Challenges for Mobile Banking Services free essay sample

Banking transactions over the mobile phone are usually performed either by sending a SMS to the bank or by using mobile internet. When you send a SMS requesting a financial transaction, it travels to the SMS center of your cellular service provider and from there it goes to the banks system. Then, you receive the response that is sent by the bank via the service provider, all within a few seconds. Mobile Banking Services Nowadays, banks have come up with a range of mobile banking services for reducing their cost of operation and providing more easily accessible and faster services to you. You can use your mobile banking facilities to inquire about the updates of your balance, statement request, details of the last few transactions and management of pension and insurance policy. In addition to these, you can request the bank to activate alerts, if a threshold limit is crossed, or to set a minimum balance alert. Mobile banking has also made fund transfer, both national and international, quite simple and fast. You can order or request a check book and card, and pay bills with the help of mobile banking. It can also give you the facility of carrying out cash deposition and withdrawals. Some other services of mobile banking include portfolio management services, personalized alerts, notifications on security prices, mobile recharging, monitoring of term deposits, etc. You can also receive online updates of stock prices and even perform stock trading. Classification of the Services There are generally two ways to classify mobile banking services. The first method classifies the banking services as Push or Pull, depending on the originator of a service session. If the bank sends information as per the already agreed rules, then it is categorized as Push. An example of Push is a minimum balance alert, when your balance goes below a particular amount. On the other hand, when the bank sends information as a response to the request sent by the customers, it is termed as Pull. So, if you request the bank to send a statement for the last few, say 3 or 5 transactions, then it is a Pull based service. The second classification of mobile banking services depends on the nature of transactions. So, if you request the bank to send a bank statement, then it is a inquiry-based service, while a request for fund transfer is a transaction-based service. Benefits of Mobile Banking Mobile banking services are not only beneficial for the customers but for the banking institutions as well. These services can significantly lower the operating cost of banking institutions by reducing the dependence on costly call centers. They can also lower the frequency of errors that are usually committed in paper based payments. As mobile banking is a cost effective innovation, it can considerably reduce the financial risk associated with starting a new business initiative. It can also enable banking institutions to closely monitor their new campaigns. Besides this, it can provide a new avenue for selling their products like insurance packages and other banking services. On the other hand, mobile banking helps customers by ensuring the fast processing of their banking transactions. As any kind of financial transaction is immediately reported to the customers, they can easily monitor and detect any error in transactions, or any unauthorized transactions. Today, the mobile and wireless market is one of the fastest growing markets. However, a lack of trust and general awareness have been observed among the people when it comes to mobile banking services. Therefore, it is essential to address issues like security of the banking transactions that are executed from a distant place and transmitted over the air. Besides this, it is also important to ensure the security of financial transactions, if the device is stolen by hackers. If these concerns are properly addressed, then it would help increase the popularity of mobile banking by instilling a sense of trust among the customers. Growth of Mobile market .â€Å"Of 6 Bnglobal population, only 1 Bnhave bank accounts while 4 Bnnowown a mobile† . Over60% of world’s population has a mobile. Penetration of mobile while use of cash globally Mobile services not only offer a new, convenient channel for existing customers of banks, the technology will also provide access to 3 Bnstrong global unbanked population . Mobile payment users worldwide ? 73 million in 2009, up 70. 4 % from 2008 . Mobile payment users gt;190 MM in2012, which is over3 % of total mobile users worldwide a level considered as mainstream† . Rise in Mobile payment penetration (2009 to 2012) North America –From 1. 7 % to 3 % Western Europe –From 0. 9 % to 2. 5 % Asia/Pacific Japan –From 2 % to 3. 8 % Eastern Europe, EMEA and Latin America gt; 3 % Mobile Banking Services Mobile banking can offer services such as the following: Account Information 1. Mini-statements and checking of account history 2. Alerts on account activity or passing of set thresholds 3. Monitoring of term deposits 4. Access to loan statements 5. Access to card statements 6. Mutual funds / equity statements 7. Insurance policy management 8. Pension plan management 9. Status on cheque, stop payment on cheque 10. Ordering check books 11. Balance checking in the account 12. Recent transactions 13. Due date of payment (functionality for stop, change and deleting of payments) 14. PIN provision, Change of PIN and reminder over the Internet 15. Blocking of (lost, stolen) cards Payments, Deposits, Withdrawals, and Transfers 1. Domestic and international fund transfers 2. Micro-payment handling 3. Mobile recharging 4. Commercial payment processing 5. Bill payment processing 6. Peer to Peer payments 7. Withdrawal at banking agent 8. Deposit at banking agent Mobile banking in Saudi Arabia While mobile financial services have been adopted widely, they have yet to be utilized heavily in Saudi Arabia. This lack of use is all the more curious, given the high rates of mobile phone ownership exist side by side with generally minimal access to formal banking