Juniper: Banking is now mobile and branchless


Industry Voices

Nitin Bhas

     Nitin Bhas

Mobile banking forms an essential component of the overall mobile commerce industry, wherein the two are closely interrelated. Empowering users to make account transactions whilst on the move, mobile banking enables supplementary mobile commerce actions to be undertaken as a function of a mobile wallet.

Equally, a consumer adopting the mobile phone to make payments reinforces a mutual mentality in which individuals increasingly consider the device as a comprehensive financial tool, and subsequently naturalizes its use for ancillary payment actions such as banking. For example, although making a contactless NFC payment for a train or metro ticket is not mobile banking, the recurrent act of paying with a mobile device allows the customer to become more comfortable, and to then find related and additional transactions a more efficient undertaking via their mobile.

However, driven by the growth of smartphones and the development of mobile applications, the scope of and therefore revenue return on mobile commerce has expanded significantly over the past twelve months. m-commerce now embraces the purchase of physical goods (retail), multiple types of ticketing, coupons and vouchers, as well as a range of types of mobile financial services including banking, both in developed and developing countries. Indeed, eBay has attributed a substantial proportion of its strong recent growth to the accelerated adoption of m-commerce by its customers. 

The convergence of financial services and mobile technology in the global drive towards ubiquitous financial inclusion and digitalized currency has produced different business models for developed and developing nations, offering distinct target markets, trends and opportunities.

In developed nations where the banked population is approaching 100 percent, mobile banking is largely additive and bank-led, integrating the physical product with the digital in forming a complete banking package, particularly targeting young banking customers who organize most of their lives through the mobile device. This has been reinforced by heightened usage of applications and substantial tablet uptake.

In developing countries, m-banking is prospering enormously, primarily as a powerful platform for delivering financial services to un-banked populations at the base of the socio-economic pyramid. Given high mobile penetration and poor banking infrastructure, such transformative banking is principally MNO-led or else comprised of collaborative ventures between banks and telecoms.

Branchless banking is a banking strategy beginning to be widely adopted in many developed (as well as developing) countries over the world. Banks and FIs opting for branchless banking will not have any kind of physical presence or branches--whether expanding their network or starting a new network--in any of the markets. For example, First Direct in the U.K. launched branchless banking as early as 1989 and operates only via phone, post and online.

Green Dot's GoBank, launched recently, offers one such mobile-only service. GoBank's owners claim that it has been designed to give access to many traditional features from a bank, including account security, but without the high fees or the queues.

Meanwhile, the economics of physical retail is under threat with the increasing demand for 24/7 access and real-time capabilities. Indeed, banks are becoming increasingly concerned that their market position is being undermined by MNOs or third-party vendors that are now also enabled by online technology to enter the marketplace and provide banking services.

Crucially, this recent industry shift highlights why banks must respond rapidly to retain market share by cultivating new revenue channels through sustained innovation. Simultaneously, such developments offer an opportunity for banks to realize their key objectives, namely reducing operational costs whilst retaining QoS, improving efficiency, and essentially reducing brick and mortar establishments.

While it took some 100 years to bank a billion individuals through the traditional means, it is conceivable that mobile banking could accelerate the process dramatically and bank a billion in the next five years. Indeed, that is what we anticipate: our latest report on tablet and mobile banking finds that over 1 billion mobile phone users will have made use of their mobile devices for banking purposes by the end of 2017, compared to just over 590 million this year.

The branchless banking and mobile banking strategies need to be at the forefront of FIs business strategy within both developed and developing markets: combining "branchless banking" and mobile will enable banking to become increasingly ubiquitous to all kind of communities and users.

In summary, the ability to access banking information and make transactions whilst on the move "whenever you want" and "wherever you are" is a compelling proposition to most banking customers, and many consumers are already seeing the benefits of accessing banking services on their mobile phones. Mobile banking technology is proven and currently available in most regions of the world, reinforced by exceptional consumer demand, especially within the developed regions.

Nitin Bhas is a Senior Analyst with Juniper Research and the author of the recently published report: Mobile Banking Handset & Tablet Market Strategies 2013-2017. His areas of focus include mobile networks, technologies and handsets.