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Mobile Banking Innovation Essay

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Updated: Jan 12th, 2020


Various innovations are being attained in different fields. Innovation refers to the process of coming up with new ideas or changes that are able to shift or alter the way things are done. In business terms, it is the process of “developing a new customer value by coming up with amicable solutions that are able to meet their new and inarticulate needs” (Mohan 2005, p. 481). This can be achieved by coming up with effective processes, ideas, services, technologies, and technologies among many others.

Innovation is also important in businesses because it gives a business a competitive edge over its rivals. Businesses that have a culture of innovation have the potential of performing better thus remaining at the niche of the market. In the mobile industry, mobile banking is one of the recent innovations that have influenced the operations of the telephone/mobile phone industry positively. This invention has enabled the company involved in the innovation to have a competitive edge over its rivals.

Mobile banking, also called ‘m-banking’, is used with reference to services relating to account transactions, performing check balances, payment of bills, and application of credit among many other banking transactions that can be conducted, effected using mobile phones, or through personal digital assistant.

Mobile Banking: Advantages in General

Mobile banking has brought a significant positive change in the banking sector based on the changes it has brought. According to Dirk and Koehn (2011), innovation may change the organisational strategy and structure (p. 35). Mobile banking is considered an innovation because it reshaped the way banking was practiced.

Many of the banking practices used were based on the conventional or traditional practices. It was a very tedious and time-consuming experience when it came to payment of bills, depositing of money, and even checking of money in ones account. Introduction of the mobile banking was a very big innovation that allowed customers to engage with their banks in their remote locations (Gumusluoglu & Ilsev 2009, p. 462).

People are not required to walk to the bank branch to get service. In terms of mobility, individuals can transact all financial transactions at the comfort of their homes or anywhere without having to spend energy and time travelling to the bank. Therefore, this important innovation has elevated the banking sector with most financial institutions investing more in this technology to compete favorably with their competitors.

There are different types of innovation including radical and incremental. Every type has its own demerits and merits in line with the innovation. Both types of innovations are aimed at improving the performance of the organisation. This innovation in banking is an incremental innovation because it involves a limited change in the existing products and services. People used mobile phones for communication. They could walk into banks to pay or check their balances.

Therefore, the idea of mobile banking was to be introduced on mobile phones by adjusting or making some improvements on their functionality (Abernathy & Utterback 1978, p. 40). This innovation did not require an individual to dispose off the handset or change the sim card. Few features were added to the existing features to ensure that it offered the services that related to mobile banking.

Furthermore, this innovation did not require many complexities in terms of adaptation to the existing technologies. Therefore, it is easily imitated by competitors. Once this idea was rolled, almost every bank reported to roll out the service too. This quick adaptation by competitor banks in itself demonstrates that the innovation was emulated by other banks easily. In addition, incremental innovations do not address the new markets.

They are associated with fewer instances of market discontinuities (Tarun & Parvis 2011, p. 33). Furthermore, the major function or purpose of this kind of innovation is to keep the existing products more competitive since improvements in existing products and services is based on small improvements. The mobile banking was just a slight improvement on the already existing technologies.

In addition, companies require limited organisational changes such as recruitment of persons with specialised skills and knowledge in mobile banking. Such people are important in offering consultancy services in the organisation in case of a problem among other changes (Dirk & Koehn 2011, p. 35). Therefore, uncertainties that are technical and market-oriented are low or not substantial. Therefore, there are less cases or probability of resistance in an organisation set up following the onset of mobile banking (Thornhill 2006, p. 687).

Advantages: PESTEL Analysis point of view

In the mobile banking innovation, PESTEL was very crucial acronyms because it helped to analyse the suitability of an innovation. A good innovation like mobile banking must satisfy the aforementioned factors. In fact, it was an added advantage to the government.

Therefore, in terms of political factors, which consist of government policies and the degree in the intervention in the economy, mobile banking was highly welcomed by the government as a unique customer-friendly innovation that could be accessed by almost any willing person (Garcia & Calantone 2002, p. 110). The government was willing to support the innovation in ensuring that certain it succeeded.

However, there was less political intervention because the project was carried out from the professional point of view. Economic factors include issues to do with taxation changes, rates of inflation, economic growth, and exchange rates among may other attributes (Oxford University Press 2012, Para. 2). An innovative idea should promote economic growth. Mobile banking has been in the forefront when it comes to boosting the economy of the various countries that implemented the innovation.

It has led to growth in performance that is demonstrated through improved gross domestic products and increased rate of productivity and improvement (Sinha & Noble 2008, p. 943). Mobile banking technology has helped to stimulate money circulation besides helping to a greater length in alleviating low living standards. Social factors are also important in any innovation. These factors are important to the lifestyles of people. The people’s level of literacy is well taken care of in the mobile banking (Dewar & Dutton 1986, p. 1422).

