MBA Best Mobile Banking Presentation

Mobile BankingRaj Patel, PartnerPlante & Moran

Michigan BankersBankers Education Summit & Trade Show

April 2011

M o b i l e B a n k i n g Introduction & Overview

Customer channel evolution Landscape & trends Should you do it? Security & regulations Closing thoughts

1

Customer Channel Evolution

M o b i l e B a n k i n g Customer Channel Evolution

Branch

Mail

Tran

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atur

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Customer Interaction(Size of Bubble = Relative Importance to Customer)

Low

High

High

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M o b i l e B a n k i n g

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Customer Interaction(Size of Bubble = Relative Importance to Customer)

Phone

Branch

Mail

Customer Channel Evolution 2

M o b i l e B a n k i n g

Tran

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Customer Interaction(Size of Bubble = Relative Importance to Customer)

Phone

ATM

Mail

Branch

Customer Channel Evolution2

M o b i l e B a n k i n g

Tran

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Customer Interaction(Size of Bubble = Relative Importance to Customer)

InternetBanking

Branch

Phone

ATM

Mail

Customer Channel Evolution2

M o b i l e B a n k i n g

Tran

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Customer Interaction(Size of Bubble = Relative Importance to Customer)

PhoneMail

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Branch

Internet

Mobile

Customer Channel Evolution2

Mobile Banking Landscape & Trends

M o b i l e B a n k i n g Terminology

Mobile Banking: Use mobile device to connect to a financial institution to view account

balances and transactions, transfer funds between accounts, pay bills, receive account alerts, deposit checks, etc.

Mobile Payments Use mobile device for purchase or other payment-related transaction at

point of sale (proximity) or via internet (remote) May be conducted via SMS, MMS, mobile Internet, downloadable

application, contactless or barcode technology Process and settle over traditional banking networks (credit, debit, ACH),

mobile carrier or other third party network

3

M o b i l e B a n k i n g Forms of Mobile Banking

SMS (Short Message Service): Send & receive text messages & alerts 90% of US phones Limited to 160 characters Uses existing carrier infrastructure Less security, no encryption

WAP (Wireless Application Protocol): Browser access via mobile phone to Internet content

60% of US phones No downloads required For online banking customers Small screen, slower data Transmission, expensive data plan

Downloadable Smartphone Application: User friendly apps customized to smart phone type

30% of US phones Blackberry, iPhone, Android Faster navigation, easy setup , more secure Involves custom application development

4

10.8 million users120% increase

18.6 million users58% increase

8.1 million users35% increase

Source: comScore

M o b i l e B a n k i n g Mobile Banking Landscape

All National banks, most regional and many community banks offer mobile banking services

National banks offer downloadable applications, SMS and WAP/browser-based mobile access (Triple Play)

Community banks and credit unions may implement their core processors’ mobile packages

Community banks usually start with basic, information-based services Branch & ATM locators, transaction history, balance inquiries

Payment or transaction services are usually Phase 2 Most banks do not charge for mobile banking

5

M o b i l e B a n k i n g 2010 ICBA Survey

The ICBA & Plante Moran Technology Survey results for Mobile Banking from 895 Community Banks from June 2010: 15% of Community Banks

already have Mobile Banking available to customers

Another 47% of the respondents plan to have it available within the next 24 months!

<$100 Mil $100<>$250 $250<>$500 $500 Mil +

6%10%

22%

39%33%

54% 55%52%

61%

37%

23%

9%

Yes Plan to No Plans

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M o b i l e B a n k i n g Features Offered by National Banks

Source: Javelin Strategy & Research, July 2010

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M o b i l e B a n k i n g Features used by Consumers

Source: Javelin Strategy & Research, July 2010

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M o b i l e B a n k i n g Mobile Remote Deposit

Use phone’s camera to capture front & back images of check & send to bank for deposit

Expected high adoption rate with consumers and small businesses that process low check volumes

Reduces Bank’s paper check process costs Less reliance on branch USAA first to offer m-RDS

(Deposit@Mobile for iPhone & Android) Chase Quick Deposit – July 2010 BoA to launch with iPhone in 2011

9

M o b i l e B a n k i n g Mobile P2P Payments

Mobile P2P allows bank customers to send funds to recipient accounts at another bank or to a PayPal account using a mobile phone

Senders register to activate mobile phone and send via email address or mobile phone number of recipient

Transactions usually settle through ACH

Very few banks offer mobile P2P A few are partnering with 3rdparties to offer online and mobile P2P (e.g.

CashEdge, PayPal or Obopay)

Replaces cash and checks for informal, low dollar payments between people you know

Popmoney by Cash Edge Popmoney allows bank customers to "Pay Other People" (POP) anywhere, at

any time, using only a recipient's email address, cell phone number or bank account information.

Offered directly from within the bank's current online or mobile banking applications, Popmoney provides simple, convenient and secure email and mobile payments directly from a customer's bank account.

10

M o b i l e B a n k i n g For Businesses

Banks originally focused on consumer mobile banking Corporate/small business markets offer new bank

opportunities Businesses want ability to monitor transactions, transfer

funds, receive account alerts, with assurance that system is secure

Examples Treasury/Cash Management

• Wells Fargo CEO Mobile• Wall Street Systems Treasury on the Move

Financial trading• e-Trade Mobile Pro

Small Business credit card acceptance Business T&E

40% of executives surveyed in 2010 would consider mobile banking for their businesses

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M o b i l e B a n k i n g Contact Less Payments

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M o b i l e B a n k i n g What else ……

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Mobile Banking Should you do it?

