Interviews with industry experts

Citation

(2010), "Interviews with industry experts", International Journal of Bank Marketing, Vol. 28 No. 5. https://doi.org/10.1108/ijbm.2010.03228eaa.002

Interviews with industry experts

Article Type: Interviews with industry experts From: International Journal of Bank Marketing, Volume 28, Issue 5

For the purposes of this special issue, two interviews with Finnish industry experts were conducted in January 2010. Both interviews were semi-structured theme interviews. The choice of the informants was based on their knowledge of the field. The experts interviewed for this research were Ms Liisa Kanniainen from Mobey Forum and Mr Bo Harald from Tieto. Both are the leading experts in the field of mobile financial services and electronic banking.

The discussion revolved around themes that covered the objectives of the special issue. The topics discussed covered the terminology around mobile financial services, industry perspectives, challenges and opportunities and the future of the industry. Finally, both interviewees were asked to give advice for academic researchers on important research areas in the field. The interviews were audio-taped and transcribed.

How would you define mobile banking?

Liisa: The industry talks about mobile financial services. Mobile banking is a subset of mobile financial services. Mobile banking includes taking care of banking affairs via mobile devices, such as paying bills, account transfers, buying stocks and these kinds of services that are typical banking services. In the mobile channel, important services also include informational services such as requesting account balance information and information on recent account activities. In addition, transactional services and marketing services are important in mobile banking. One service is the so-called trust service. That means that the mobile medium is used as an authentication for third parties.

How clear is the line between mobile financial services and online banking services in general?

Heikki: If I use online banking via a laptop and I am on the move, aren’t I mobile then, and thus using mobile financial services?

Liisa: Yes, in a way you are. The line between these is not clear. It has been estimated that in 2010 over half of the internet connections globally will be via a mobile device such as a mobile phone. Online banking services also include mobile banking services. However, it is important to note that mobile banking services are not the replication of online banking services, because via the mobile channel people use different services than via their computers. So mobile has its own role in banking, but I would say that mobile banking will be integrated fully in online banking in the future.

Bo: The development of new mobile phones blurs the line even more. When small mini-laptops nowadays may also include SIM cards similar to mobile phones, it is difficult to draw the line based on the device in use. What I would suggest is that a mobile device is a device that is easily carried in one’s pocket. Mobile financial services will also be part of online banking in the future as mobile services also have the same infrastructure in the banks’ side. The gateway to the user is a bit different.

Classifying mobile financial services

There are various ways to categorise mobile financial services. According to the interviews, one common classification includes mobile banking services, mobile payment services and trust services (Figure 1). Mobile banking services include mobile e-banking and text-based services such as SMS-based account transfers, bill payments, investments, alerts and notifications. In addition, mobile banking services also include downloadable applications.

Figure 1 Classification of mobile financial services

Mobile payments form their own area in the mobile financial services field. Payments can be categorised as person-to-person payments and remittances, remote payments and local payments. The difference between local payments and remote payments is not only the distance between the buyer and the seller as one might imagine but also the technology used in processing the payment. In local payments, products or services are paid without a telecommunications network. Local payments are typically processed by some near-field-communication (NFC) technology such as radio frequency identification (RFID) and a tag. In remote payments, the payment is processed via a telecommunications network. As an example, if a consumer purchases a tram ticket with SMS, it is a remote payment. If the tram ticket is purchased with an RFID tag on the phone, it is a local payment. Most mobile payments in Europe still are remote payments (examples include purchasing of logos and ring tones that are charged to one’s mobile phone bill), but in the future, as more NFC handsets come to market, the number of local payments is expected to grow rapidly.

Trust services include authentication with a mobile phone. These can include, for example, authentication services for third parties with NFC technologies that would help us to communicate via our mobile phones with various other devices such as our car, or our home and office doors.

In summary, it is suggested that academic research should distinguish between mobile banking and payments at least. In addition, trust services such as authentication services seem to form their own area under the concept mobile financial services. As stated, contributors to the special issue have mainly looked at mobile banking services. Riquelme and Rios (2010), for instance, define mobile banking as “electronic banking that uses mobile phone technology (or other wireless devices) to deliver electronic financial services to consumers”. Cruz et al. (2010) further categorise mobile banking operations as mobile accounting, mobile brokerage and mobile financial information services. Laukkanen and Kiviniemi (2010) argue that mobile banking should be defined as “an interaction in which a customer is connected to a bank via a mobile device such as cell phone, smartphone or personal digital assistant (PDA)”. As none of the articles in this special issue gives a definition of mobile financial services, one is provided here:

Mobile financial services can be defined as using a telecommunications network (or some NFC technology) on a mobile handheld device to carry out banking affairs and other forms of payments such as person-to-person, local and remote payments and using the handheld device for authentication purposes.

Although the same online banking services that are typically used via personal computers can be accessed on mobile browsers as well, the most successful mobile financial services so far have been simple and easy-to-use SMS services. For example, in Finland, more than half of all tram ticket purchases are via SMS, but mobile online banking services are not widely used. Therefore, SMS is still the dominant and most widely used technology in mobile financial services, especially in Europe.

