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Mobile money - what the future holds

In this episode we are talking to the biggest mobile money specialist in the world, they're called Monitise and they aim to make money totally mobile across the globe. They give us an interesting insight into the progression of mobile transactions and to tell us more we speak with, Andrew Griffin, SVP for Industry and Investor relations at Monitise (opens in new tab).

He starts by telling us a bit about the background of the company and how things have developed to where they are today.

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We are a mobile money company and we look at mobile banking, mobile payments and mobile commerce. We are about 10 years old and we originated from the idea from our two founders to allow banks to service their customers via mobile. Back then there were no Smartphone’s, the banks were not too keen on small technology companies hooking into their core banking systems and so our founders had the bright idea of using the ATM network to connect phones to banks and this worked brilliantly. With an ATM you can check your balance, you can look at a statement you can even pay bills and so this enables mobile phones with SMS without touching the delicate core banking systems. Of course, since the advent of the iPhone and other such Smartphone’s we are now seeing banks with good mobile banking platforms seeing more transactions over that channel than all the other channels put together including online banks and phone calls.

Mobile payments are becoming more a part of everyday life but put us in the picture as to what volume of transactions are being carried out through mobile platforms currently and where is the growth coming from?

The last numbers published show that we are doing about 3,200 requests per second over our systems and some of our customers have disclosed their usage. NatWest here in the UK for whom we built their platform are getting 25 logins per month per user from their retail App. So people on average at least once every working day are having a look at their App either to check a balance, transfer to a savings account, pay a bill and more recently to pay their friends on the pay-to-pay payments.

What are some of the latest developments in mobile banking that we should all be paying attention to?

What is interesting to both our customers and us is this very high usage ever since 2000 when people started talking about killer Apps. The technology industry has been looking at killer Apps and it turns out that the humble balance enquiry is just that. We found through surveys that people who have started using mobile banking not only interact more with their bank which the bank is obviously delighted with, but also they pay lower overdraft fees and lower penalties because they are much more in control of their finances. It very much meets the needs of people wanting to have a handle on their balance and not being surprised by going overdrawn. Having created that audience, the banks are thinking about what they can do with that audience now to continue to improve their closeness to that customer. Mobile commerce is one area where this could work. Right now if you are trying to buy stuff on mobile one of the biggest reasons why transactions don’t complete is that you are suddenly asked to type in your credit card details, your name and address and it doesn’t really work on a small screen but if that ability to one click pay were made available via a trusted App like your bank, then that could make that process of whole lot more seamless. If we get it right and people are receiving the kind of offers that make sense to them then it ends up being a win win, the consumer gets what they want perhaps it’s an offer by way of discount from their bank and the bank continues their relationship with their customers.

It seems to have given the relationship between customers and banks more immediacy – is that true with what you have seen too?

Yes it has and it is striking this change in behavior. We did some research with the US population which showed that 50% of people paid lower fees as a direct result of taking on a mobile App and 25% actually visited an ATM less often which is curious because you can’t get money out of your phone? It turned out a lot of visits to the ATM were just to check balances and not to get money out. So it really does change banker’s behavior.

Have the developments in mobile allowed banks to have a closer relationship with retailers?

Like a lot of traditional industries the digital age is creating disruption and clearly for High Street retailers the focus has been around the whole online experience. Many High Street retailers are moving online but one problem has been that unless you have got the kind of audience like the likes of Amazon (opens in new tab) has and the nice one click payout experience it always tends to be a slightly slower experience to check out using these other ecommerce sites. Equally, if you are a bricks and mortar retailer, say you have got a physical advert on a bus shelter or in a High Street your problem is that people will see your ad and then go and buy it using an online retailer rather than going to the store that is actually doing the advertising. Something we set up last year was a joint venture with Carphone Warehouse (opens in new tab) and Charles Dunston called Mobile Money Network and this was really to trial what we would refer to as a physical instant mobile checkout. Using this technology retailers and brands could advertise a product and it could come with either a short code on the advert or it could be a QR code that you take a photo of, or you could even just take a photo using your Smartphone of the entire advert. Because you had pre-registered your name and payment details and address with the app that was all you had to do to purchase and that product would be delivered to you the next day, instant checkout was reality.

Having trialed that and seen its success what the merchants and retailers really wanted was a big audience for that app and so we acquired the third party stakes in Mobile Money Network and it became wholly owned by Monitise (opens in new tab). We are now in the process of integrating that Mobile checkout into our apps, which are used by millions and millions of consumers. Suddenly it becomes a much more interesting way to checkout for retailers so we are getting huge interest there.

Does that whole change in purchasing behaviour offer opportunities for increasing revenues?

