After a slow start, banks are more optimistic about mobile phone financial services finally taking off, with contactless payment methods such as text messaging now on offer. Wendy Atkins reports from the 3GSM show in Cannes on some recent developments.

After several years of pessimism, it seems that mobile operators and banks are more positive about the potential for mobile financial services. This year’s 3GSM show in Cannes was upbeat, with vendors and delegates reporting something of a feel-good factor in the atmosphere.

The event attracted an abundance of third generation (3G) phones and services offering fast connections to an increasingly innovative array of content. Nokia’s new Near Field Communication (NFC) shell for payments and ticketing – seen by MasterCard and Visa as a natural extension of their contactless payment programmes – caught the eye of some financial sector insiders.

Meanwhile Sun’s real-world examples of Java technology showed how it is being used in applications such as NTT DoCoMo’s iMode FeliCa Mobile Wallet service and Globe Telecom’s G-CASH m-commerce service.

Technology is up and running

On the conference floor, representatives were involved in discussions about mobile financial services. These discussions followed a period in which the industry has had to cope with a raft of announcements that demonstrate the technology is available, it works and it is what consumers are interested in using – if significant business hurdles can be overcome.

As one delegate said: “There are no huge revenue streams to be expected as mobile banking involves moving existing customers from one payment mechanism to another.” The interest instead comes from a desire to replace cash and offer new, attractive, value-added mobile payment services to customers.

In the past, some banking industry insiders have reported that a lack of reference cases has hindered progress towards mobile financial services. However, this could be changing: many people at 3GSM were talking about, and aware of, fairly significant developments in both pilots and implementations. For example, in February, Visa International and Sberbank announced a joint mobile commerce pilot in the Russian Federation.

As part of this project, Sberbank’s clients will be offered new online services in bank account management, based on existing international standards in the secure processing of remote financial transactions. Holders of Visa cards issued by the bank will be able to pay for services provided by cellular operators using their mobile phones and also carry out other banking payments

“The number of people subscribing to mobile phones in Russia and the world is speeding up,” says Lou Naumovski, senior vice-president of Visa Central Europe, Middle East & Africa and general manager of the Visa representative office in Russia. “That is why it is obvious that financial services rendered through mobile communication will be popular in the Russian and global markets. And mobile communication can provide people living in remote regions and earning small incomes with access to financial services, such as banking and electronic payments.”

China joins market

Also in February, China’s Bank of Communications announced that its WAP-based national mobile banking service was operational and available for customers of China Mobile and China Unicom.

And Sony Corp announced that sales of mobile phones equipped with its contactless smart card system had reached two million units, seven months after the service was launched. Growth is expected to continue, with sales of the phones forecast to reach 10 million by the end of March 2006, after Japan Railway Co (JR East) adopts the system for ticketing. The telephones, which are equipped with Sony’s FeliCa smart cards, can be used as electronic cash, loyalty cards and airline tickets for airport check-in. In the future, their use may also be extended to making payments at restaurants, convenience stores and shops.

Other south-east Asian systems that have attracted people’s attention include a Philippines SMS-based remittance service called Padala and a South Korean mobile banking application. Padala allows Filipinos overseas to send money to relatives at home using SMS technology, while the South Korean system enables consumers’ bank account details to be stored on a memory chip inside their mobile phones. To make purchases, consumers pass their phones in front of modified credit card readers, which take the transaction details via infra-red or near-field wireless readers, before being validated by the customer entering a pass code on the keypad of the handset.

North America has also been a focus for activity, with MasterCard’s contactless PayPass now being used for contactless payments in 13,500 McDonald’s restaurants in the US. And there is growth in general mobile payments and mobile banking in Europe.

Nordea Bank reports that usage of transactional mobile banking services has grown by 30% in the past year. “Nordea Bank handles 16 million transactions per month on its net platform, which includes both internet and mobile banking,” says Liisa Kanniainen, vice-president, mobile banking, at Nordea. “Nordea’s customers have been persuaded to take the netbanking and mobile routes because these are cheaper and more convenient ways of banking.”

Banks ready and willing

Interest in mobile financial services seems to be coming from every direction: operators have a need to find more revenue streams, so are happy to co-operate with banks to develop new services. Banks, meanwhile, have payment mechanisms in place, so are an essential part of a mobile commerce industry. The real challenge now is how – and if – all this talk can be converted into action that will benefit the banking industry.

“If you compare today to the hype of the late 1990s, I think talk is on a much more realistic basis,” says Ms Kanniainen, who is also work group executive at Mobey Forum, which promotes the use of mobile technology in financial services. “We’ve got co-operation. We’ve got implementation and the technology is in the right place: handsets are much more sophisticated. Contactless technology is getting there – and there’s a payments infrastructure in place to back this technology up.”

CEPBANK’S CARDLESS TRANSFERS

Turkey’s garanti Bank has launched a mobile-enhanced cash transfer system called CepBank, which enables money to be transferred by sending a single SMS (short message service) text message.

Started in January, CepBank enables Turkey’s 30 million mobile phone users to do instant money transfers from mobile to mobile via a single text message and without a card.

Described by Garanti as the first such transfer system in the world, the most appealing aspect of the process is that the receiver does not have to have a GarantiBank card or account to withdraw money sent via CepBank. All that is needed is a mobile phone. The receiver gets a text message on their mobile notifying that money has been transferred and, through a cardless transaction, the cash can be withdrawn from a Garanti Paramatik (Garanti automated teller machine).

The system is viewed as a convenient and secure means of exchanging money between two parties.

Once the Garanti client is registered with CepBank, the process works as follows:

1) The sender sends an SMS to 3333: including the number of the receiver, the amount to be sent and a password specified during the transaction;

2) The bank sends the transaction reference number to the customer;

3) The bank sends an SMS to the receiver: including the name and surname of the sender plus the password to withdraw the money;

4) The receiver goes to any Garanti Paramatik to withdraw the money through a cardless transaction.

Ali Fuat Erbil, executive vice-president of Garanti, believes that the mobile sector is “growing like crazy”, with the number of mobiles at 30 million now exceeding the number of credit cards at 27 million, and services like CepBank starting to take off.

With inflation coming into single figures after decades of hyperinflation, banks are now keen to make ATMs more attractive.

PLEASE ENTER YOUR DETAILS TO WATCH THIS VIDEO

All fields are mandatory

The Banker is a service from the Financial Times. The Financial Times Ltd takes your privacy seriously.

Choose how you want us to contact you.

Invites and Offers from The Banker

Receive exclusive personalised event invitations, carefully curated offers and promotions from The Banker



For more information about how we use your data, please refer to our privacy and cookie policies.

Terms and conditions

Join our community

The Banker on Twitter