FRB: Mobile Consumer Financial Services

Slide 1

Mobile Consumer Financial Services

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Slide 2

Mobile Definitions - ABC's and More

Mobile Authentication – verifying identity. This is one of many security related mobile finance apps.
Mobile Banking – monitoring and managing finances
Mobile Commerce/Shopping – buying via mobile, generally for mobile (digital content)
Mobile Marketing – attracting, cross-selling, keeping customers via mobile devices
Mobile Payments – transferring money
Mobile Wallet – replacing cash, checks and cards

Slide 3

Mobile Platforms and Finance Industry Impact

SMS Text , WAP/Browser-based, Downloadable and Embedded Applications Features Comparison

SMS/Text	WAP/Browser-based	Downloadable application	Embedded application
100% of phones sold today	95% of phones sold today WAP-enabled; but many require difficult activation 18% have smartphones-best for viewing	95% of phones sold today WAP-enabled; but many require difficult activation	Not widely available yet
FI-carrier-independent	FI-carrier-independent	Requires FI partnerships with wireless carriers - mobile banking vendors can facilitate partnerships	Requires FI partnerships with wireless cariers and mobile handset vendors - mobile banking vendors facilitate
Relatively less expensive (depending on plan) or approx. $0.20 per message	Requires expensive data plan	Requires expensive data plan	Requires expensive data plan and new phone
Easy to set up and use for most consumers	Fairly easy to set up and use for most consumers	More difficult; downloading application can be challenging for many	Easiest to set up and use for consumers, but availability is limited

Slide 4

Mobile Banking Ecosystem Has its own Complexities

Figure 2. Mobile Banking Ecosystem shows a Brand, Company, or Financial Institution transmitting information to a authentication vendor, aggregator, mobile banking vendor, handset manaufacturer and operating system. It is then transmitted to a SMS/MMS, WAP/MOBI, or a downloadable or preloaded application. It is then transmitted to the mobile network operators and the mobile subscriber receives information on their mobile device.

Slide 5

NFC/Countactless and M-Payments: Where's the Value? (And for Whom?)

Contactless and Mobile Payments Ecosystem

Consumer Usages

Technology Partnerships and Vendor Relationships
Credit and Debit Card Issuers

Merchant Acceptance

Wireless Carriers Distributing NFC-Capable Devices
Payments Networks

Slide 6

Compared to Other Finance Channels, Mobile Currently Has More Security Upside

Mobile can have a positive or negative impact on institution and consumer safety

Mobile (Bank access via handheld mobile device with an over-the-air or mobile Internet connection)

Mobile negative impacts are:

Lost/Stolen Phone
Mobile Malware/Spyware
Phishing
WAP gap

Mobile postive impacts are:

Most Frequent Account Access
24/7 Anytime/anywhere Access
Ability to Interact Directly with CSR
Diverse Operating Systems Decrease Risk of Malware
Gelocation
Remote Deactivation
E-mail Alerts
Mobile Alerts

Fixed Online (bank access via desktop or laptop computer with an Internet connection)

Fixed Online negatives are:

Phishing
Spoofed Sites
Malware/Spyware
Cracking
Lost or Stolen Laptop
Man in the Middle
Spamming
Online Scams
Sniffing

Fixed Online postives are:

More Frequent Account Access
Turn Of Paper Statements
Ability to Interact Directly with/ CSR via VOIP, IM, Chat
24/7 Access
E-Mail Alerts Ability to Manage Detailed Account Settings

Voice (access via voice call to customer service center)

Voice negatives are:

Vishing
Pretexting (Social Engineering)

Voice positives are:

24/7 Access
Ability to Interact Directly with CSR

Slide 7

Mobile Finance Apps: Another Perspective

Banking, payments, commerce and more

M-Finance App.	Market Impact	Security Impact	Players	US Adoption
Marketing	Low	=	FIs, Telcos	Moderate
Alert notices	Low	+	FIs, ?	Growth slowing
Authentication	Low	+	FIs, Telcos	Nascent
Review-and-release alerts	Medium	++	FIs	Urban legend
Bank account management	Medium	-	FIs	Growing fast
Payment Transfers	High	--	FIs, Telcos	Low
In-mobile or EC purchases	Low	--	FIs, Telcos	Moderate
In-store purchases	High	?	FIs, Telcos, merchants, chips, networks	No, high in long-term

Slide 8

Javelin's Five-Year Forecast for Mobile Banking Adoption in the United States

Chart entitled Millions of Mobile Banking Users and Percentage of Users

Vertical bar chart which shows the actual and projected numbers of U.S. adults with mobile phones. The number of U.S. adults using mobile banking last 12 months rises from the actual 24 million in 2008 to the projected 99 million in 2014. The percentage of U.S. adults with mobile phones from the actual 20% in 2008 to the projected 55% in 2014. The percentage of U.S. adults using mobile banking in the last 12 months rises from about 12% in 2008 to 45% in 2014.

