Mobile Banking Security

Consumers love the convenience, but security issues are making them nervous.

November 14, 2011
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Mobile Banking Security


  • The financial services industry is moving toward a
    ‘true mobile wallet.’ 
  • Security experts agree the growth of mobile malware raises questions about the prudence of managing finances on the fly.
  • Board focus: The risk of not offering mobile banking
    to members might be greater than offering it.


By 2014, more people will access their accounts through mobile devices than through their home or office computers, predicts Robert Hedges Jr., managing partner of the research firm Mercatus.

But security concerns—and a couple of well-publicized breaches—could slow the rate of adoption. The number of consumers rating mobile banking as “unsafe” or “very unsafe” increased from 25% to 40% between 2009 and 2010, according to reports from Javelin Strategy & Research.

The only issues holding mobile banking back from the next phase of consumer adoption, it seems, are security concerns.

A game-changer

Mobile devices have, without a doubt, transformed our daily interactions and transactions. Some experts suggest the impact of mobile technology is far greater and has revolutionized the way we live.

A consumer shopping for a flat-screen television can compare prices, check account balances, and even transfer funds between accounts right on the sales floor using a mobile device. A stay-at-home mom with a small hos-pitality sales business can use her smartphone’s camera to deposit checks.

“Mobile banking will become the norm at some point, because our society is spending more time on mobile devices than on their PCs,” says Tony Rasmussen, senior vice president of eServices at $2.9 billion asset Mountain America Credit Union, Salt Lake City. “Our goal is really to enable our members to conduct business on their terms, when and where they want to.”

To that end, the credit union offers a full suite of mobile banking services including wireless application pro-tocol (WAP) Internet banking, short message service (SMS) text banking, and a downloadable application (app).

The credit union launched its WAP service—a slightly pared-down online banking site, accessible from any mobile device with a browser feature—about seven years ago. To use WAP, which works on more than 300 dif-ferent devices, a member needs only a feature phone, not a smartphone.

Mountain America’s SMS text banking allows members who’ve registered their mobile devices to complete a limited number of functions by entering short codes.

“It’s a fast way to check your balances, look at your past few transactions, and even make a transfer if you need to,” Rasmussen says.

The credit union’s downloadable app, however, is where most of the action is. Developed by an outside vendor, the app is custom-branded to the credit union and operates independent of a phone’s browser. Mountain America offers the app free to members in both the Android Market and the Apple iTunes Store.

The app looks better and works faster than WAP, says Rasmussen. It also offers additional features, including a GPS-driven branch and ATM locater. The app allows members to graph expenses or set up personal budgets with alerts when they get close to limits or exceed them. Glancing at their phones, members can determine if they can afford to eat out or go to a movie.

The app even saves members time since they don’t have to stop at the branch to deposit checks. With the remote deposit capture (RDC) feature using their phone’s camera, members can deposit and transfer funds by taking pictures of checks. Soon, Mountain America’s app will also accommodate bill-pay.

The new industry standard

Rasmussen expects the app to eclipse the mobile website and the regular online banking site as smartphones in-crease market penetration. Estimates vary, but some reports indicate smartphones constitute 35% of the current mobile market, and the International Data Corp. predicts final 2011 smartphone sales will double the sales of 2010.

“I think it’s a foregone conclusion that the industry will come to embrace feature-rich mobile banking applica-tions,” says Hal Tilbury, CEO and founder of Bluepoint Solutions, an independent software vendor that offers RDC and specializes in electronic content management and item processing.

The financial services industry is moving toward a “true mobile wallet” that allows consumers to use cell phones to do anything they currently do with the contents of a wallet, he says. A mobile phone as a debit or credit card? “Right around the corner,” he speculates. “Google has already launched its wallet service, and within two years you’ll see the players in that space multiply further.”

As mobile banking becomes a bigger facet of personal financial management, experts like Carlo Cardilli, senior vice president of mFoundry, expect physical branches to play a much smaller role. But that’s good news, he says.

“Mobile banking allows credit unions to cast a bigger shadow,” he adds. And when members rely less on brick-and-mortar branches, credit unions won’t have to work as hard to retain them, even when they move out of town or out of state. With shared branching and no-fee ATM locators on mobile apps, members can figure out how to access cash just about anywhere. And they can do just about everything else on their mobile devices.

Don’t forget the financial benefits of the mobile platform, Cardilli adds. Credit unions are very sensitive to cost, and call centers are expensive to staff and operate while mobile alerting is much cheaper, he says.

“Fifty percent of calls are ‘What’s my balance?’ or ‘Has my rent check cleared?’” he explains. Credit unions don’t want members to stop calling, but they do want members to use more efficient ways to get the information they need. “Mobile allows members to get that kind of information faster than it would take a call center employee to pick up the phone,” he says.

Members seem to like the platform, too, says Cardilli. Within the first three months of availability at mFoundry’s client $769 million asset Columbia Credit Union in Vancouver, Wash., 20% of members signed up for mobile banking.

Next: Malware and data breaches

Controls and Protection

Ron Kimball
December 20, 2011 1:06 pm
Great article but I had to comment on David Dye's comments regarding how the controls are "as much, or more protection, as you do on a PC". The devices this article is referring to are consumer based devices and therefore do not require the user to use a username or password. In the case of most mobile phones, if the user does opt to use a password, it is most likely a simple 4-digit numeric password. I fully understand, and agree, that authentication and network encryption are on par with most PC applications but to say the controls are the same (or better) is a bit of a stretch. I would contend that it's more likely that a PC has anti-virus installed (perhaps not updated but installed), on a windows PC perhaps has the security center running, and maybe even a firewall. From a risk perspective I would have to say the impact to the user is the same, the likelihood of loss is significantly higher since I haven't heard of too many PCs being left in the back of taxi-cabs lately and the control environment is signficantly different. I'm not advocating that PCs are better, just that to say the risk is the same or better with a mobile device is very misleading. Both environments are plagued with their issues and users need to be aware of the risks. I just don't think it's wise to go on record with a user and say they're 'more secure' than they would be if they used their PC. IMHO

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