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Oct 2, 2012
Simplicity or Security: mobile banking tradeoffs
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Customers increasingly demand more mobile banking, but security should be on everyone's mind.Mobile banking is estimated to be worth $117 billion by the end of this year, according to Gartner.  ACI projects $670 billion by 2015, with 2.5 billion customers.  The convenience of mobile banking is the primary selling point, and the migration will likely continue to accelerate. The obstacle during this development is essentially protecting information over mobile networks.  With convenience as the primary selling point for mobile banking, and security being innately inconvenient, banks and their customers are faced with a tradeoff: simplicity or security?

Customers

A recent study by Infosys generated some substantial numbers to apply to this query.  In the US, 25% of current mobile banking users state that a lack of confidence in the protection of their data is a top concern, compared to 60% of non-mobile banking users.  Furthermore, 45% of nonusers would describe mobile banking as ‘dangerous’ or ‘experimental’, and another third referring to it as ‘scary’. This is a huge opportunity cost for banks, highlighting the need to address security as a reasonable priority. 

On the opposing side of the argument, only 46% are content with the ease of access to their own accounts.  Another 46% are unsatisfied with the speed of access as well.  This implies that somewhere around half of mobile banking users have a reasonably high demand for a quicker and simpler log in process.  These numbers are substantial, and lend their support to the well-established induction that simplicity and convenience are at the forefront of the consumers’ mind.

BanksA man checks his smartphone while standing beside a sign advertising interest rates in Korea.

With a customer base that wants the best of both worlds, and a world where security is pretty much always a nuisance, the banks are in a tight spot.  Convenience is king, and banks want to provide.  Furthermore, online banking reduces costs and allows for various channels of revenue expansion.  It is extremely tempting, for consumers and banks both, to promote online banking despite the risks.

Threats: Real or Perceived?

Mobile malware will inadvertently follow suit with this move towards mobile banking, the question is how much more secure is your home computer?  The numbers are often conflicting in regards to just how much malware is out there, but some sources place the unique strands of computer viruses at about 90 million (currently).  Of this 90 million, only 13,000 are found on mobiles (up from 2,000 in 2011).  This implies that computers are in fact much more likely to encounter malware, but that the mobile malware count is increasing by a few hundred percent annually at the least. This is also not to mention the effectiveness of antivirus on mobiles compared to computers. The threat is real, but likely not substantial just yet (though certainly it will be).

Opportunity

The current methods of battling malware are fairly straightforward: tracking customer habits and flagging unusual behavior, password protection, and the capacity for real-time tracking.  As we noted above however, ensuring the customer is as unburdened as possible is the goal.  If your payment is denied you are frustrated while representatives of the bank call you to confirm your identity.  I often absent-mindedly travel for business and forget to inform my bank, throwing them into a frenzy when purchases pop up in China. This frustrates me despite how reasonable it is for them to assume fraud. 

Mobile actually provides some interesting potential alternatives. Our phones know everything about us. They have a full list of pretty much everyone we know, access to our location at nearly all times, our spending habits, our Facebook accounts, and our emails.  With this extensive and dynamic array of data, finding a security construct that asks for our location at the time of our mobile purchase or shows us a picture of a contact while asking for their name might be a simple and seamless way to confirm identity. Siri could be leveraged as a voice authentication, or the camera could be used to take a photo of ourselves. Finding the simplest and most convenient way to confirm identity is the opportunity here, and any tech-savvy entrepreneurs with a flair for mobile applications should start experimenting. 

Bottom Line

With the majority of bank customers opting out of mobile banking as a result of security concerns, approaching this demographic must be high up on the to do list. No one innovation in the mobile security environment has managed to truly differentiate itself as of yet, presenting an interesting opportunity for the technology-minded entrepreneur.  Mobile banking threats are actually not nearly as high currently as one might perceive, but they will be soon. Considering that convenience is likely why people have switched to banking via their mobile in the first place, bulky security solutions won’t be well-received. The bank with the right muse stands to gain serious market share and profitability.

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