The Handheld Bank
Dec 01, 2006
In the battle to stay connected with consumers, banks have leveraged technology advances to develop and enhance distribution channels, from ATMs to interactive voice response systems and even online banking. Now, financial institutions are tapping the potential of wireless networks and mobile devices to serve their customers. As a result, these solutions are helping banks to deliver critical account information and strengthen customer relationships. >>
According to Oyster Bay, N.Y.-based ABI Research, 245 million mobile devices shipped in the third quarter of 2006. And the telecommunications technology research firm reports that the global mobile devices marketplace is on target to reach 1 billion units by year-end. Realizing that almost every banking customer uses some sort of mobile device, financial institutions are rethinking how to exploit these units and wireless networks to foster more customer interaction.
While early mobile solutions caught the attention of financial services firms over the past five years, the "technology just was not ready," says Paul Race, director of innovation marketing for Dayton, Ohio-based ATM manufacturer NCR. Race tests emerging technologies at NCR's Global Research Center for Research and Development for Self-Service Business in Dundee, Scotland. "As we start to emerge from the stage of disillusionment, technology is getting more robust, bandwidth is stronger and customers are more accepting," he says. Like any emerging technology, however, "wireless solutions will only work if consumers see their benefits and adopt them," Race adds.
As statistics prove, few individuals leave home without a cell phone, PDA (personal digital assistant) or other personal wireless communications device. And as more customers rely on mobile devices, it is not surprising that they are managing more daily tasks while on the run. "Mobility is increasingly important in people's daily lives, and these 'mobile' people expect to incorporate the management of their finances into this lifestyle," says Frank Georgi, global lead, CRM financial services, Internet and mobility practice for Accenture in Munich.
That said, banks are in the hot seat as more of their customers are requesting mobile banking services. The trend is so strong in Europe that "research indicates that 25 percent of all U.K.-based banking customers would be willing to switch to another bank if it offered them a comprehensive mobile banking service for free," Georgi reports.
But consumer demand is not the only driver behind the mobility trend in banking. Mobile solutions are expanding internal opportunities for banks as well. "Rather than invest thousands of dollars into stationary PCs, banks can expand the power of their enterprise by leveraging existing wireless networks," asserts Richard Rushing, chief security officer for AirDefense, an Alpharetta, Ga.-based provider of wireless network security solutions.
And wireless applications seemingly are endless. They can empower the workforce, or service customers both inside and outside of the branch. More important, wireless and mobile applications enable banks to create a new marketing channel and extend their brand in new ways. "They allow banks to differentiate themselves in the marketplace and offer their customers more freedom and flexibility," Accenture's Georgi says.
Thus, banks are partnering with technology vendors and delivering more applications via mobile solutions. "The key is to create a two-way channel [wherein] users can deliver and access information in a secure way," says Joe Salesky, CEO of mobile messaging solutions provider ClairMail (Novato, Calif.).
Unleashing the Power of Mobility
The easiest way for banks to whet their appetites for mobile applications is to untether their workforces -- a task that is becoming more important as more associates become mobile, according to Ed Martino, director, finance industry, Sprint. "The number of employees working outside of the office in mobile locations has increased dramatically over the last couple of years," he relates. "Enterprises need a way for these associates to remotely reach into the back office and access databases and mission-critical information," he adds. "Thanks to wireless-enabled laptops and consumer handheld devices, employees can conduct business from a hotel, home or a remote office."
Chicago-based Northern Trust ($52.6 billion in total assets) is no stranger to the mobile workforce. Whether conducting perspective sales or servicing existing clients, Northern Trust's relationship management associates are never far from their BlackBerrys or other handheld devices.
"All PDAs are password-protected and hooked to our server," says Diane Spradlin, the bank's senior vice president and director of enterprise relationship management. "These units keep associates connected to their calendars and e-mail, and deliver information to their fingertips," she adds. "They can also access details about customers rather than carry reams of paper files."
Northern Trust's internal and customer portals are getting renewed attention thanks to wireless networks. "Northern Trust's internal portal provides sales and client servicing partners the capability to access client and prospect information by bringing up a real-time view of the customer," says Deb Dworman, VP, Northern Trust.
And mobile solutions can boost profitability for banks. "Customers are no longer forced to make a trip into the bank," explains Sprint's Martino. "By allowing associates to go to the customer, wireless networks and mobile devices are a catalyst for profit growth."
Loan officers, for example, no longer are tethered to their desks in a branch. "With 220,000 loan officers available in the industry today, they need access to data while on the road," says Shane Hughes, cofounder, president and CEO of Waltham, Mass.-based Pyxis Mobile, a wireless software provider.
While meeting with customers in their offices or homes, for example, loan officers can use wireless laptops and printers for loan origination. "They have access to customer information and can deliver a quote on the spot, enabling customers to make an investment decision," Sprint's Martino says.
Building Customer Relationships
Mobile solutions also have merit for banks as they connect with customers in-branch. Whether they use a kiosk, wireless tablet or a handheld device, "Mobile solutions enable banks to serve more customers," says AirDefense's Rushing. "They can process a transaction as customers wait in line, enroll them in new accounts or cross-sell new products."
