There is little doubt that the opportunity for the mobile channel and mobile devices in general to transform financial services has been subjected to a great amount of exaggeration and hyperbole. Some of it is warranted.
Looking at the opportunity in the context of global transaction services, commercial banking and treasury functions within major financial institutions, there are some truths that should be acknowledged.
First and most importantly, mobile devices are universally in the hands of corporate representatives at all times. As such – and similar to other applications like email and sporting scores – financial services applications deliver immediate and convenient access to information and interactions that are important to users.
Second, on the retail side of the house, bankers have been able to quantify the bottom line impact of offering mobile banking, alerting and payment services to corporates. Adoption is material – in some instances a majority of the total customer base. And customers become more loyal, oftentimes decreasing customer churn by over 40%.
Third, mobile devices have significant computing power, appropriate security features and interface options that effectively enable different types of banking and payment transactions.
While the opportunities for mobile financial services in commercial and treasury are conceptually endless, industry experts feel that demand for mobile services will be centred on banking, payment and alerting functions that can be delivered ‘snack-sized’.
Payroll operations staff are unlikely to create and manage company-wide payroll processes for thousands of staff via their mobile device. But it is easy to see why a divisional corporate chief financial officer (CFO) would be interested in approving payroll payment processes on the go (at the golf course, for example).
Based on M-Com’s experience with financial institutions around the world, we feel the most of the meaningful developments in corporate mobile financial services will focus on ‘snacking’ interactions that deliver benefit to corporate users from ‘location independence’. At a functional level, these are most likely to include:
- Approvals for transactions such as foreign exchange (FX) trading or wires, including those requiring multiple signatories.
- Checking on the status and/or outcome of a major financial transaction (either proactively through a status-driven alert, or reactively thorough a customer-initiated inquiry).
- ‘Actionable’ alerts that enable decision-makers to effect corporate decisions. Examples include positive pay or payroll exception conditions.
- Out of band authentication to augment the security and safety of existing channels, such as online and over-the-phone interactions.
At a more holistic level, the mobile channel also acts as an effective business continuity option for a bank’s customers. If the power goes out (or similar) at a critical point in the transaction cycle for a given commercial entity, the mobile channel is there when online banking is not.
Mobile Technology Options
There are a number of mobile technology options available to financial institutions when it comes to mobile financial services. These include:
- SMS or text messaging – primarily a store-and-forward messaging mechanism. Email is another relevant option available in this context, even if its mobile-centricity is not as clear.
- Unstructured supplementary service data (USSD) – a simple, command-based interface run by mobile operators that delivers a text-based, menu-driven application.
- SIM toolkit (STK) – an application that resides on the phone’s SIM card, owned by the mobile operator.
- Downloaded applications – such as those downloaded from Apple’s iTunes store or RIM’s BlackBerry AppWorld.
- Mobile browser, including WAP – for internet-based browsing on mobile devices.
Of these technology options, we believe that only those that banks can control will be sustained for commercial mobile banking transactions.
Mobile browser as an access mode already has a number of internet parallels – such as security management – and will be easiest for banks to deploy and customers to accept. End users are already familiar with concepts such as hyperlinks and other interface controls.
Downloaded applications offer additional security measures, such as embedding client-side certificates and may gain traction within commercial banking over time. Applications can also deliver a faster and slicker user experience, but require banks to address device diversity and the maintenance associated with application distribution.
M-Com believes that these two ‘rich access modes’ will be tightly coupled with alerting technologies – SMS, email and push notifications – to make the user experience faster and more intuitive for decision-makers using these services.
Beyond the User Interface
A common theme we encounter when commencing discussions with financial institutions is the ‘what does it look like?’ syndrome. It is vital that any deployment mobile solution optimises the presentation and the user interface on a broad range of devices (since the bank cannot control what mobile phone types are in the hands of its customers).
While the user interface is important to adoption and on-going usage of mobile financial services (and even more so in the retail side of the house), the more critical requirements – and those that are most difficult to satisfy – go well beyond the mobile interface.
