Imagine you are sitting in your car stuck in a traffic jam, and you receive a call from your bank telling you that your account has been overdrawn. No problem, you think. You snatch your smartphone, access your mobile banking application and transfer from your savings account to the current account. Problem solved, the balance is green again. You will have a word with your spouse this evening, though.
This emergency action is only one example of what the future of banking has to offer all of us. Mobile banking is an application that is becoming increasingly popular among bank customers, saving precious time and effort.
There have been surveys to determine the popularity of mobile banking in the future globally. While most of them differ in the numbers, the outcome suggests that remote banking is one of the ‘killer applications' of the future.
Telecom researcher Berg Insight, based in Gothenburg, Sweden, stated in its mobile banking research report in 2010 that users of mobile banking and related services, including money transfers, doubled between 2008 and 2009 to 55 million and again in 2010. In 2015 there will be 894 million users globally, Berg Insight predicted. Growth is driven by efforts of operators and banks in developing countries, particularly in Asia.
Global Industry Analysts from California predicted last year that the global customer base for mobile banking will reach 1.1 billion by 2015.
"Mobile banking is emerging as a key electronic channel for the global banking and financial services industry," the report says. "The ubiquitous nature of mobile devices and services, and the ability of mobile banking services to reduce overall operational costs, streamline operations and expand customer base are expected to boost prospects in the industry."
In Asian countries such as India, China, Bangladesh, Indonesia and the Philippines, and parts of Africa, where mobile infrastructure is comparatively better than the fixed-line infrastructure, and in European countries, where mobile phone penetration is very high, mobile banking is likely to appeal more.
A mobile lifestyle
There is a lot to do with mobile banking. Apart from checking account information and shifting money from one customer's account to another, mobile banking has far more options, for example, money transfers, remittances, bill payment, commercial payment processing, micro payments and the latest trend, making purchases with the mobile phone using contactless near field communication.
"Consumers are already living a mobile lifestyle so using their phones to make payments on a daily basis is a natural next step," Mung Ki Woo, Group Executive, Mobile at MasterCard Worldwide, said after the release of a study by Kelton Research that examined how Americans using a mobile phone would use the device to make different purchases.
"When credit and debit cards were first introduced, consumers welcomed the improvements they made to the speed, convenience and reliability of transactions," Woo adds. "Now with the mobile wallet ready to revolutionise this experience again, consumers have even more to gain as their phones take on additional functionality and value in their lives."
Younger people aged between 18 to 34 are particularly ready to take their transactions to the next level, says Joanne Trout, Vice-President, worldwide communications at MasterCard. "63 per cent of 18 to 34 year olds would be at ease using mobile phones to make purchases versus those at the age 35 or older," she says. Younger consumers feel more naked without their phones than their wallets, she adds.
Emerging markets are another growth area for mobile banking. According to Berg Insight, there will be more than 700 million mobile money users in emerging markets by 2015. The total value of mobile money transactions is predicted to reach $215 billion (Dh789.7 billion) at that time.
"In developing regions such as Africa, the mobile phone will become the primary digital channel for people to conduct financial services in the coming years," says Lars Kurkinen, Telecom Analyst at Berg Insight. He also estimates that $16 billion worth of international money transfers will be received using mobile phones in 2015, up from less than $ 1 billion last year.
In a recent move, three top US banks have even gone further and started a cooperation on a service allowing users to transfer funds by simply logging in to a personal online bank account and entering the name and mobile phone number of the person who is to receive the money. The system, called ClearXchange, is seen as an "innovative game-changer in electronic payments," according to Mike Kennedy, Head of Payments Strategy at Wells Fargo, one of the participating banks besides Bank of America and JPMorgan Chase.
Mobile banking in the UAE
The high penetration of mobile phones and fast pace of living in the UAE is seeing customers increasingly embrace mobile banking solutions.
"The demand for mobile payments and money transfers solutions by mobile phone has increased substantially over the past year in the GCC, including in the UAE," says Morten Hofstad, Regional Director, Middle East, Africa and India, of mobile banking technology provider Luup, whose strategic partner in the UAE is National Bank of Abu Dhabi. "Mobile services… allow people to easily, conveniently and instantly manage their money. For example, payroll services tied to subsequent mobile money transfer services enables people to send money back home to their family at a lower price than they are paying today."
Another mobile banking service provider in the UAE is Swiss company Vipera, supplying Mashreq and First Gulf Bank with its services. Mashreq spokesman Samir Hammad agrees with Hofstad about growing mobile banking customers. "We have witnessed our customer base grow fivefold in the last quarter," says Hammad. "The overall penetration across bank customer segments is 3 per cent whereas the gold, affluent and aspiring affluent segments are close to 20 per cent."
Emirates NBD has recently enhanced its mobile banking service with a cash remittance functionality, enabling Western Union money transfers via mobile phones.
"Emirates NBD recognises the needs of its customers and the importance of making account information available in the most accessible ways. Since Emirates NBD was the first [in the UAE] to launch mobile banking services back in 2002, the evolution of this channel and its development had been a prime focus for us," says Abdulelah Al Kindy, General Manager, Retail Banking at Emirates NBD. "We receive very positive feedback from our customers on mobile banking, especially because customers' financial information has become readily available on their phone," he adds.
Another UAE bank, RAK Bank, has recently jumped on the bandwagon of mobile banking.
"Our mobile banking facility reaches all bank customers who wish to make use of this facility, by making the free-of-charge service available on mobiles and smartphones, including the iPhone, BlackBerry and Android phones," says Ian Hodges, Head of Personal Banking at RAK Bank. "RAK Bank mobile banking has been widely welcomed by customers since its launch two months ago. With almost 30 per cent of our customers registered for online banking, positive customer feedback around mobile banking suggests a similar, if not greater, take-up in the near future given the availability of this facility."