will facilitate adoption.
2. People will login more frequently using mobile than from a desktop.
3. The early adopter of mobile banking will most likely be using a Windows phone. Next most common will be a BlackBerry and a distant third will be an assortment of Java phones.
4. For some mobile users, desktop home banking will decline.
5. Members don’t yet expect mobile banking to be available from their CU, but they like it when they get it.
6. More payments will be made online with mobile devices than with the desktop.
7. Early adopters will be younger and, on average, more affluent. This is a perfect antidote to the “graying” of your members.

Is it Worth It?
Mobile banking deployment requires technology review, careful vendor selection (is the company established or a VC funded startup?), security analysis, compliance review, marketing roll out, training employees and supporting members.

As with any very new technology we don’t yet have the direct data to answer this key question. Nonetheless, the indirect data is revealing.
Mobile banking can be viewed as a complement to home banking, a replacement for it, a replacement for interactive voice response systems, an extension to home banking, or some combination of the foregoing. Whichever perspective you choose, the data derived from home banking illustrates the value of mobile banking.

Compare the 300 fastest growing CUs (based on assets) vs. the 300 slowest growing CUs. Some important conclusions jump out: 64% of the fastest growing have home banking vs. only 13% of the slowest growing, and 32% of the fastest growing have bill pay vs. only 4% of the slowest growing.

Or, compare the average assets per member for all CUs without home banking, $4,400 vs. $6,700 for CUs with home banking, but not bill pay, and for $7,600CUs with home banking and bill pay.

The data makes clear that home banking is essential technology for credit unions. Mobile banking, as the next generation of home banking, will accelerate its adoption and magnify the benefits of anywhere anytime financial management for both credit unions and their members.


Ben Morales is CIO and SVP for Washington State Employees Credit Union ($1.2B in Olympia, WA) which implemented the Access Softek mobile banking solution for members. Their mobile site can be seen at:
Chris Doner is CEO of Access Softek, Inc., a provider of eight products to the credit union and banking industry including a secure and complete mobile banking solution - Mobile Finance Manager (MFM). Call 510-848-0606 or visit for more information.




July 28, 2008



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