Your Phone As Financial Central

The guy next to you on the train looks like he's texting away, but actually he might be checking his bank balance, paying bills, or transferring emergency funds to his son away at college. Mobile devices still have their shortcomings as a banking tool, but several large banks think the time is right for a major rollout of on-the-go financial management.

Citibank is the latest, last week unveiling Citi Mobile, the first downloadable mobile banking application from a major financial services provider. After enrolling online and downloading the app to a cell phone or smartphone, customers can view balances, pay bills, transfer money, locate ATMs, and click to call customer service.

Citi Mobile can be downloaded to 100 cell phone and smartphone models. It's initially available in California, but Citibank says it will be out in other states by midyear. The app has been more than a year in development, and Citibank execs think U.S. cell phone users are ready to do more than talk and text on their phones. "They can manage their accounts while sitting at a red light in their car," says Steven Kietz, Citi's business manager for enhancement services and e-commerce.

Seriously? There will be a growing market for mobile banking when there's a need for immediacy, like emergency fund transfers and balance checks, predicts James Van Dyke, president of payment consulting firm Javelin Strategy and Research. But his take on a mass market for mobile bill paying: "It's ridiculous." The banks beg to differ, though. Wachovia, which has a mobile offering, says mobile bill paying is one of the top customer requests.

Since the Citi Mobile app resides on the phone, it's faster and offers a graphics-intensive interface that's closer to online banking than text-heavy Web-based apps. Customers select the Citi icon on their phones to access accounts instead of navigating through multiple Web pages on a tiny screen. They'll also receive new features automatically whenever Citibank makes an upgrade available.

Bank of America took a different approach, launching its WAP-enabled Web-based mobile banking service in February. Most mobile browsers can access the service, which lets Bank of America customers check account balances, pay bills, and transfer funds. "We chose to go with a WAP application, so that everyone can access it," says Sanjay Gupta, an e-commerce executive for Bank of America. The downside: WAP displays information mostly in text form without rich graphics.

Wachovia also went with a Web-based app, launching its Wachovia Mobile service in December. It works only with Web browsers that come on smartphones running Microsoft's Windows Mobile 5.0, Research In Motion's BlackBerry, and the Palm OS. More than 50,000 people access Wachovia Mobile each week, says Ilieva Ageenko, the bank's director of emerging applications.

But Wachovia has another option in the works. It has teamed with AT&T, which will offer later this year mobile devices preloaded with a mobile application for accessing Wachovia's and other bank's services. Preloading the app makes it easier to use on the phone. By getting together with AT&T, Wachovia has "enough footing to reach out to this huge base of customers," says Ageenko.

AT&T is using Firethorn Holdings' software to enable the mobile banking app. The software sits on a mobile device and connects with Firethorn's servers, which communicate with the banks' systems. AT&T has plans for similar preloaded apps for BancorpSouth, Regions Financial, and SunTrust Banks. Verizon Wireless also is using Firethorn for a banking and payments app; it hasn't disclosed any partnerships with banks, however.

But preloaded apps have their downside since the number of customers a bank can reach is limited to the number of phones its app is loaded on. But even with downloaded and Web-based apps, banks may have to work hard to convince customers to sign on. "Instead of banks giving away toasters, maybe they'll give away phones," says Richard Crone, of Crone Consulting. Also, putting an app on a mobile device could increase calls to the support center as people struggle to get an app to work on a particular device, thus increasing a bank's costs, he says.

Besides usability and access issues, security looms as a potential problem. Mobile applications preloaded on cell phones mean personal information will be stored on phones, posing a huge risk. The good news is that the banks are putting a lot of effort into securing their mobile offerings. With Citibank's Citi Mobile service, the phones don't store any personal information and transactions are secured with 128-bit encryption, the same technology that's used at Citibank.com.

Customers accessing Bank of America's online banking service from their cell phones are protected by the bank's SiteKey security technology. Data also remains encrypted when it's sent between the phone and the bank. Once AT&T rolls out mobile devices with Firethorn's preloaded banking application, it will have the ability to remotely wipe devices clean of personal data if they're lost or stolen.

BEYOND MOBILE BANKING
Banks may be trying to turn cell phones into vital financial tools, but MasterCard and Visa are planning to make them into credit card replacements. Both of the credit card providers for the past few years have been testing contactless payments, in which cell phones are used to make quick purchases at concession stands, fast food restaurants, and other stores.

MasterCard and Visa have tested cell phones with embedded Near Field Communication technology that enables short-range wireless communications between devices. The next step is to team with wireless carriers and financial services providers on actual products. MasterCard says it's in discussions with several carriers and financial services companies.

Visa is testing a mobile application that will let consumers use their cell phones for payments and online purchases. Customers will have access to their credit card account information and will receive account alerts and mobile coupons when they use the service. Visa also is partnering with chipmaker Qualcomm and phone maker Kyocera on contactless payment-enabled phones.

With everything that credit card companies, banks, and wireless carriers are doing, people's cell phones should soon turn into more than communications devices. "It truly is disruptive technology," says consultant Crone. The question is whether consumers also will be as excited about mobile banking and contactless payment apps.