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Mobile banking versus a mobile bank

March 2006

The mobile bank versus mobile banking debate is still raging, but what are the real fundamental differences between the two and why is there so much noise around which is seemingly better?

The two are vastly different. A mobile bank is essentially a new bank or product built around the understanding that the primary interaction with the bank will be through a mobile device.

A mobile banking solution on the other hand is the evolutionary step after internet banking. It is an additional service bolted on top of an existing solution – making access to services more immediate and reducing customer reliance on branch infrastructure or access to the internet.

Underpinning the debate is the question about the validity and longevity of mobile in general. Looking at worldwide statistics there can be no doubt that mobile is king. In South Africa alone more than 250 000 people interact with their bank via a mobile device – whether it be via mobile banking or a mobile bank. The real argument is what form banking via mobile devices will take – right now that is left to personal choice and market availability.

In essence both are a different banking experience, guided by the provider and selected by the user, depending on the requirements of the individual and the availability of infrastructure wherever the solution is being offered.

A mobile bank is by definition a new offering and thus unconstrained by existing infrastructure, pricing structures and product rules, allowing it to be optimised for a totally mobile experience.

It is true of both mobile banks and mobile banking that the user doesn’t need to go to a bank once either is implemented, but in an ideal mobile bank no interaction with bricks and mortar whatsoever should be needed, whereas a mobile banking solution may still require the user to enter a bank to set up an account or even manage changes to it. The one barrier to entry is whether or not customers have mobile phones, however, worldwide market penetration of cellular devices makes this almost a non-argument.

In a mobile bank, the phone remains the primary transacting mechanism – it is the entry point for the user into the bank and the bank’s entry point to the user. The benefits to the provider are numerous as it lessens the individual’s dependency on the physical infrastructure and mobile transactions are less costly to facilitate and manage.

At the end of the day it is all about the business case of the organisation and where emphasis is placed in the organisation. In traditional banking the interface is with a teller or an ATM. With internet banking the primary interaction is with a PC. With mobile banking, the interface is through a cell phone. The case with a mobile bank then is simple – the phone becomes the branch and this model is thus very appealing to new financial service providers looking to get to market rapidly without the burden of physical infrastructure investments.

Mobile banking is a means to reach a mass market, its popularity on the infrastructure constrained African continent and other emerging markets is evidence of this in itself. The form it takes is then more about the product, versus the channel. Traditional financial institutions are seeing mobile banking as a massive opportunity, and rightfully so, as it puts them in a position to innovate, where their services have previously been very similar. And while we have seen physical banks forming mobile banks, for example MTN Banking which is backed by Standard Bank, it is entirely feasible that in future, mobile banks, as yet unformed, may expand into the physical sphere.

This may not be the answer that the debaters want to hear, but as is so often the case with technology, how you use it depends on what you aim to achieve. Either way, mobile financial transacting is the way of the future and there are few companies which are not considering this as an option. While we may squabble over who has the best solution, the user is merely interested in what is best suited to them from a convenience, access, and affordability point of view.

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