In the Early Going, P2P Leads Banks’ Mobile-Payment Services

Mobile payment is making headway among the nation’s top 100 financial institutions, according to a new study from First Annapolis Consulting Inc. The mobile offerings today, however, center on person-to-person payments, wire transfers, and remittances rather than the use of mobile devices as payment instruments at the point of sale.

Mobile payment on the one hand “is certainly of interest” to financial institutions, says Paul Grill, a partner at Linthicum, Md.-based First Annapolis. On the other hand, mobile payment could be considered a “laggard” at financial institutions considering the interest the mobile channel is drawing from tech firms and others, he adds. “We think the study ought to serve as a call to action. There is all kinds of payments activity going on by non-banks,” Grill says.

For its study, First Annapolis analyzed the mobile banking and payment services offered by the nation’s 100 largest financial institutions ranked by year-end 2009 deposits. Besides banks, these institutions included five credit unions and some deposit-taking credit card issuers and brokerages.

Pure banking functions such as transaction histories, intra-account transfers, and balance inquiries come standard with nearly all mobile-banking services. But payments functions, which First Annapolis places in a category it calls “advanced features,” are much less common and are offered mostly by large, credit card-issuing institutions. Only 8% of the institutions offer mobile person-to-person payments, 3% offer mobile remote deposit capture, 2% offer wire transfers, and 1% remittance services.

Financial institutions offering person-to-person payments are using a variety of platforms ranging from in-house technology to services from PayPal Inc. or Visa and MasterCard. “It’s a functionality you would think consumers would want [but] true P2P payments turns out to a more elusive notion,” says Grill. “Not too many people are splitting dinner tickets.” Broader adoption may hinge on making the technology faster and easier to use, he says. The transaction flow typically is through the automated clearing house or traditional funds-flow mechanisms. “The underlying applications need to evolve,” he says.

Mobile remote deposit capture, meanwhile, has received a lot of press in recent months, though its leading providers remain members of a somewhat exclusive club headed by pioneer USAA Federal Savings Bank, JPMorgan Chase & Co., and State Farm Bank. Adoption is growing, however, as Mitek Systems Inc., the leading software provider in the field, and processors such as Fiserv Inc. roll out the service (Digital Transactions News, Aug. 25). “Over the course of time I think this is going to become just below the category of ‘must have,’” says Grill. But the factors favoring mobile deposit—convenience and the elimination of paper—will be countered somewhat by the need of financial institutions not only to implement the technology but also to install risk-control measures, he says. Low monthly deposit limits, a key risk-limiting practice, crimp adoption by small businesses.

Among other findings, First Annapolis determined that browser-based and Short Message Service (SMS, the technology behind text messages) continue to dominate mobile banking, but 32 of the institutions offer application-based mobile services. Among that cohort, 88% offer apps for Apple Inc.’s iPhone followed by 50% with apps for Research in Motion Ltd.’s BlackBerry and 44% with apps for smart phones running Google Inc.’s Android platform.