As the world globalizes various initiatives have been developed in the information sector to enable faster transfer of money from one person to the other by the use of mobile phones. As the use of wireless communication gains momentum, so have new developments in mobile commerce and mobile banking. Among the first development in mobile commerce was mobile banking (Routray, Sherry & Reddy, 2008).
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Mobile banking was developed in the year 1996 in the USA though its adoption rate has not been that encouraging. Mobile banking is often described as a channel through which customers interact with bank or to the service provider itself through a mobile device, for example, a mobile phone. In today’s bank system, business depends on building a wide client base and thus any new invention that is likely to increase the client base has been received at an encouraging rate.
Discovery and adoption of new and better ways of service delivery to customers has improved economic development. As more and more people migrate to wireless communication from fixed communication, technology holds a huge potential of creating a new business platform as we shall see in mobile banking development.
With people’s desire to operate their bank accounts without necessarily visiting the business premises, mobile banking (M- Banking) could not come at a better period than this. The various account operations that M- banking has enabled include but are not limited to:- checking of the balance, transacting money to other people, branch or ATM information, fund transfers and payments using mobile phones among others.
Significance of the Development
The mobile banking has had a dramatic effect on the poor in transforming their lives. It has been a major economic driver in Asia, Africa, and Latin America even in Europe due to its fast way of engaging in financial transactions without many limitations. Among the significant contribution of M-Banking is that it offers customers greater convenience and empowers them make sound banking decisions by providing them with adequate and reliable financial management tools through the handset at their place and time of pleasure.
M-Banking also offers security to bank customers as they can conduct transactions in the place where they feel safe and with the technology advancements, which provide multiple ways of authentication; it is difficult for one’s bank details to be tracked by other people. The new development is also a time and cost saving mechanism for the banks that engage in the finance business due to the fact that integration of the different banking systems reduces costs on messages, maintenance, and deployment costs. Mobile banking also enables banks to offer the convenience of comprehensive banking services anywhere-anytime banking, using GPRS, mobile browser or SMS.
Another major significance of Mobile banking is that it supports a wide range of mobile devices and mobile browsers. Banking customers can query on account balances and make fund transfers. Banks can also proactively send timely information to customers in a completely secure environment whenever a customer-defined event occurs. The solution’s self-service capabilities empower customers to manage their banking activities better. The solution also addresses data transmission and storage related security concerns adequately, delivering a truly streamlined customer experience.
Mobile banking is a means of providing and extending financial services to all those who cannot afford banking systems and to all those who in the hour of need may not be anywhere near a bank thus the spread of mobile phones is a major driver in increasing mobile banking services. With M-banking still in its formative stages in emerging economies a number of projects are currently under way and fruits can already be seen, for example, in most Less Developed Countries, Mobile banking has played a key role in creating and exchanging information, allowing Small and Medium Enterprises to communicate with clients and suppliers. M-banking has also allowed money transfer to distant family members. As observed by Comninos, Esselaar, Ndiwalana & Stork (2008) “domestic and international remittances have become indicative of the potential of mobile banking as the case of the Philippines’ G-Cash from Globe Telecom and Kenya’s MPESA from Safaricom demonstrate” (p5).
In the United States of America mobile banking users have increased and studies shows most different platforms are used by different age groups. For instance the young may prefer web platform while the older prefer SMS system. Statistics, as noted by Tubin (2010), show that “the number of US subscribers to mobile banking has soared by more than 129% in the past two years to 13 million; people who use their mobile phone for Web-based banking tend to be younger, male and more ethnically diverse than their online counterparts. Over a third – 36% – are between the ages of 25 and 34, while only 18% represent that same age group online. Males represent 53% of this population versus 43% online while 30% are Hispanic, compared to just 11% of Web banking users” (par 1).
Money Banking Development
The mobile banking system was developed or has been undergoing development under the following platforms: Short Message System (SMS), mobile web, and finally mobile client applications with each platform having their weaknesses and strengths. It is important to understand how the different platforms work. The common characteristic of the three platforms is that they all involve receiving different types of messages since each has the capability of message it can carry.
Due to the fact that no common platform can be said to be better than the other, banking institutions need to develop mobile banking services that respond to their customer needs. It has been seen that most banks implement the mobile banking service in phases so as to ensure the risks involved are minimal as possible. Most of the banks which have developed M- Banking services started with the simple Short message System (SMS) before proceeding to Mobile Web and finally Mobile Client Applications.
