Opportunity knocks

Mark Moore explains how the emergence of mobile personal payments offers a great opportunity for financial institutions to increase customer retention, generate new revenue streams and increase the visibility of their brand.

“Today, cash and checks reign as the primary payment mechanisms for these types of casual purchases, however, the door is wide open for financial institutions to deliver the right mobile personal payments service to make strong inroads here.”
-Mark Moore

The popularity of smart phones has helped usher in the mobile personal payments era, creating an extremely compelling market for financial institutions. Research and advisory services firm TowerGroup forecasts the mobile personal payments opportunity to be $137 billion, or 2.4 percent of the $5.6 trillion in annual US consumer spending. Included in this projection are opportunities for banks to capture unbanked consumers, who represent 11 percent of the US population, global remittances and casual sales from both banked consumers and businesses, including casual cash spending by banked individuals, representing 12 percent of all consumer spending today.

There are endless practical uses for mobile personal payments services in everyday life, including purchases at garage sales or on eBay, paying charities, spending on food or splitting the tab at a restaurant, sending money to children in college, settling personal loans as well as paying for personal services such as school dues, child care, babysitting, lawn care, home repairs, household cleaning or personal training. Today, cash and checks reign as the primary payment mechanisms for these types of casual purchases, however, the door is wide open for financial institutions to deliver the right mobile personal payments service to make strong inroads here.

While several models are emerging, one approach quickly gaining interest among banks is aimed at simplifying the sender and receiver sides of the equation. In the past, complex enrollment processes and difficulties accessing funds undermined the promise of mobile personal payments. A new service launched in November 2009 by S1 Corporation and PayPal provides easy, fast and secure payments sent directly from a bank account to PayPal users around the world using any mobile device - and requires no enrollment by the sender, who merely has to type in the recipient's email address or mobile number before funds are transferred real-time to the receiver's PayPal account. PayPal has the largest personal payments community in the world, with more than 200 million users in 190 countries. However, if the receiver does not have a PayPal account, he can set one up in a few easy steps - upon which the payment is immediately released. The funds are guaranteed and the sender has full insight into the payment's status, including whether or not the money was claimed by the receiver.

The new service, which will be available in the first quarter of this year, combines the S1 Mobile solution and S1 Real-Time Payment Framework with PayPal's Adaptive Payments API. Mercantile Bank of Michigan, an S1 Online Banking and S1 Mobile customer as well as a PayPal customer, will be the first financial institution to go live with the service early this year.

For Mercantile, the mobile channel is increasingly important to the bank's focus on driving deposit growth and on increasing customer retention. "We see tremendous value for our customers in expanding our mobile banking functionality to include person-to-person payments," affirmed Mercantile CIO and Senior Vice President John Schulte.

Financial institutions can also leverage robust entitlements capabilities, empowering them to tailor services, the user experience and pricing of both online and mobile services down to the per item level. As a result, financial institutions have the flexibility to decide how they want to deliver the mobile service - as part of a value-added service bundled with online banking, as part of a hybrid offering that blends a monthly subscription fee with per transaction pricing or priced purely in an 'à la carte' fashion. This level of flexibility opens up the potential for institutions to cultivate revenue opportunities from the emerging mobile channel.

Finally, mobile personal payments services can also open up branding opportunities for financial institutions, who can cleverly leverage text messages by embedding web links that, when clicked upon, will open up a bank-branded HTML payment confirmation message containing cross-sell offers for other banking products. In addition, banks have an opportunity to become highly visible to the 200 million PayPal consumers who checkout using PayPal with a bank payment instrument.

For more information, see www.s1.com/mobilepayments  or call us at 866-355-6695. 

Mark Moore is Vice President of Strategy and Business Development at S1 Corporation, a leading global provider of flexible, bank-centric solutions and payment services. In this role, Mark is responsible for authoring the company's Core Strategic Vision and managing strategic partnerships. Mark joined S1 in September 2008 to help build a global marketing organization within S1 Enterprise, bringing together the marketing teams from the company's Retail Online, Treasury Online, Branch & Call Center and International business units. Prior to joining S1, Mark spent over 8 years at CheckFree Corporation (now part of Fiserv) serving in a variety of business development, strategy and strategic marketing roles. He has also worked as a market analyst for a number of Atlanta-based companies including Witness Systems (now part of Verint Systems) and Per-Se Technologies (now part of McKesson Corporation).