Mobile Banking: Questions About the Future

Does anybody know what comes next for mobile banking?

It’s a valid question, because we can all be sure it won’t be the same as it is now. That’s the basic understanding of technology: When something is working well, the best thing to do is to break it and find something that works better. If we don’t, someone else will.

Here’s a good reason to follow that rule. Consulting firm KPMG is out with its Global Mobile Banking Report for 2015, and the numbers are amazing. In only four years, mobile banking will double to 1.8 billion users worldwide. That’s a solid quarter of the entire world’s population. Is that really going to happen with the same tools and technologies we have now? That wasn’t the case with PCs, mobile devices, social channels or any other technology fields, so it’s a safe bet that there are entirely new paradigms on the way, and they will drive changes in customer habits.

The related question has to do with the institutions behind those advances. They’ll win, and others will lose. Remember, mobile banking users are among the most fickle customers around—one problem with the app can drive them to another bank with better options.

Stymied by the difficulties inherent in cultivating their own innovations, some institutions have taken to buying the goods—they just go about acquiring technology firms wholesale. But when money is involved, it changes the dynamic. There’s a raft of compliance mandates to consider, along with rising challenges from a variety of threat matrices. While certain other industries can be more liberal in their experimentation, the true potential of ‘Open Banking’ is still largely unrealized.

In this context, another finding from the KPMG study is particularly relevant. The report notes that adoption rates for mobile banking are highest in what are loosely described as ‘developing’ countries. For example, they reach 50%-60% in vast markets such as China and India. However, there are serious concerns here that need to be addressed.

Researchers from the University of Florida are reporting that mobile money systems in nations such as Brazil, India, Indonesia and Thailand exhibit alarming levels of vulnerabilities in the technologies used. They studies several dozen popular apps and identified numerous problems, ranging from ineffective cryptography and poor authentication to widespread data leaks.

Branchless banking supported by mobile capabilities clearly offer a significant advantage to an underserved demographic—these apps sometimes represent the only way consumers can pay bills, send money and conduct other transactions, all features that those in more developed markets take for granted.

However, it should also be remembered that some of these regions lack the industry maturity needed to address the problems. In fact, many of these services are offered not by the banks themselves but by telecommunications and other technology companies, without the regulatory protections involved.

There’s no panacea to be found here. The KPMG study says that there are three basic issues confronting continued growth, and it’s not hard to guess what they are.  First, innovation must be matched with adequate security. Next, that fickle customer won’t get any easier to please—if anything, it will become more demanding. And of course, a comprehensive mobile strategy that covers many bases is required, which means looking past the next cool app.

So that’s the challenge. Is your institution taking a big-picture approach to mobile banking, one that encompasses entirely new offerings that defy current conventions? If it isn’t, take a look around, because that’s what comes next.

Written by Jack Dougal