What we are trying to do is help banks, retailers and others with what Google is doing offline and online. It is no coincidence that Google is getting interested into the mobile wallet (opens in new tab)space as well and right now roughly 5% of retail commerce in developed markets is online. If you click on a Google ad through a Google search or through a Google provided ad on someone else’s website and you go on and purchase something online, Google will receive a lead generation fee. That is something like 5-10% of the transaction value, which is a fairly chunky amount, it is much much more than the payment interchange rate that a bank would receive through a payment on one of its cards. Now wouldn’t it be great if you received an offer on your phone and then you walked into a shop and redeemed that offer. You could get the same lead generation fee so Google were interested in doing that. With their wallet they had some kickback from some of the mobile phone operators who were not too keen on co-hosting it for them and also retailers are a little skeptical about being seen to be giving away their data to Google. The great thing about banks is that they are not trying to steal anyone’s data, they are basically acting as an orchestrator here and allowing what are quite often their own retailer customers on the corporate side to create the same type of transactions and offers, but in a way that does seem the retailers are giving away their data. I think that is the way to think about it.

How do you ensure confidence over security and privacy on mobile platforms when it comes to financial transactions?

One of the things from the survey that we recently commissioned is clear that a trusted brand, a trusted financially instituted brand, goes a long way towards making consumers feel secure here. Some of the companies we work with like Visa for instance took two years of due diligence before they started working with us back in 2009. An awful lot of effort goes into security by banks and other financial institutions and payments companies because you can’t afford to be making mistakes. It takes a lot longer to recover from them afterwards and so I think there is a built up trust there and I think you are going to see for instance Visa coming out with their button is going to begin to appear this year in the UK on ecommerce and mobile commerce websites and that will begin to allow banks using those rails to allow one click purchases through mobile commerce websites.

How secure is the mobile? Well, this is an interesting one, one of the consultants I speak with often says “well how secure does it need to be given that your credit card has your name and your number printed on it for anyone to take” and I think this is an important point. It is impossible to get 100% secure here but you can certainly get good enough security and with the mobile phone the wonderful thing about a mobile is it is very personal to you. I think I saw some statistics somewhere that if you lost your credit card or debit card it took on average a couple of days for you to notice unless you were going to pay for something that day. With a mobile phone, you know you have lost it within 40 minutes. There is an inherent security with a mobile phone that you know you have lost it and of course it is very easy to switch it off, you just call the operator or even there is an App where you can go online and switch them off with some operating systems. The other thing that is more secure with a mobile phone than say online is that when you go online to an App you can pretty much do it from any computer certainly with online banking I can use the computer in my office, I can use the computer in my home or use an internet cafe and I can still log in to my online banking. What we do with online banking applications is to lock them to one phone so I happen to bank with NatWest but I can’t use your NatWest app on your phone to log into my account it has to be on my phone and there are many ways we lock the app to the phone and so that adds another layer of security. I don’t think that is widely understood yet but I think it is something that we and our customers and partners can continue to communicate to consumers.

Mobile phones especially seem to touch every element of our life at the moment, are we edging ever closer to a cashless society with technology developments such as these?

Great question, something like 50% of transactions in developed markets are still cash in value terms particularly when you include all the huge sums transferred from business to business, it is something like only 6% of the value of transactions are now cash. In some ways there is a long way to go in other ways we have already largely moved to electronic. There are many reasons to do with tax collection and to do with fraud prevention and criminal activity for governments to be interested in reducing the cash economy and increasing the electronic economy and actually there are good reasons for the economy as well. It is a lot more expensive in total to handle cash than it is to deal with electronic transactions so you can see a lot of regulations trying to increase people’s usage of electronic means. I think it is inevitable that over time cash will decrease but it will take a long time in my opinion and it is a huge debate amongst colleagues and peers in the industry.

Is the take up of mobile platforms varying in different markets across the world?

It would be wrong to say it is the same but it not necessarily blanket more or less in different countries for instance the survey we have just done shows that Germany compared to the UK, German people are a bit less receptive to doing mobile payments than UK consumers and yet if you ask Germans if they have ever redeemed a coupon or an offer on a mobile phone more of them have done it on a mobile phone in Germany than here in the UK. You get pockets of behavior and it also depends who in the country owns a Smartphone, in Spain the penetration of mobile phones with the young is much higher than it is in Germany and to some extend than the UK. That means that behavior on Smartphone’s is more youth oriented so they tend to use the phones for social networking for listening to music and that kind of thing whereas in Germany and the UK it is a bit more for checking prices and finding directions for instance. You get little different flavours depending on who uses the Smartphone.