Are Banks from Mars, Mobile Banking Technology Vendors from Venus?

by Bart Narter, March 3, 2010
Product Trends/ Reviews
North America

Abstract

In the US, banks and mobile technology vendors have a symbiotic relationship that should grow over time. As is the case in every relationship, there are areas of agreement and disagreement. Celent examines their respective views of the road ahead for mobile banking.

Although talked about for years, mobile banking has become a reality in 2010, to the point where it is viewed as the “fifth channel” of banking. By the end of this year, the majority of top 50 US banks with retail operations will offer some form of mobile banking, and there will be about 18 million mobile banking active users. Reaching large financial institution saturation, the banking and mobile vendor technology industries are rapidly approaching a point where competition will center around innovation. To gain a better understanding of these views, Celent interviewed 11 banks (all but one in the Top 50 category) and 10 mobile banking technology vendors in a new report, Are Banks From Mars, Mobile Banking Technology Vendors From Venus?

Banks and vendors have similar “big picture” views of how innovation will play out. They share a belief in the growth potential of mobile banking, including the acquisition of high-cost, offline customers. Both parties are nearly unanimous in their views that certain front end functionalities, such as real time alerts and P2P (person-to-person) payments will be important in the near future. There is also a strong consensus that mobile banking has to be a channel of its own, not an appendage of online banking, and greater integration with back end core banking systems is required. Most players in both industries are clearly hoping for mobile-related fee opportunities.

“Both parties feel that mobile channel monetization will eventually occur,” says Red Gillen, Senior Analyst with Celent’s Banking group and author of the report. “However, many of these hopes for monetization appear to be out of line with early adopter, in-market solutions, including free mobile P2P and RDC products.”

There are also many areas where banks’ and vendors’ views understandably diverge. Banks tend to take a broader approach, having to worry about multiple channels, systems, and organizational units. On the other hand, vendors are mainly concerned with a narrower approach, because mobile technology is their niche field of expertise.

Expectations regarding some of the "next big thing" elements of mobile banking also differ. Banks are taking a very cautious approach to mobile-based marketing, whereas vendors see unrivaled potential for the mobile marketing channel. Near field communication (NFC) payments and downloadable apps represent other front end functionalities where the two industries do not always see eye to eye.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

3

Introduction

5

2010: Is the Market Plateauing?

7

Wedded Bliss: Areas of Agreement

14

Separate Lives: Areas of Divergence

31

Conclusion

41

Leveraging Celent’s Expertise

43

Related Celent Research

45

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