Why Early Adoption Of Mobile Banking By Banks Could Be Risky For Credit Unions

Now that the benefits of online banking are well understood to most computer-savvy banking consumers, what’s the next step in banking convenience?

Many major banking institutions such as Bank of America, Citibank, and Wachovia are offering mobile banking from cell phones and developing multiple applications for smart phones (CU Journal, Nov. 26). With today’s emerging applications, consumers are able to check balances, pay bills, and transfer funds from cell phones. With the proliferation of smart phones, which act as a small hand-held computer and phone capable of executing complex programs on its internal computing hardware, as well as those programs that are fed to it by a telephone network, mobile banking has become the hot new mobile application.

With so many banks offering cell phone banking, a few credit unions like Technology Credit Union and Silver State Schools Credit Union have followed suit. Many others are now trying to make the right decision for their members and themselves in adopting this popular technology. There are many questions to ask regarding the risk/reward of this new mobile technology channel, such as:

* What features and functionality should they provide?

* Is it safe and secure yet?

* Will members trust it?

* Who will have access?

* Is it still too early to jump in?

These are all valid questions that need to be addressed by credit unions that are serious about taking the plunge with this technology.

What’s currently available for cell phones are the text-based solutions for basic online banking functions, an interim solution to what will soon be possible with smart phone technology. What’s going to be really hot, and sought after, are applications enabling what’s termed an “electronic wallet.” Such technology will enable customers and members to pay as a point of sale with their smart phones, as well as perform multiple online banking functions.

The attraction to this new mobile application is obvious. Customers gain an extra level of convenience with instantaneous access to their funds from anywhere in the world. As the capabilities of the smart phones evolve, so will the possibilities of what banking transactions will be possible remotely in the near future. The younger generations are most likely going to be the early adopters of this technology, as their comfort level with the new cellular technology at times seems to be innate.

So, should more credit unions jump on the proverbial bandwagon and attempt to offer mobile banking for cell phones now or concentrate on what’s possible with smart phones? It’s tempting to jump in now with the lure of attracting the younger generation as members to compete with larger financial institutions. Chasing the younger generations with the latest and greatest technology offerings is enticing but with the average age of credit union members currently at 47, it’s important to continue to appeal to the Baby Boomers, who generally expect more personal service from credit unions.

The risk for credit unions without the capital backing and large IT staffs of the larger financial institutions is that in the quest to get mobile banking applications out to members quickly to respond to implied demand, the credit union will waste money on a “too little, too soon” application, as well as forcing members to switch to another technology in a year or so, when the next phase of smart phone banking becomes available. Over the next year, smart phones will become more the norm and it might be a waste for credit unions to create applications geared to simple phones. Not to mention, there are increased security risks with text-based applications that will be addressed with smart phone technology.

When accessing new technology, it’s important to understand the technological horizon, what’s available now, what’s on the roadmap, and when will the next best thing be available. Technology changes so quickly that it’s difficult to remain at the forefront. The important question remains for credit unions–what cell phone banking features/functionality will provide mutual benefit and improve the banking experience of your core membership? Looking at the whole picture of what’s coming down the technology pathway will help credit unions focus on initiatives that will truly maximize ROI and provide better member service in the long run.

Sean McKenna is president DigiWorld USA, provider of custom wireless and CRM applications for credit unions. He can be reached at nwdtsean@sprynet.com. (c) 2007 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com