Short Message System
With almost every make of mobile phones supporting the SMS system, it has been easier for most financial institutions to use SMS since the market pool they serve is quite large. The SMS system from the consumer perspective is cheap compared to the other forms. Some prefer SMS also due to the fact that they are easy to use, requires no new software installation other than the existing one, and it allows banks send information to their customers and employees on time as well as the messages stored in the phone do not require internet for their retrieval. The main disadvantages are that SMS are short (about 160 characters) and do not offer secure environment for the recipient.
An SMS system is simple to implement as it requires the service provider and the bank to arrange the required logistics that ensures the needed connections to each wireless carriers are established (Mobile Market Association, 2009). The SMS system works in a simple manner where a mobile banking application is installed on the bank’s network that continuously polls the bank database. Whenever a request is made to the bank by a customer, the application detects a change in the bank’s database and an SMS is sent to the customer depending on the changes he or she has made. The system can also work in a way that bulk SMS to the service providers, after reaching the service provider it is then sent to the wireless device (Kohli, 2004).
Majority of mobile phones in the USA come with a web browser through which phone users are able to access the internet. With the rates of accessing internet becoming affordable across the country, phone makers have developed mobile phones with huge screens and service providers have increased their bandwidth to increase the speed of sending and retrieving data.
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A combination of the above factors has made mobile banking through the internet an easier task and thus more preferable especially among the young generation. Among the advantages of this system are that it enables the user access corporate applications and a secure connection can be established on most of the web browsers that the customer might be using. The major disadvantage of the system is that there is no offline coverage capability meaning that if the customer’s phone has got no units, he or she cannot access her account information (Mobile Market Association, 2009).
Mobile Client Applications
These are advanced agent based technologies, which are mainly created by the banks. The applications creates a more secure and friendly feature the main problem with these client based applications is that while in some phones it might work without any problem to the simple handsets it would force the client either to buy an enabled application phone or not use the service completely. Under these three platforms, depending on the capability and the suitability of the banking information may be in need of, one can easily access his or her bank information (Mobile Market Association, 2009). These Mobile Client Applications can be developed within a financial institution, use a shared or purchase the enabling technology from any of the vendors in the information sector.
The Frontiers of Mobile Banking
High capacity and intelligent mobile communication networks have resulted in new services. The growth in mobile internet network infrastructure and subscription has provided a base for development of mobile banking. The main frontiers of mobile banking have been the phone makers who have created platforms which enhance communication between the clients, bank through the service provider or the other model where the service provider provides a system where customers can save cash in their phone accounts through the service provider agents.
The banks for developing new banking strategies which adopt new technologies as long as they enhance efficiency in the provision of services to the customers and the customers for adopting these technologies, which help ease the burden of the banking process. As it is happening in Kenya, the emerging markets have been a driver of the new information management systems to customers using the M-Pesa (M- Mobile, Pesa- a Kiswahili name standing for money) thus mobile money, the customers provides its customers with a new software which is all phone enabled at no cost. This software is used to deposit money and send money to all service provider subscribers at a low cost (Kimenyi & Ndung’u, 2009).
From the study we can conclude that man’s desire to engage in faster and time saving financial transactions without much bureaucracy and with more guaranteed safety has led to development of new technologies in the information and management technology. One such invention has been the development of mobile banking. Mobile banking comes with its own advantages and disadvantages but the fact that it gives poor people the chance to open and save their money in bank less accounts and also enabling those who operate bank accounts operate them at their comfort has been cited as a major advantage.
From the study, we can also conclude that mobile banking is implemented through different platforms depending on consumer satisfaction. For mobile banking to gain the much deserved popularity more cooperation and policy coordination would be necessary between financial and telecommunication services providers. Several initiatives have been carried on in different countries as countries try to embrace the new wave of mobile technology.
Comninos, A: Esselaar, E; Ndiwalana, A., & Stork, C. (2008). M-banking the Unbanked: Volume ONE 2008 Policy Paper 4. Web.
Kimenyi, S. M., & Ndung’u, S. N. (2009). Expanding the Financial Services Frontier: Lessons From Mobile Phone Banking In Kenya. Web.
Kohli, K. (2004). SMS in Banking Mitigating the Risks: Paladion Networks. Web.
Mobile Market Association (2009). Mobile Banking Overview. Web.
Routray, S; Sherry, A. M., & Reddy, R, V (2008). Wireless ATM: A Technological Framework to m-banking. Journal of Internet Banking and Commerce, Vol. 13.
Tubin, G. (2010). US M-Banking Take-Up Jumps 129% In Two Years. Web.