Although the innovation favoured the literate people, mobile banking has proved convenient and easier to use even by the illiterate. New technologies tend to make the current ones obsolete. Therefore, to be able to remain competitive, the mobile banking has been able to watch closely for any innovations to incorporate them in its strategy to remain competitive (Hoffman & Hegarty 1993, p. 549). So far, it has proved one among the best innovations.

Ecological aspects comprise atmospheric conditions and climate fluctuations. Changes in temperature and climate may have adverse effects on certain innovations. Fortunately, mobile banking is not affected by such factors in any way. It is convenient in any type of environment. However, in this innovation, there is the likelihood of delays and slowness during the rainy season, which is currently being resolved. Legal factors “relate to the legal environment under which a given organisation operates” (Christensen 1997, p. 25).

There are various laws that companies need to comply with such as disability acts and recycling laws among others. The mobile banking innovation is in tandem with these legal requirements to avoid court cases. For instance, mobile banking innovation has put measures in place to address the issue of infringing on other people’s rights. Mobile banking innovation has managed to comply with them.

Suitability of Mobile Banking: SWOT Analysis

Mobile banking, as an innovation, can also be evaluated using the SWOT analysis, a strategy that helps in determining whether the innovation is appropriate for implementation or not (Koehn 2011, p. 59). The acronym stands for strengths, weakness, opportunities, and threats.

Strengths refer to the areas that the company can work on to attain a competitive edge. For instance, one of the notable strengths of this innovation is that it has the capacity to improve service delivery to the largest number of people. However, the major weakness in this innovation is that it may become obsolete quickly. Threats for this innovation include the fact that other companies have emulated the idea while opportunities are that the idea has been applied in other areas of technology to improve the way operations are conducted.

Challenges facing Mobile Banking

The road to these inventions has been marred with many challenges. The first initiative that was communicated concerning mobile banking was during 1999, which saw Fundamo Company deploy its first and the only kind of prototype. Henceforth, various companies undertook the initiative of finding an amicable solution.

These companies included Mathias Entemann and Eckart Ortweiin owed by the Germans, BBVA Telephonica owned by Spanish, Simen, Trinet, and Adamtec, among others. All these companies tried but in vain to find a solution to the problem they were looking for. In summary, in early 2000s, most consumers could not view their financial information over mobile phones.

Some banks had started to provide these services. However, they could not move ahead due lack of enough controls and development of the system. When Well Fargo rolled out mobile banking service, around 2500 clients joined it though they later opted to leave. In the mid 2004, the capabilities and size of mobile phones improved. The banking sector began providing more services through cell phones including smaller phones such as smart phones.

The improved geographical and images that were offered by the mobile phone improved the level of customers (Garcia & Calantone 2002, p. 110). The revolution in mobile banking came in 2008 when most banks began to offer mobile services/banking. The number of customers increased. In fact, by 2009 February, the customer base averaged 1.9 million customers. These customers used the Bank of America for their banking needs

Pre- and post – mobile Banking Innovation

Before mobile banking innovation was realised, the mode of checking accounts balances, paying of bills, and any other financial transaction was done in banks. Customers were forced to move or go in person to specific bank to check for balances to transact any financial transaction.

This method was very slow. It consumed a lot of time. Furthermore, it was very lengthy as banks could spend a lot of time searching for customers’ records. It was also very difficult to establish whether the client carried out transaction or not. In the post mobile innovation, the situation has changed significantly.

Mobile phones are used for multiple purposes. They are not only used for communicating but rather for financial transactions. Money can be transferred from one individual to another and account balances can be checked without the hustles of having to queue in banks. Therefore, the innovation has done a lot in reviving and reenergising the banking sector (Martin 1994, p. 21) in terms of having a mobile bank.

Mainstreaming mobile banking innovation

Mainstreaming mobile banking presents an opportunity in the banking industry to expand and reach out many potential clients. This platform has a bright future if technology is used and adopted appropriately. Many people and countries have already rolled out their mobile banking with the reception being awesome. However, innovation theory such as the valley of death may pose a challenge if adequate measures are not improvised.

This theory is used as a metaphor that means lack of enough resources and expertise in a given area of specialty (Lynda, Angus, Markham & Ward 2010, p. 402). This lack of expertise may cause a technology or an idea to crumble. Therefore, to ensure this does not occur in mobile banking, various stakeholders in the banking industry must develop and nurture more expertise besides investing in more resources that will ensure that the innovation functions smoothly.

However, the much that has been realised through mobile banking is enough to declare it a working innovation and a motivation to the banking sector based on its many advantages in terms of mobility among others as discussed in the paper. Mobile banking innovation has influenced the economy positively besides making banking easy and faster. However, it is quite important to put measures in place to ensure that advancement of technology does not render the idea obsolete.


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