Managing money on the move

In the light of global recession, consumers have sought to take far greater control over the way they manage their money. FST spoke to Steve Townend, CEO of of MoBank, a new fully mobile financial services company in the UK, about the potential for mobile banking.

“We've had to invent things because they didn't exist, but generally it's about integration and that's where we concentrate our effort and technology”
-Steve Townend

It has been two-and-a-half years since Wells Fargo and Bank of America triggered the mobile banking movement in the US and according to research conducted by market intelligence company ABI Research, mobile financial services are very likely to become the 'next big thing' that will attract many millions of consumers. The global number of subscribers more than doubled between 2008 and 2009, and is expected to almost double again in 2010.

The latest forecasts from ABI Research indicate that in 2015 about 407 million people worldwide will carry out financial transactions with their banks using their mobile phones. Of those, some 66 million will be in North America.

When it comes to mobile banking, Bank of America has certainly been a leader. Back in May 2007 it launched its mobile banking services and by June 2008 it had already gained over a million mobile banking customers. But Wells Fargo recently became the first major financial services company in the United States to offer text banking to all its customers.

Banking by cell phone is certainly growing in popularity but banks will need to further develop their mobile applications in order to engage and retain customers that are part of the so-called 'Generation Y' or the 'Millennial Generation' - young adults, 18- to 25-year-olds who grew up with computers and do everything from their phones.

However, the next innovation in mobile banking technology may be just around the corner, or just across the pond. MoBank, a UK-based company, has just launched the first fully mobile financial services company in Europe. The comprehensive mobile banking service combines the functions of bill payment services, mobile banking applications and account aggregators, all into a one-stop-shop that is currently available on the iPhone, iPod touch or Palm Pre.

The reason why MoBank has created such a furore is because it is the first payment servicing company that has been created specifically for mobile devices. And because of this it is able to offer a much broader range of services, not all of which are directly related to banking. For example users of MoBank can buy tickets for the cinema or their favourite gigs using their cell phone, they can also order fast food or order, pay for and send gifts or even book travel tickets or buy travel insurance.

Steve Townend is MoBank's CEO and he has some lofty aspirations for his latest venture including bringing it stateside. "We're already incorporated in the States and although we haven't invested there yet, there is a pull for us to go there," says Townend. "We want to get it right in the UK first, but actually it's very transportable, particularly with the iPhone. You could use it in the States now if we allowed it."

This is the plan eventually and not just in the States. Townend admits that he has plans to roll MoBank out on a larger scale although he says that his initial intention was to only expand to English-speaking countries. This is something that he has since reconsidered however, after having received calls from as far afield as Hong Kong asking if it can be licensed in China. Townend originally declined such offers but when inquirers pointed out to him that in the near future there could potentially be more English speakers in China than in the States he wisely decided that China maybe a market that MoBank will consider exploring.

One of the main advantages of MoBank that will help to facilitate its global expansion is the fact that it is relatively universal. "I think one of our greatest assets, in terms of competitive edge, is the ubiquity. We're not tied to anybody so whether you bank with Lloyd's or HSBC it doesn't matter to us," explains Townend. "We don't mind what mobile telephone company you're with. We don't care what bank you're with. And in some respects, we don't mind what platform you're on," he says nonchalantly.

Infact, MoBank only operates on the iPhone, iPod touch andPalm Pre platforms at the moment, but Townend stresses that if he had the funding required - an amount he puts at about £10 million - MoBank would be available on all platforms. However, developing the technology to make this a reality is not cheap. Townend estimates that it costs about £20,000 and takes about six weeks to put MoBank on a new platform. However, he does have plans to go for Android - Google's mobile operating system - as many of the new smart phones are using this platform now.

But one thing Townend is adament about is the fact that MoBank will only ever be available on smart phones. "To be frank, it doesn't look good on anything that's not a smart phone," he says. After all the effort that MoBank has invested in the interface this is not surprising. "Our expertise has always been on the customer interface. We make the experience as good as any experience you would get on the internet."

This interface obviously helps to differentiate MoBank from other forms of mobile banking, many of which are still using SMS as the main form of transaction. But Townend always aimed to go beyond this. "What we want to be known for is integrating, deploying, making relevant and designing technology for our customer base," he says. "We've had to invent things, because they didn't exist, but generally it's about integration and that's where we concentrate our effort and technology."

Whilst integration is something that may go unnoticed by all but the most trained eyes, relevance and the design of technology for the customer base is blindingly obvious as MoBank leads the way in mobile applications that are relevant to Generation Y. "One of the reasons we did this was because we thought that the youngsters - anyone born after 1980 - are profoundly different to any group that had come before them, especially in the way that they interact with one another and the way that they use media. They've grown up with the technology and they are confident with it.

