A ccording to a report by Boston-based consulting firm Aite Group, mobile banking installations grew by more than 44 percent in 2008 over the previous year. And as technology picks up more momentum in 2009, those numbers are expected to double. U.S. installation rose from 17 in 2007 to 245 in 2008 and will balloon to approximately 614 this year. The report is based on an analysis of 14 vendors and suggests that vendors serving this market, often startups without product lines, now face potent competition from processors that have entered the business only recently and are starting to grab proportionately bigger chunks of the market share.
While more banks are adopting the technology, huge market potential remains. Aite estimates only 1.5 percent of all financial institutions offer mobile banking; it predicts this will grow to approximately 3.7 percent this year.
"Core processors and online banking vendors have jumped into the market by offering mobile banking to their customers at a fraction of the cost levied by the startup specialists," said Nick Holland, an Aite Analyst and author of the report. "Indeed, two processors now rank first and second among mobile banking vendors in its number of installations.
"Jack Henry and Associates Inc. of Missouri had 75 installations late last year, while Florida-based Harland Financial Solutions had 64. And Jack Henry's installations have exceeded 100 since [I have] conducted the research. Both vendors have been able to shoot to the top of the rankings by making it easier and less expensive over specialist vendors for their existing processing clients to add the service."
Startup vendors like ClariMail Inc., Firethorn Holdings LLC and mFoundry Inc. were early providers who brought basic banking services to customers' mobile handsets. Holland estimated the price tag for a mobile banking product from a specialist vendor might run into six figures annually, including integration and maintenance costs; however, a core processor with existing links to a client's system might be able to offer the same service for just a few thousand dollars per year.
Mobile banking is getting the attention of bigger companies that see the product as a natural complement to other merchant transaction processing services. "The rapid progress of the processors poses a threat to the startups that blazed the trail in mobile banking," Holland said. "They need to come up with a value proposition that is more compelling." Some startups have responded by working with processors to offer their services through them.
"As competition heats up, vendors are starting to add text-messaging capability to go along with downloadable applications and services that rely on the mobile Web," Holland said. "And text messaging for bill payment and other banking functions will be crucial to reach the widest possible audience."
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