To the convenience of the mobile phone and that of the ATM, add another—the convenience of the mobile phone and the ATM working together to save retail-banking customers time, improve the security of their transactions, and increase their loyalty to financial-service institutions.
If this convergence of cell phone and banking sounds like mobile banking, it is—and it’s more. Mobile banking, or the ability to conduct financial transactions on the fly from a mobile phone or personal digital assistant (PDA), has captured a lot of headlines lately. Yet quietly in the works for several years now has been the courtship of the mobile device and ATMs. The know-how to marry these two technologies has been lab-tested and could be in users’ hands within three to five years.
Once it’s realized, this coupling of mobile communications and self-service could change the way we bank by facilitating faster transactions and more of them, in more places and at more hours, and with greater peace of mind.
How will this work? The potential applications are myriad. Imagine a tourist in an unfamiliar city discovering he’s low on cash as he gets ready to hail a cab. The global positioning system (GPS) on his mobile phone could direct him to the nearest ATM. When he arrives, the withdrawal he “ordered” by phone is waiting. By entering a special one-time pass code on his phone, he is able to retrieve the cash he needs from the specified ATM—without ever using an ATM card or personal identification number (PIN).
Or imagine a college student standing in the crowded lobby of her on-campus branch, using the keypad on her cell phone—not the ATM keypad—to conduct an ATM transaction with enhanced privacy and security.
Or imagine being able to “fill out” and transmit a personal check from one cell phone to another, allowing a baby boomer bargain hunter to impulsively buy that rare collectible at the Saturday morning flea market, despite having left her credit cards and checkbook at home.
An ATM Access Tool
If consumers are likely to appreciate these conveniences, banks should too. One attraction is that this new technology could reduce fraud even as it permits banks to offer more services. Another lure is that these expanded services could attract new consumers among the so-called unbanked or underbanked. Individuals in these hard-to-reach market segments have little or no relationship with a financial institution. Some are recent immigrants; some are 20-somethings without much need yet for financial services.
However, 18-to-25-year-olds (or “Generation Next,” as demographers call them) tend to be heavy users of real-time communications technology, including instant and text messaging, and 90% of mobile-phone users age 25 or younger already have data capabilities on their phones. While these young customers may not always possess an ATM or debit card, the vast majority own a cell phone, according to recent research by Celent LLC. In an increasingly competitive environment, banks can build loyalty within this group tomorrow by providing services that fit their lifestyle today (chart).
Mobile banking to date has mostly replicated a subset of services that are also available through online banking, that is, banking via personal computer. Mobile-banking services traditionally have included bill payments, funds transfers, account alerts, and the ability to check balances. Major institutions such as Citigroup Inc., Wells Fargo & Co., and Bank of America Corp. currently offer these services to mobile-banking customers, and they are good, useful services to offer.
New technologies that marry the mobile device to the ATM will make this possible. The mobile phone is evolving from primarily a voice medium into a rich channel for data exchange and customer interactions. The convergence of mobile communications and self-service will leverage that bandwidth. Soon, a customer’s cell phone will be able to function as an input device for the ATM. Think of the phone as a kind of ATM access tool, able to offer all the display and keyboard functions currently available on the ATM.
Foiling Skimmers
The mobile phone can’t completely replicate the ATM, of course. For one thing, it can’t dispense cash or accept deposits. But it can make banking faster and more convenient. And, for the time-pressed executive trying to squeeze more into a day, or for the Gen-Next-er who will soon need more financial services, or for the bank working to differentiate itself from the competition, such distinctions count.
Another benefit of this new technology will be added security for many transactions.
Online transactions are vulnerable to hacking and identity theft. Using the same channel to verify a transaction as to fulfill it can challenge any bank trying to ensure that the user is legitimate and authorized.
Adding the mobile channel changes the equation. So-called out-of-band authentication, or using a path other than the online transaction channel to verify the user’s legitimacy, could help cut fraud and losses to identity theft.
Let’s take the example of a customer banking from home. Online, he initiates a transaction, such as transferring funds from savings to checking. To enhance security, the bank could send him a one-time pass code via his mobile phone before completing the transaction. The consumer has to enter the pass code to validate the transaction before the bank releases the funds. This step would make it much harder for criminals to conduct illegal transactions under another user’s name.
Further protection is available by using the mobile phone as an input device to the ATM. In public settings, users worry about entering their information where others can watch or an unauthorized camera can record a pass code. Using a mobile phone to enter transactions inhibits this kind of snooping.
Additionally, the mobile phone eliminates opportunities for card skimming or PIN surfing, since customers don’t need bank cards or PINs to bank. Rather, a customer can privately enter his account data into his mobile device in one part of the bank even as another customer is simultaneously accessing the ATM. The bank would then transmit a one-time-only pass code to access the ATM transaction. The single-use code eliminates the risk of exposing the ATM card and PIN to theft. The system will be able to distinguish the remote user’s entry from that of the person standing at the ATM and release cash to the correct consumer.
Future Applications
What happens if the phone is lost or stolen? Transactions will still be protected by the authorization process, even if the phone should fall into the wrong hands. Login schemes, challenge/response sessions, and even biometric voice verification are all viable options for screening transactions, thanks to the inherently personal nature of the mobile phone.
Diebold has been exploring the convergence of mobile communications and self-service for several years. The patents we hold in this area illustrate the potential of this technology. Here are a few applications we foresee, some of which rely on the same technology but don’t necessarily involve ATMs:
Putting your money where your ATM is. Bar codes, an ID number, or even a radio-frequency signal on every ATM will identify that particular machine and its location. As a customer approaches the machine to withdraw cash, he snaps a photo of the bar code and punches in the identifying number, or simply lets his phone “hear” the identifying signal. His phone will call the host banking system and identify both him and that machine, whereupon it issues his cash.
Banking services—without the banker. A branch visitor notices a brochure about certificates of deposit (CDs) at a desirable rate. On the back of the brochure is a bar code. As she takes a picture of the bar code with her PDA, the bank receives that action automatically from the PDA and registers her request, purchases the CD for her, and transfers funds from her checking account to her new CD.
The next generation in self-checkout. At the local supermarket, that same customer shops for her weekly groceries. As she places items in her cart, she uses her mobile phone to scan the bar code on each package. The system keeps a running tally of the items in her cart, which is finalized as she approaches the checkout. Of course, paying with her mobile phone is an option before heading home.
Mobile banking is poised for growth. According to industry researcher Celent, just 1.2% of all banking households today are conducting transactions from a mobile device. That number could grow to 14% of all banking households and 30% of all online-banking households within three years, says Celent.
Combining the patents we hold with technology partners and customers who also want to see these opportunities realized will help the self-service industry bring these sorts of capabilities to the marketplace quickly. Diebold has long imagined many of these possibilities, and we are excited to see the industry heading where we dreamed it could go.
Soon, mobile banking will encompass more services and enable many more conveniences for customers. For any bank looking to compete successfully by offering innovative services to a broader demographic, the marriage of mobile communications and self-service is a match with huge potential.
Jim Block is director for global advanced technology at Diebold Inc.
Source: http://www.digitaltransactions.net
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