in the Kingdom. This presents an opportunity for banks, potentially allowing them to both expand their consumer base and assist the needy in their communities. Three questions should dictate whether Saudi banks adopt mobile financial services: could banks utilize mobile financial services, would they benefit those companies, and should Saudi Banks adopt such services? According to study has been done by KPMG about 67% of the Saudis are looking forward for mobile banking services in the kingdom. This percentage ranked Saudi Arabia as number one country in for the most promising market for mobile banking. According to Tariq Al-Sadhan the managerial partner of KPMG, the new generations of smart phones has enhanced the opportunity in this business and encouraged the customers to look forward to mobile banking. However it’s now up to the banks to get over the obstacles and ensure the reliability and security of the service. Furthermore these study shows how promising the future of this service and the opportunity for the banks. Challenges for a Mobile Banking Security This is the biggest challenge for banks. And what make it even more challenging is the perception of online business for the Saudis. Security of financial transactions, being executed from some remote location and transmission of financial information over the air, are the most complicated challenges that need to be addressed jointly by mobile application developers, wireless network service providers and the banks IT departments. The following aspects need to be addressed to offer a secure infrastructure for financial transaction over wireless network : 1. Physical part of the hand-held device. If the bank is offering smart-card based security, the physical security of the device is more important. 2. Security of any thick-client application running on the device. In case the device is stolen, the hacker should require at least an ID/Password to access the application. 3. Authentication of the device with service provider before initiating a transaction. This would ensure that unauthorized devices are not connected to perform financial transactions. 4. User ID / Password authentication of bank’s customer. 5. Encryption of the data being transmitted over the air. 6. Encryption of the data that will be stored in device for later / off-line analysis by the customer. Handset operability There are a large number of different mobile phone devices and it is a big challenge for banks to offer mobile banking solution on any type of device. Some of these devices support J2ME and others support SIM Application Toolkit, a WAP browser, or only SMS. The desire for interoperability is largely dependent on the banks themselves, where installed applications (Java based or native) provide better security, are easier to use and allow development of more complex capabilities similar to those of internet banking while SMS can provide the basics but becomes difficult to operate with more complex transactions. Scalability Reliability Another challenge for the CIOs and CTOs of the banks is to scale-up the mobile banking infrastructure to handle exponential growth of the customer base. With mobile banking the banks need to ensure that the systems are up and running in a true 24 x 7 fashion. As customers will find mobile banking more and more useful, their expectations from the solution will increase. Banks unable to meet the performance and reliability expectations may lose customer confidence. There are systems such as Mobile Transaction Platform which allow quick and secure mobile enabling of various banking services Application distribution Due to the nature of the connectivity between bank and its customers, it would be impractical to expect customers to regularly visit banks or connect to a web site for regular upgrade of their mobile banking application. It will be expected that the mobile application itself check the upgrades and updates and download necessary patches (so called Over The Air updates). However, there could be many issues to implement this approach such as upgrade / synchronization of other dependent components. Challenges -Security concerns, inadequate ‘ecosystem’and undefined areas in banking regulationsremain challenges for m-payment (Gartner) -Development of a standard protocol that will enable money to be send across different networks in a seamless way (Citi along with Swift, is looking for more flexible protocols that will span different providers –Michael Knorr, MD, GTS, Citigroup) -Mobile remittance services interoperabilitywith other payments applications -The biggest challenge is to gain subscribers onfidence and persuade them to use mobiles forsensitive financial transactions -Deciding upon the right business models, handing revenue settlements, designing and offering new user interfaces, and integrating technology -From a cost perspective, the main drivers are the investmentin the technology platform and the SMS/data access fees. Since it is likely that the former can be based to a great extent on the Internet platform, mobile banking can in fact be a way for banks to extend the value of existing investments. Operating service costs, which include SMSand data access fees paid to telecom operators, have been decreasingsteadily in recent years Factors for Success in M-Banking -With mobile internet at the precipice of mass adoption, banks that will succeed in making the most of their m-banking offers must act fast! Developing innovative technology solutions that are efficient, secure, andcost-effective while understanding the customers growing desire for personalization andreal-time access are the dual tracks to successful next generation Mobile Banking -Mobile Payments processors that are going to be the most successful are the ones that are willing to adapt to various regions and various countries andcustomize their solutions to those countries -Organizations that succeed will be those that balance the strengt hs of technology with those of business(including its influence in the market and market rules) and are faithful to the core economics of the business