500 million will use mobile banking

A new report from ABI Research estimates that 500 million people will be using some form of mobile banking by 2013  - either mobile online banking, person-to-person payments or mobile wallet services. I usually take forecasts with a pitch of salt, but this one recognises that there is a major theme going on here.

Mass market mobile banking has been a long time coming - and a long time being predicted - but the tipping point has finally arrived. Larger screens, improved interfaces, ubiquitous networks, and more flexible services are giving mobile banking the oomph it needs to be a more popular application than mobile gaming or music.

You might think that the current global recession should dint the bank's hopes of colonising the new opportunity.  Not necessarily. Mobile banking can thrive despite the current credit crunch. Banks don't necessarily need to be lend money to profit: mobile banking benefits by cost cutting (reducing the cost of transaction) and increasing the number of bank users.

There are two areas where I think mobile banking will really take off:

Banking for those without traditional banking services

For once, emerging markets are proving to be key to an emerging technology. Africa in particular is a hotbed of mobile banking with operators like Vodacom Tanzania and Kenya's Safricom racking up millions of users of the mPesa mobile banking service. Orange Money is a similar service in Ivory Coast in partnership with BNP Paribas.

Africa is particularly ripe for mobile banking because the majority of Africans do not have access to bank accounts yet husbands, wives, fathers, sons and daughters and so on travel to cities or abroad to find work. They need to be able to send money home to their rural families. Mobile remittances are proving a cost effective alternative to the more expensive traditional remittance services like Western Union, making it easier to send smaller amounts and for less fee.

And this is a great opportunity for operators. The World Bank estimates that the remittance market could be worth $1 trillion a year with the input of mobile remittances). The next step is to extend the remittance services into a broader range of financial services for people who live far from banks and do not have a traditional address. Mobile banking could provide a current account, insurances, micro-loans, savings and so on. It's not without its challenges as this Forbes article explains but the potential is there.

Cash-free transactions and immediate offers

Another growing aspect of mobile banking is mobile payments and wallets. Smart cards using near field communications - such as the Oyster system used on London's public transport - are proving to be excellent at reducing the costs of handling cash for the transport provider, while increasing the convenience of the passenger. I expect mobile phones to muscle in on the standalone smartcard. There are countless trials around the world of using mobiles to make small payments, such as that of Payez Mobile trial in France involving seven banks and four mobile operators. And why not? The mobile phone can do everything the smart card can do - short range communications and limited memory - only better. By using near-field communications, users can swipe a phone close to a payment system, and then use the 3G connection to interrogate balances, top up and so on. This increased intelligence of using the phone could spread out to combine with location based services. A secure mobile wallet would also allow the phone user to purchase coffee or an umbrella on route and receive offers based on their journey.

There are opportunities a plenty here for operators, financial services organisations and any business that wants to have closer, more immediate transactional relationships with customers or simply want to stop using cash tills.