BAI Retail Delivery Conference - Long stalled by lack of adoption and a range of technical issues, new research from TowerGroup finds that mobile banking is finally coming into its own. Banking over the mobile channel, especially when considered in the context of an evolution toward mobile payments, is now fast becoming a market mandate - and is no less important than the dawn of Internet banking in the late 1990s.

Mobile banking initiatives launched in the early part of this decade crashed and burned - victims of a lack of compelling features, functionality and consumer friendliness. Compounding these issues were limited device support, poor network availability and slow data speeds, aswell as a lack of focus from mobile operators.

TowerGroup estimates that by year end 2007, mobile banking customers will top one million, and that more than 40 million U.S. consumers will adopt mobile banking by 2012. TowerGroup attributes this growth to substantial improvements across wireless networks, handsets and applications, as well as the significant marketing and technology investments being made by top banks to increase consumer awareness and trial.

"With mobile device penetration in the U.S. at an all time high and market dynamics shifting, mobile banking is finally poised to thrive," said Bob Egan, Chief Analyst at TowerGroup and author of the research. "Consumers view their phones as trusted devices, even more so than their desktop PC. This perception will help fuel the adoption of mobile banking among non-online banking users."

Research highlights include:

- The adoption of mobile banking will be fueled by two primary factors: consumers' increasing preference for real time, self-service transactions; and their growing adoption of mobile data services and applications.

- TowerGroup estimates that up to 30 percent of online banking users will adopt the mobile channel in the next five years. However, mobile banking is also likely to appeal to a segment of the banking population that accesses services via ATMs, but is not willing to use or comfortable with online banking. TowerGroup expects that by 2012, approximately one-fourth of all mobile banking users will come from outside the online banking channel.

- The growth of mobile banking still faces cultural, technical and business challenges. Chief among the technical challenges are information security and consumer privacy.

"Beyond technology, broad participation in mobile banking will be most encouraged by maximizing and improving the customer experience," said Charul Vyas, an analyst in the Emerging Technologies research service and co-author of the research. "Banks must invest substantial marketing dollars to increase consumer awareness about mobile banking, as well as remain vigilant regarding privacy and data security in this area."