Why you shouldn’t develop a banking application for iPhone (first)

iPhone 2g, iPhone 3GS, iPhone 4
iPhone 2g, iPhone 3GS, iPhone 4 (Photo credit: reticulating)

As I’ve said before, one of the biggest challenges for banks in deploying mobile payments is getting good information on the deployed based. There are also approximately 100 major handset manufacturers around the world, supported by an average 3 networks per country, meaning that the complexity of mobile infrastructure across the 27 Member States is considerable. Nokia still remains the world number 1 handset manufacturer with 40% global market share (38% in Europe), selling over 125m handsets in 1st quarter 2010.  However, given the apparent ubiquity of Apple’s iPhone and the many headline projects, sales of the entire model range globally to date account for only 1.1% of the world’s handset population (approx 50m handsets in total) – even with increased density in more developed markets this would still only be 1 handset for every 10 European citizens if every handset were in sold in our region (which isn’t the case – there are around 15-20m in Europe). It could be suggested that many Banks leading their mobile initiatives with iPhone applications have fallen for the seductive marketing offered by Apple instead of looking at the reality of the deployed handset base.

Given this market share it becomes abundantly clear that Apple is not the best way to go. However, working with the iPhone does have a number of big plus points. Applications are loaded onto the iPhone via Apple’s App Store and so can easily be distributed through a source trusted by consumers. Additionally, the market is awash with iPhone  developers making software relatively cheap to create. Apple’s investment in securing their channel to ensure recurring revenues has created a device upon which security-conscious European consumers are happy conducting banking transactions, and finally, the relatively high cost of the device in most markets pre-defines the customer segmentation for a banking offer.

If you take the pragmatic route into mobile, it becomes more important from a deployment point of view to look at available pervasive technologies rather than being forced into a specific channel. European handset turnover (the rate at which handsets are replaced) and consequently the time taken for a brand or technology to achieve significant market share is believed to be approximately 4 years – although there is no impirical evidence to confirm this, and it varies considerably dependening on the balance between contract and non-contract consumers in a particular market and whether handsets are sold exclusive of the network provider (SIM lock free) or as part of a network provider-subsidised bundle. In developing markets, where a significant percentage of the handsets are recycled from developed markets and have already exceeded their hype cycle, this means that the overall technology cycle for handsets (the time for a new technology to become globally pervasive) can be in the region of 8-10 years – a similar lifecycle to that of POS technology in the banking sector.

As handset technologies do finally become pervasive, they have been leveraged for payment systems. WAP and SMS are the basis for many schemes in emerging markets such as Vodafone’s M-PESA, Wizzit and Orange Money. Similar schemes are yet to surface in financially-developed markets, perhaps due to the stigma of using ‘old’ technology. Although the Dutch Mobile LVP scheme Minitix proves that creating a brand-agnostic scheme based on a pervasive technology can be a route to success.

So if you’re not going down the iPhone application route, what can you do first – and still capture reasonable publicity? The answer to that is not simple and lies in understanding the dynamics of your own market. What do consumers do with their phones? How do they view technology initiatives from Banks? Should you be security-led or innovation-led? The challenge is creating the solution in a climate where there are still no agreed rules. The phone is the platform, but beyond that the scope is wide. Look at what the issues actually are in your market – what problem are you seeking to solve? What segment of payments or consumers are you going to target?

Looking at the market this way gives you new space in which to find winning mobile payment solutions – Mobile SCT at POS in low volume retailers? 2D barcode as a card replacement? Using GPS on the phone to automatically find the business payment details? Linking mobile positioning to card accounts to verify cardholder presence? The ideas are all out there, so why start with the iPhone and limit yourself to less than 10%?


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