Navigating the Mobile Channel

New companies are emerging each day with innovative mobile initiatives in financial services, yet complicated carrier policies, technology obstacles and market regulations remain barriers to entry. Companies that are considering developing mobile initiatives need an experienced business partner to help them navigate the complexities of the mobile channel.

Popular Mobile Programs

Financial services firms of all types and sizes are launching mobile campaigns to promote unique offerings that will spur loyalty and retention that will ultimately make them more profitable.

Some of today’s most popular mobile programs allow customers to quickly get important bank account information via their mobile phones. For instance, one of the largest providers of reloadable prepaid debit cards in U.S. today enables cardholders to text into a short code to receive the current prepaid balance on their card or the last five transactions. In addition, many mobile start-ups are emerging with text alert campaigns to notify customers of overdue payments. Some of the more established banks are launching finder services that allow customers to locate nearby ATMs and branch locations by texting to their short code. These types of mobile programs are delivering substantial cost savings for financial services firms and providing better customer satisfaction because inquiries are now being handled via the mobile phone instead of a phone call into the company’s support center.

Channel Challenges

Unlike in the Internet economy where there is an open network for direct interaction with customers, the lack of standardization in the mobile channel limits the ways of communicating with customers.

One example is the regulation of mobile programs and their distribution. Today, the types of mobile campaigns that are approved and how they are disseminated to customers vary among carriers, making it difficult for companies to consistently reach their target audiences and grow their profits.

In addition, because of tight regulations over billing processes, there are limited payment options available to customers. Today, customers must pay for mobile goods and services via their carrier statement, which restricts how companies can transact business in the mobile channel.

Mobile service payment providers like Obopay are trying to change that model. What many analysts have deemed the next mobile payment evolution, Obopay has been paving the way for a new wave of companies offering customers a means to transfer money and make purchases using downloadable mobile applications, WAP and text-messages. For a long time this “mobile wallet” concept was not widely accepted by U.S. carriers because of the equipment investment required to support payment applications and security concerns about transferring funds over the wireless network. In addition, the fees for money transfers and receipts vary among mobile payment service providers and carrier revenue share is not standardized.

But Obopay has been aggressively making its case and has recently signed several new carrier, bank and online community partners. “Historically, mobile operators have taken a ‘walled-garden’ approach and have been cautious about offering financial service over their networks due to the regulatory complexities,” said David Schwartz, Director of Product Management & Marketing for Obopay, Inc. “Obopay is focused on managing the financial service rules and regulations and developing an ecosystem that includes strong relationships with carriers so they can deliver a profitable and unique service to their customers and ultimately increase traffic on their networks.”

A Need for Change: The Right Mobile Commerce Solution

Given the promise of the mobile market, financial services firms see a vast opportunity to sell content directly to consumers through the mobile channel. Yet, today’s mobile commerce market focuses on messaging and delivery and not a complete business solution with standardized processes and proper financial controls Additionally, financial companies need a partner with strong carrier relationships and extensive knowledge of their policies and billing systems.

“Financial service companies should seek a mobile commerce solution provider with a true financial system that can provide clear visibility into the cost of operating a mobile commerce business,” said Steve Shivers, General Manager for OpenMarket, provider of the OpenMarket Exchange financial and messaging system for direct-to-consumer (D2C) mobile commerce. “The mobile commerce solution should offer a standardized business model, transparent terms, and use policy to make it easier for new companies to participate in the mobile market.”

As carriers continue to evaluate mobile programs at their own pace and establish their mobile payment strategy, the mobile industry has embraced more open discussions on how the market can change for all participants in the value chain. We can only hope this evolution will continue in the years to come.