History of Mobile Banking

Like most innovations, mobile banking came to be after several fits and starts by different telcos and technology companies, mostly from Europe. Here is an excerpt from another blog on m-banking:

• The first mobile banking and payment initiatives was announced during 1999 (the same year that Fundamo deployed their first prototype). The first major deployment was made by a company called Paybox (largely supported financially by Deutsche Bank). The company was founded by two young German’s (Mathias Entemann and Eckart Ortwein) and successfully deployed the solution in Germany, Austria, Sweden, Spain and the UK. At about 2003 more than a million people were registered on Paybox and the company were rated by Gartner as the leader in the field. Unfortunately Deutsche Bank withdraw their financial support and the company had to reorganise quickly. All but the operations in Austria closed down.

• Another early starter and also identified as a leader in the field was a Spanish initiative (backed by BBVA and Telephonica), called Mobi Pago. The name was later changed to Mobi Pay and all banks and mobile operators in Spain were invited to join. The product was launched in 2003 and many retailers were acquired to accept the special USSD payment confirmation. Because of the complex shareholding and the constant political challenges of the different owners, the product never fulfilled the promise that it had. With no marketing support and no compelling reason for adoption, this initiative is floundering at the moment.

• Many other large players announced initiatives and ran pilots with big fanfare, but never showed traction and all initiatives were ultimately discontinued. Some of the early examples are the famous vending machines at the Helsinki airport supported by a system from Nokia.
  

• Siemens made announcements in conjunction with listed and high-flying German e-commerce company, Brokat. Brokat also won the lucrative Vodafone contract in 2002, but crashed soon afterwards when it run out of funds.

• Israel (as can be expected) produced a large number of mobile payment start-ups. Of the many, only one survived – Trivnet. Others like Adamtech (with a technically sound solution called Cellpay) and Paytt disappeared after a number of pilots but without any successful production deployments.

• Initiatives in Norway, Sweden and France never got traction. France Telecom launched an ambitious product based on a special mobile phone with an integrated card reader. The solution worked well, but never became popular because of the unattractive, special phone that participants needed in order to perform these payments.

It is not clear when the first successful attempt was made, but it can be inferred that when it was, things moved very quickly. With many banks already getting into internet banking by the time mobile banking was developed, "many analysts expected mobile banking to end up as another type of Internet banking deployment. Many bankers expected mobile phones to provide (just) another "channel" to customers to access the Internet Banking portal" (http://mbanking.blogspot.com). Mobile banking initially required that the device be capable of accessing the internet, the banks internet portal, and make transactions from there -- the way one would if he were online.

Today, mobile banking has totally separated itself from internet banking. It has its own set of protocols, and does not require the user to go online and access his bank's internet portal. The device to be used need not have internet-browsing capability. Mobile banking has become simpler to use and more easily accessible.

It is these qualities that have made mobile banking described by analysts as the next "killer app" (http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=98930). With billions of mobile users worldwide, more developments are expected to arise. Particularly in third world countries where wireless communication has more penetration than wired (source needed), mobile banking may grow to be one of the most significant tools that can be used for financial services to reach unserved and unbanked individuals.

This blog will focus on one of the latest mobile banking applications in the Philippines - GCASH and SMART Money. To go directly to these topics, click here.

Van Rensburg, Hannes (2006), Why Mobile Banking is not Internet Banking, retrieved from Mobile Banking, Website: http://mbanking.blogspot.com/2006/12/why-mobile-banking-is-not-internet.html

Van Rensburg, Hannes (2007), A Perspective on the History, retrieved from Mobile Banking,
Website: http://mbanking.blogspot.com/2007/11/perspective-on-history.html

Baar, Aaron (2009), Report: Mobile Apps Key for Financial Institutions, MediaPost Publications,
Website: http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=98930