Important examples of considerations beyond what the interface looks like include:
- Enrollment and device activation processes that ensure authentication and identity integrity of the bank’s customers.
- Effective management of roles, privileges and account entitlements for end users, including administrative ones.
- Logging, auditing and reporting – both for the bank and commercial entity.
- Effective customer care and support, including dealing with exception conditions.
- Risk and security management – both proactively and reactively.
No One Likes Risks
Most product managers within commercial banking and treasury units in financial institutions get a headache simply thinking through the scenarios and opportunities available to fraudsters within the bank, company and the general public. Certainly, risks and threats must be identified and addressed before deploying high-value transactional services. And they can be.
Some examples of banking-grade risk and security measures that can be deployed effectively as part of a mobile deployment include:
- Authenticating all transactions, including those carried out by mobile users and administrators.
- Leveraging additional multi-factor and mutual authentication measures, including use of unique URLs and application-based identifiers.
- Formally activating all users and devices.
- Monitoring, detecting and alerting on login failure parameters.
- Applying channel-specific transaction parameters and velocity checks.
- Integrating mobile interactions and data to existing fraud management infrastructure within the bank.
Furthermore, as an additional channel that is ‘out of band’ for internet and telephone-based interactions between companies and banks, the mobile channel can augment the safety of the relationship between the two.
Emerging Versus Developed Economies
It is well understood that for retail banking, developed and emerging economies have rolled out vastly different mobile services. We think that the level of distinction will be significantly lower for commercial and treasury functions, and see this in the requirement similarities between M-Com’s customers in southeast Asia versus those from the American Midwest. They key reasons for this are that across most parts of the globe:
- Internet-based commercial banking trading tools are broadly used already.
- Decision makers and administrators already leverage internet-connected smart phones (such as BlackBerrys).
Businesses around the world want to do the same things – buy and sell currencies, invest and borrow funds, and make payments to employees and suppliers. Despite these similarities, the mobile channel will enable banks in emerging nations to offer treasury and commercial banking services to businesses that have previously been under-served. This is because the economics of mobile financial services transform traditional cost structures (and hence make it feasible for the bank) or because these business owners have mobile lifestyles (and see mobility as relevant to how they run their business).
Additionally, of course, there are also likely to be some country and segment-specific variances such as those of regulatory and industry-body compliance – that will require closer scrutiny for financial institutions in different geographies.
The Ch-Ching of Investing in Mobile
The return on investment (ROI) metrics for investing in the mobile channel are compelling and highly visible to financial institutions. The services that banks are deploying to their corporate customers directly affect decision makers within those corporations. Focusing a mobile strategy on approval, authentication and action-oriented services delivers immediate value to those individuals within enterprises who determine which bank the corporation should throw its business to. That’s what banks who are investing in these services – such as Wells Fargo with its CEO Mobile Service – are rapidly discovering.
Most commercial entities have a multitude of banking relationships. Which banks get what share of that business is determined by the people who most value location independence, and by extension, their own time. Being ‘the most convenient bank’ for CFO’s, treasurers, financial controllers and other senior financial delegates in corporations can and will deliver your bank a bigger share of their funds under management, debt arrangements, transactions and loyalty.
Mobile Financial Services in Practice
Figure 1 is an example of how a mobile financial services transaction works in practice within the context of treasury and commercial banking, with a focus on a transaction approval process.
- A – A company representative initiates a transaction within the bank’s core system. This could be a foreign exchange trade, payroll/payment process, wire transfer or any other type of financial transaction offered by the financial institution.
- B – The core system initiates an approval request from the bank’s mobile financial services platform.
- C – The mobile financial services platform notifies the approver of a transaction requiring approval and requests an action from the approver.
- D – The approver approves, modifies or declines the transaction request via his registered mobile phone.
- E – The mobile financial services platform provides approval outcome information (and any other required data) to the bank’s core system.
- F – The core system processes the transaction.
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