M o b i l e B a n k i n g Key Decisions

Why are you doing it? To stay competitive Customers are asking for it

What services are you going to provide? SMS WAP Smart App

Demographic study % of customers that would use this channel Current statistics on mobile usage

Cost for implementing mobile banking Evaluate current vendors

Existing core banking vendor

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M o b i l e B a n k i n g US Mobile Banking Users Forecast

2007 2008 2009 2010 2011 2012

Javelin 10 27 47 67 88 108

Juniper 9.2 14.5 23.9 42.4 69.2 NaN

AITE 1.68 9.5 21.1 34.9 NaN NaN

Mercator 2 6.4 15.7 24.2 33.1 NaN

Tower Group 1.1 5.7 11.4 19.9 30.3 42.3

Celent 1.38 5 10.8 16.8 NaN NaN

10

30

50

70

90

110

Num

ber o

f Use

rs

(mill

ions

)

Source: Federal Reserve Bank of Boston

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M o b i l e B a n k i n g Could you lose customers?

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M o b i l e B a n k i n g Other Stats

37% of all applications downloaded on iPhone, Blackberry and Android were banking/finance related applications

In 2010, three out of four users are happy with their mobile banking experience (FIS study)

'We are seeing mobile deployments by banks accelerating in 2011, with our clients growing mobile users by 35% monthly,' said Douglas Brown, senior vice president of FIS.

In 4th Qtr 2010, 30 million Americans accessed their bank, credit card or brokerage account from a mobile device. Up 54% from same quarter in prior year

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M o b i l e B a n k i n g Demographic Analysis

Technology Perception Mobile phone services E-mail Internet

Reference Group Relatives & Friends Sociability Bank clerk / marketing

Usage Pattern Speed of use Ease of use Contains all banking

services Independence from

time and place

Security Constraints

Mobile banking is reliable

Electronic channels are reliable

Demographics Gender Age Marital Status Education Income Profession

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M o b i l e B a n k i n g Demographic Analysis

Source: a research study from Finland

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M o b i l e B a n k i n g Demographic Analysis

Technology Perception Mobile phone services E-mail Internet

Reference Group Relatives & Friends Sociability Bank clerk / marketing

Usage Pattern Speed of use Ease of use Contains all banking

services Independence from

time and place

Security Constraints

Mobile banking is reliable

Electronic channels are reliable

Demographics Gender Age Marital Status Education Income Profession

18

M o b i l e B a n k i n g Operating Cost / Transaction

Cost per Transaction

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M o b i l e B a n k i n g Vendors

ClairMail Clickatell Firethorn Mobile FIS Fronde Anywhere Harland Financial Solutions Jack Henry - goDough M-Com

recently purchased by Fiserve

mFoundry Monitise Americas Mshift Sybase 365 Tyfone Yodlee

20

Mobile Banking Security & Regulations

M o b i l e B a n k i n g Preventive Measures

Banks Secure (encrypt) communication channels: SMS, browser based,

downloadable apps Assign security levels & user authentication based on payment

type, transaction value, number of daily transactions, etc. Set transaction limits Know your vendor: ensure mobile apps have built-in safeguards

to limit security breaches in case device lost or stolen Apply due diligence for new customers by authenticating account

number and user name Educate consumers on security policies and tools

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M o b i l e B a n k i n g Preventive Measures

Consumers Set strong passwords, install anti-

virus software on smart phones Know the developer before

downloading applications How well have they tested the app? Is it certified?

Do not store sensitive data on mobile phone

Receive mobile alerts on potentially fraudulent transactions

About a year ago, owners of Android smart phones began downloading mobile banking apps from Google's Android Market. The apps cost about $1.50 each and connected users with about 40 major banks, including Bank of America and Wells Fargo. There was only one problem: The banks hadn't put them there."

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M o b i l e B a n k i n g

What guidelines are regulators currently offering? FFIEC E-Banking, Appendix E: Wireless Banking

Risk Implications: Transaction / Operations risk and Strategic Risk

Message encryption Password Security Wireless Vendors Product & Service Availability Disclosure & Message Limitations

Other related guidance includes:• FFIEC - Remote Deposit Capture Risk Management Guidelines• FIL 84-2004 Guidance on Instant Messaging • FIL 8-2002 Wireless Network Risk Management• ATMIA - Best Practices for Mobile Phone Banking Security Guidance

23Regulatory Guidance

M o b i l e B a n k i n g Closing Thoughts

The demand for Mobile Banking is growing at a rapid pace Two biggest deterrents to enter Mobile Banking

Cost to implement Security unknowns

Given the current economy, now might be the best time to invest Mobile banking will keep you competitive, increase deposits, decrease cost to service and increase

margins

If implemented properly, Mobile Banking can be more secure than Internet Banking Take advantage of your branches to provide customer training – the more

comfortable they are, the more they will use it. Do expect to see guidance (and regulatory auditors) soon Make sure you optimize your web pages for the mobile web!!!!

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Thank You!

Raj Patel, PartnerPlante & Moran

Tel: 248-223-3428E-mail: [email protected]