According to Northern Trust's Spradlin, the bank currently is exploring how to apply mobile solutions to cross-selling efforts. Northern Trust, which has been supporting a customer relationship management (CRM) program for approximately eight years, will launch the first release of an enterprise relationship management (ERM) tool in November. Spradlin says her goal is to eventually enable users to access data via mobile devices, but she declines to specify a rollout date.
"One of our distinctions is that we do not force our clients to visit us -- we go to them," explains Northern Trust's Dworman, who is leading the project. Since it's crucial for the bank's remote relationship management executives and sales staff to be on the road and in front of clients, "We need to keep them connected to all client data available in our enterprise systems."
New York-based Citigroup ($83.6 billion in assets) also is bullish on employing technology to expand customer relationships. "Besides interacting with customers at ATMs, call centers, branches and through the Internet, we are also testing mobile solutions," Richard Naddy, SVP, North America decision management, Citigroup, said during the SAS user conference, "BetterManagement Live!," held in Las Vegas in October. "We are committed to focusing on how to connect with customers across all distribution points," he added. "Mobile technology is part of this strategy." Naddy declined to discuss specific projects during the session.
One popular mobile application that offers enormous potential for relationship building is SMS (short message service) text messaging services. In 2005, an average of 5 billion text messages were sent a month in the United States, up from 2.8 billion in 2004, according to the wireless trade association CTIA.
"Text messaging is a $35 billion-a-year business," explains ClairMail's Salesky. "Text messaging is a natural way to invoke two-way communication with customers."
For example, banks can use text to deliver actionable alerts to their mobile customers. These may indicate a low balance, seek to verify a transaction, deliver a cross-selling opportunity or even supply special dial-in information for the contact center.
"The mobile phone can strengthen the abilities of agents at the contact center," says Accenture's Georgi. "The combination of a person in the contact center and the mobile device opens up the next level in terms of contact center services," he adds. "Texting becomes a means for the customer to connect with you rather than call in and wait on hold."
According to ClairMail's Salesky, if a bank is outfitted with the vendor's solution, for example, the customer can text the bank, and ClairMail's system puts that person in the call queue. "Then we text the customer with a message alerting them with a time and number to dial into," Salesky says. "Being on hold never benefits anyone. Texting is a means of connecting the bank more easily and getting better customer service."
Better Safe Than Sorry
Before banks can make any mobile opportunities a reality, however, they need to be mindful of security. Clearly, banks are comfortable with traditional configurations, in which PCs are wired and plugged into networks via Ethernet cables. "Banks can see where the computer is plugged in and detect where the firewalls and other layers of security are," explains AirDefense's Rushing. "But with wireless, all bets are off."
In fact, a lack of security is a surefire way to kill any wireless project. "Customers will only adopt [wireless applications] if they trust their bank, and if applications are treated and maintained responsibly," NCR's Race asserts.
While wireless networks are not yet 100 percent secure, there is hope on the horizon. "The encryption problem has been solved, but due to the nature of wireless, users are still able to mimic and piggyback onto networks over the air," AirDefense's Rushing says. "Until this is resolved, banks need to monitor what is going on and who is doing what functions."
Despite some security concerns, however, new mobile banking applications already are emerging. While total mobile banking remains a theory for the time being, the first step toward achieving that nirvana may be through contactless payments. Supported by a contactless smart card or NCF (Near Field Communication) chip embedded in a mobile device, customers may gain a new way to access ATMs, pay for purchases or make electronic deposits. An NFC chip encrypts credit card or bank account information; then, using short-distance radio waves, transmits data to a receiver that can reside in a point-of-sale payment terminal, an ATM or a kiosk. Since the chip is considered two-way technology, the unit also can receive other data, such as receipts or coupons.
"The concept also holds the opportunity to mitigate payment card skimming and fraud," NCR's Race points out. "By removing the mag stripe from the equation, consumers no longer need to insert a card into an ATM slot. This eliminates the chance of embedded data being skimmed or cloned."
Looking ahead, banks may choose to outfit entrance doors with electronic sensors that detect these chips. "This will alert associates to when a valued customer enters the branch," Race says.
While European markets already are testing various contactless banking applications, the domestic market may soon follow suit, according to Race. NFC chips will gain traction during 2007 and 2008, paving the way for these solutions, he contends.
While U.S.-based banks are hopeful, they do remain cautious. "Banks overseas are testing mobile payment alternatives, and they clearly provide an opportunity," said Richard Martino, senior vice president, U.S. Bank (Minneapolis; $217 billion in total assets), at the "BetterManagement LIVE!" conference. "However, it will happen over time," he added.
Daniel Thorpe, senior vice president with Charlotte, N.C.-based Wachovia ($700 billion in assets), agreed. "Europe is ahead in this arena, and from a business level, they are more comfortable with the technology," he told show attendees. "To gain critical mass here, the industry needs to ensure security [for users]."
Security issues aside, banks also are at the mercy of another factor. "The mobile phone industry will enable and drive these solutions, as they own the underlying and supporting technology -- not the banks," concludes Thomas Spitzer, president and CEO of Tyfone, a Portland, Ore.-based provider of applications for mobile phones. **