It has been estimated that more than half of the internet connections will be made via mobile handsets in 2010 in the USA, and the same trend is visible in the online banking field (Mobile Marketing Association, 2009). Do you see rapid growth in mobile financial services in Europe and specifically in Finland?

Liisa: Yes, mobile devices are used more and more to take care of financial affairs. There are many success stories from different parts of the world; for example, new handsets like the iPhone have accelerated mobile banking usage.

Bo: I would not be so optimistic, although the iPhone phenomenon might accelerate mobile internet connections, especially in the US. Estimations often underestimate the thickness of the walls of the so-called PC-habit prison (meaning that users stick with their old habits and prefer using their PCs for banking affairs). Many still prefer to do their banking via their computers. It is different in developing countries where most people do not own a computer, like in India and China.

Challenges and opportunities of mobile financial services

According to the interviewees, the main challenges related to the use of financial affairs via small mobile devices are related to the infrastructure of a country, existing usage habits and convenience of online banking, lack of business models and a still developing ecosystem and standards. In addition, small screen size will be a challenge but also an opportunity. In addition, the lack of global standards in the authentication of a user and lack of NFC phones are obstacles. NFC is of special importance for getting the critical mass to use mobile services, and for that reason NFC could be the key to mass adoption:

Bo: NFC technology can be very helpful for us in the area of mobile payments (e.g. in public transport and shopping) and in various authentication services.

Table I Pros and cons of mobile financial services

The players in the industry, especially Mobey Forum, are currently seeking to develop a business model for the industry that is beneficial to all the value chain members. Table I classifies the pros and cons of mobile financial services according to the interviews.

Future of mobile financial services

The interviewees stated that one area of great interest would be electronic bills and their integration in the mobile medium. An example would be that a user receives his or her bills on his or her mobile device, which are then accepted by just a press of a button, or additionally giving a PIN code or similar.

Both interviewees agreed that the potential for mobile financial services lies especially in developing countries. As there are around four billion mobile phones in the world and only 1.5 billion bank accounts, one can easily calculate that there are roughly 2.5 billion people who own a mobile phone but do not have a bank account. It can be easily estimated that these people form one of the most promising target groups for mobile financial services. The first services aimed at these people have included person-to-person account transfers that are relatively easily implemented with SMS technology. These pre-paid accounts using mobile phones are then this target group’s first bank accounts allowing money transfers. However, these person-to-person account transfers are not regulated by financial statutes.

Killer apps of mobile financial services in the future?

Bo: Consumer bill payment notifications and two-way communication, local payments and especially low-value payments in public transfer. These two. These are the most important. The third important one would be access control – a type of service like getting in a building with electronic ID embedded in the mobile phone.

Advice for academics – What are the most important research areas from your viewpoint for academic research?

Liisa: We at Mobey Forum have made an action plan of the research priorities. These include remote mobile payments, business models for contactless mobile payments and merchant perspectives. To enable mobile payment offering it is crucial that all application issuers could provision their applications to the mobile users openly. It is also crucial to ensure the merchants are seeing the value to invest in the contactless infrastructure. This would enable wide-range mass-market services. I encourage academics to look at these issues as well and co-operate with the industry and us.

Bo: What we should remember is that we should start with thinking what many people would need often or all people would need all the time. But too often we start with thinking what a few people need rarely, and that will never become a success story. This is why I think that traffic payments are so important, and on the whole, all kinds of payments processed via the mobile medium. Payments will be the main driver for the development of mobile financial services. It has the needed volume. It also creates a routine for users. PC-based online banking would never have got so far without first starting with bill payments. It is the same thing with mobile devices, and even more if all card payments could be conducted via mobile, for instance, with NFC-enabled mobile handsets. In a nutshell, payments are the most important area to look at.

What about consumer studies?

Liisa: The industry has done many consumer studies and pilot tests. I would say that we already know whether consumers like this or not. All pilot tests and consumer studies indicate that consumers love mobile financial services with some limitations such as technical difficulties in using the services. The industry is at this point not very interested in consumer studies as we know that people have liked the services. From our perspective, the biggest challenge is to form a viable business model.

Bo: Research often misses how consumer behaviour has changed when comparing people in the “new” world against those in the “old” world. At present people have too many tasks to take care of, and they have to choose what can be done and what not. It is a question of how to manage time. Companies had before, let’s say, 15 minutes to get a consumer to understand the benefit of an offering. Now they only have three minutes to do that. In this hectic world, research should focus on examining how important it would be that we could manage our daily tasks with devices we already have in use, let’s say, for example, authentication or sending an electronic invoice. In other words, research should look at how barriers between different services could be removed by doing it with a familiar device and service, like with SMS that has proved its power. We have far too much technology. It is all about how to get users convinced. So in summary, I would suggest investigating end users from a holistic point of view.