"Another thing is, they actually adopt before they research so they give you a chance, whereas some of the older generation probably wouldn't do that," explains Townend. He believes that iPhone defines this segment quite well as most of those who have adopted it are 20-35 year olds.

But he points out that their research has also shown that there is another segment that has become part of their target market. He calls this segment "BlackBerry Dads" and defines them as users who like to get everything done on the train or on the go as they resent going home and having to log on to a computer to get their internet banking done.   

With this target market in mind, Townend has also adopted a relevant way of marketing MoBank, which has involved very little, if any, spending on branding and advertising. "Viral is a new marketing tool so we are experimenting with that," he says. "We use Twitter, Facebook, YouTube, and all those sorts of things that are cheap and free. We also use Google AdWords. We do as many viral things as we possibly can."

One thing that proved a big success was when MoBank was featured on the iPhone as a featured app. It was downloaded 20,000 times and MoBank didn't pay a penny for that. But Townend realizes that using viral as a sole means of promotion can only go so far before it reaches saturation point and he will have to start spending money on branding and advertising to raise both awareness of and the profile of MoBank.

Townend himself admits that awareness is one of the main challenges that MoBank faces at the moment. With no links to major UK or international banks, MoBank doesn't have an already established reputation and will need to work hard to gain people's confidence, especially with regard to security. But Townend is adament that MoBank is totally secure as no important information is held on the phone itself and everything is encrypted.

Another challenge that Townend expects to come up against in the near future is compliance. Currently, as a small business, MoBank is able to self-regulate, but as it continues to grow it will have to be PCI compliant and Townend assures us that this is something he takes very seriously.

And there is no reason why MoBank shouldn't continue to gain in popularity, especially if the trend towards mobile banking in general is anything to go by. Even the recession hasn't managed to dampen the popularity of mobile banking. In fact the opposite may be true. As people are feeling the pinch of the economic downturn they are increasingly looking to micro-manage their money and MoBank provides the perfect means to enable this.

"People are wanting to control their money more so now than they ever have. And the way we see it is that MoBank is almost like a digital checkbook, only much more clever," says Townend. "You can find out what your balance is, what you spent and what you've got left, but you can also buy stuff with the phone. But in addition to doing that we allow you to transfer money dynamically between accounts and pay bills. You'll eventually be able to pay person-to-person. What we want to do is enable you to manage your money like a balance sheet," he explains.

Mobile banking is therefore more about managing money than actually spending it although as the technology develops further shopping is something that will be made infinitely more simple. Townend is already planning to integrate Near Field Communication chips into smart phones turning them into virtual payment cards so that shoppers will merely have to wave their cell phone over a reader to make payment.

According to figures released by ABI Research, mobile online shopping in the United States rose from $396 million in 2008 to $1.2 billion in 2009. Furthermore, in 2015, shoppers around the world are expected to spend about $119 billion on goods and services purchased via mobile phones. That number represents about 8% of the total e-commerce market.

So there is obviously huge potential for mobile banking in the future and Townend is hoping to cash in on this with MoBank. "The opportunity is massive, but there are risks as well. Nobody is really transacting on the phone yet. It's all new. It's all invention. But the intellectual capital we're building up because we are new into this is massive. It's all about risks and rewards," he says.

The biggest reward for Townend on a personal level though will be if he manages to disrupt the market with MoBank. "I want to change the way people think about banks and what banks can do. It's not about retiring with millions in the bank, it's more about leaving a mark. And I want to leave a legacy," he says.  "So I've got a fair few aspirations and then I'd like to move on and maybe start again on something else."

Mobile banking report card

In September 2009, two years since mobile banking was introduced in the United States, analysts at ABI Research undertook a study to assess its progress, with a focus on the user-friendliness of the services on offer. The firm published a mobile banking report card, which assessed 29 banks on the discoverability and accessibility of their mobile banking services.

The results were as follows:

A – Exceptional: BB&T, Eastern Bank, Fifth Third Bank, Northeast Bank, USAA, Wells Fargo

B+ – Very Good: Bank of America, Chase

B – Good: Capital One, US Bank, Huntington Bank

C – Average: America First, Bancorp South, Citibank, PNC, Wachovia

D – Below Average: Carolina First, 1st Bank, IBC Bank, Mercantile Bank, Regions, SunTrust, Synovus

F – Failing: M&T, Provident Bank

No mobile banking offering: Citizens Bank, Comerica, HSBC, KeyBank