Slide 9

Unclear Value, Security Fears Remain Biggest Obstacles for Mobile Banking

Question 6: You indicated you do not use mobile banking. For what reasons do you not use mobile banking? (select up to three)

Chart entitled Primary Reasons Consumers Do Not Use Mobile Banking

Horizontal bar chart shows primary reasons consumers do not use mobile banking on the y-axis and percentages from 0% to 50% on the x-axis. X-axis: I don't see the value of mobile banking at 44%, Security of mobile banking at 42%, The cost of data access on my wireless plan at 34%, Cost or hidden fees from my bank for using the service at 10%, Dropped or lost telecommunications connections at 9%, It is not offered by my bank or credit union at 8%, Potential limitations in wireless plans at 6%, New technology, it may not work correctly at 5%, My bank offers it but i don't have access to it at 4%, Setup process to register accounts at 3%, I don't have a formal banking relationship at 1%, Other, please specify at 14%

July 2009, n = 2,396
Base: All consumers with mobile who do not use mobile banking. ©2009 Javelin Strategy & Research.

Slide 10

Underserved and Less Affluent: Real-time Notification and Access Resonates

Chart entitled Essential Features to Spur Mobile P2P Usage, Affluent vs. Less Affluent

Question 35: Which of the following features do you believe are essentialin order for you to begin using mobile person-to-person (P2P) transfers?

Horizontal bar chart shows on the y-axis the essential features to spur mobile P2P (person-to-person) Usage, Affluent vs. Less Affluent and on the x-axis the percentage from 0% to 50% showing consumers likely to use mobile P2P. The affluent goes from 100K to 149K and less affluent from 25K to 34K. For affluent, 72% consumers are likely to use mobile P2P for the enhanced security (so only I can make transfers) feature and 63% less affluent. Real-time access to fund (45% affluent, 50% less affluent). Real-time notification of funds transfer (text message sent to sender and receiver of funds transfer): 44% vs. 53%. Straightforward registration process (20% vs 27%). Simple user interface (display only important features) 37% vs 24%. Other, please specify is 7% vs. 5%.

Slide 11

What M-Features are Top FI's Offering?

Chart entitled Leaders among 18: Citi, USAA, Chase, Bank of America, Capitol 1, Wells Fargo

Horizontal bar chart on the x-axis shows the Mobile Monitoring, Money Movement, and Advanced Capabilities with the list of what financial institutions reviewed. The y-axis shows the percentages of 0% to 120% for features being offerred in the three categories. Following is the features being offerred, with their percentages.

Mobile Monitoring

Check balances (DDA): 100%
View recent transactions (DDA): 100%
Check balances (Credit Card): 89%
View recent transactions (Credit Card): 89%
View any other account: 89%
SMS/text message alerts: 89%
ATM/branch locator: 83%

Money Movement

Move funds between your accounts: 100%
Pay bills: 72%
Transfer funds between FIs to your own accounts: 39%
Transfer funds between customers: 33%
Transfer funds between FIs between customers: 17%

Advanced Capabilities

Bilingual: 17%

Slide 12

M-Finance Outlook: How We Get From Alerts to Wallets

Chart entitled Potential Evolution and Key Catalysts for US Mobile Wallet shows the evolution of mobile banking from years 2009 to 2014.

2009 - Pilots in transit and at select merchant locations drive consumer, merchant, and FI interest.
2009 to 2010 - Continued brand enhancement and differentiation capabilities from vendors attract both FIs and carriers to vendor wallet solutions.
2010 to 2011-Uptake of mobile banking and increased percentage of smart phones
2011- Broader utility of NFC handsets spurs further carrier investment; more robust merchant infrastructure.
Multi-faceted vendor models aimed at carriers and FIs gain broader traction.
2012 - NFC becomes more mainstream technology on deployed handsets, with consumers usage and demand driving further merchant infrastructure investment.
2013 - Mobile payments revenue stream for FIs and carriers becomes more quantifiable

Slide 13

How well do we understand the problem we're working to solve?

Thank You

Javelin provides superior direction on key facts and forces that materially determine the success of customer-facing financial services, payments and security initiatives. Our advantages are rigorous process, independent position, and expert people.

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