Tuesday, 10 May 2011

Mobile Banking: An insight into pros and cons

As a popular and potentially explosively fast-growing service, mobile banking is a serious force in the world of finance. For the customer, however, there are important gains and drawbacks to consider.

Mobile banking, or M-Banking, touted by many as the more convenient heir to Internet Banking, offers its users a portable, easy way to conduct one’s financial affairs without having to enter the doors of a traditional banking establishment. Furthermore, as technology and sophistication in the field of mobile phones has developed, so has the range of tasks available to the user via their device: from applying for loans to changing pin numbers or adjusting your stock market portfolio.

A recent innovation, mobile banking began as a service around the turn of this century providing customers with an opportunity to conduct basic banking tasks via SMS or the “mobile web”. However, it has evolved to suit the times: it is hard to find a financial institution that does not offer m-banking as an iPhone or Google Android app (offering a very wide and sophisticated range of services to the customer), or a respectable modern phone that cannot be comfortably used for m-banking .

It’s not just in its format change from internet banking that mobile banking represents an evolved service to customers: it offers a portable access to one’s financial information that can connect to the internet as long as there are bars on your phone, and a possibility to conduct business far more inconspicuously than with a laptop.

For those who watch the markets it offers a unique tool: instant access to personalised up-to-date information in your pocket; it can also add a decisive advantage for keen investors to receive text alerts about the health of their holdings, or, crucially, competing stocks.

From a purely practical standpoint, for those with physical mobility issues or who live in remote areas, m-banking is a highly valuable tool, constituting an affordable alternative to online banking and an opportunity to save on travel costs.

Another advantage of mobile banking is that the device necessary for its use is far more affordable than that required for internet banking, with many companies offering quality products as a part of a contract (rather than pay-as-you-go). This is a money-saver for those who use m-banking apps, as it is common for banks to offer its services free of charge, for example Ulster Bank's UK mobile banking.

However, the ease of use, security risks and cost-benefit virtues of m-banking should be should be fully weighed against its advantages before becoming a convert.

One problematic technical issue with the use of mobile banking is its compatibility with certain phones: it can be very irritating to find that complex or urgent banking actions (that one was used to doing on a different phone) cannot be carried out on a phone that does not have Java ME, but supports, for example, a SIM application toolkit instead. Some banks offer services that only work with the former but not the latter, and so on. This is due to change, because the industry is aware of and motivated to overcome format inoperability, and will profit from such a development; until then, the issue is a contemporary headache.

Another technical issue that bears consideration is that of m-banking application upgrades: it is inevitable that app performance and customer demand will lead to novel services and improvements that require upgrades. Consequently, many phones are and increasingly will be expected to be able to automatically update apps. Although this is quite possible, it will be a challenge for banks and application producers to implement as well as for customers to keep up with, effectively isolating a section of m-banking users and custom where clients do not have advanced phones.

Whatever technical challenges lay ahead for customers, the security risks of mobile banking are worthy of far greater concern- they cause more than just irritation: they can be a portal for criminal activity and personal loss. Identity theft can open one’s personal details up, in the worst cases, to highly organised hacking operations that will attempt to drain your money dry with efficiency and virtual anonymity.

Having said that, it is important to remember M-Banking is without doubt a growth market for financial institutions: predictions from respected sources (berg insight : http://www.berginsight.com/News.aspx?m_m=6&s_m=1) predict 115 million mobile banking users in Europe alone by 2015, and around 80 Million in the US in the same timeframe. Mobile banking is therefore big business and accordingly, banks protect the security of their clients’ interests as their own- any business that gains a reputation for poor security in this highly competitive field would surely lose customers, and profit. As a result, all financial institutions using m-banking will do everything in their power to protect your money and your security details. In some cases, there are security guarantees that appear to ensure refunds in the case of successful online fraud, for example Wells Fargo: http://bucks.blogs.nytimes.com/2010/02/25/banking-by-text-message/

Methods to combat insecurity of information include reliable options such as one-time passwords sent to your message inbox or email address by your bank (if that address itself is secure!); intelligently-encrypted information transfer (most contemporary, developed m-banking tools will do this); encryption of any insecure data stored in the device and a host of other protections.

Having said that, there is no absolute guarantee of security in the world of electronic commerce, only high and low risk trading partners . It is fair to say that most trusted names are very safe, nonetheless it is up to the consumer to exercise caution where it is due.

The choice of whether to use mobile banking or not rests on the degree to which it assists one’s needs: if you require an “any time, any place” access to your bank, it is ideal; if you are not in need of such a service and have gnawing security concerns, it may be prudent to stick to what you know.

If you are choosing an m-banking service, opt for a bank with security credentials.

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