Money Talks: Banks Start to Offer Mobile Service on Cell Phones

The cell phone does it all: You can take pictures, send emails, play music and watch TV. Now, you can add banking to that list.

That's because some of the largest U.S. banks -- Bank of America, Citibank, Wachovia, Washington Mutual, Wells Fargo, and ING Direct – are launching mobile banking services that give you access to your accounts wherever you are.

Like regular online banking, the mobile service allows consumers to transfer funds, check balances, make bill payments, and look up branch locations from their mobile devices.

Though still in its infancy, banks are hoping the mobile service will catch on with consumers. Dan Schatt, a senior analyst at Celent, says banks see it as a way to keep customers and “generate more payment revenue down the line” as people get more comfortable with using mobile devices for their finances.

"The more services" the banks offer, says Asaf Buchner an analyst at JupiterResearch, "the less likely you are to quit your bank entirely."

Mobile banking is an obvious extension of online banking as cell phones get more powerful and begin to mimic computers. This week's launch of Apple's eagerly awaited iPhone is intensifying the push to have cell phones and other mobile devices do everything that a home computer does.

Works Two Ways

Mobile banking basically works two ways--either through the Web browser on your phone or special software that you download.

Bank of America and Wachovia both offer a browser-based service, which is a simplified version of the online site that fits within a cell phone and PDA screen. Any customer that has Internet access on their cell phone can log on to their accounts by typing the banks URL -- bofa.mobi or wachovia.mobi -- into their mobile browser.

Citi Mobile, which was launched last month, is a downloadable application. Customers need to log on to citi.com/citimobile on their computers and download Citi Mobile to their cell phones. The application then resides on the phone anytime you want to access your accounts.

ING Direct, which plans to launch its mobile banking later this year, will offer a browser-based service, as will Washington Mutual in early 2008. Wells Fargo is piloting both a downloadable application and a browser-based service for next year.

Apple's iPhone, which goes on sale Friday, will have a full Web browser like that on their home computer, so users will be able to do online banking whether or not their bank has created a mobile service.

Carrier Partnerships

To generate interest in the mobile service, banks and wireless providers are teaming up.

Wachovia has partnered with AT&T and Firethorn to have the bank's mobile service preinstalled in AT&T phones starting in the fourth quarter of 2007. AT&T customers who don't have Wachovia Mobile installed in their devices will be able to download the application from the Wachovia or AT&T website.

Schatt says that this type of partnership provides a “higher likelihood of consumers gravitating to” mobile banking, because it is already on the phone and they don’t have to search for it on their own. Analysts expect other banks and carriers to follow.

One drawback for mobile banking users is the fees. Even though banks are not charging for their service, carriers do charge for accessing data through their phone. Carriers typically charge by each kilobyte they use to access data. Customers can select instead to pay a monthly fee to use an unlimited amount of data – a price that varies depending on the carrier and type of phone you use. AT&T, for example, charges $19.99 a month for unlimited data usage, according to their website.

Some customers may also be hesitant to sign up for mobile banking because of security concerns. The banks say that their mobile service will have the same strict log ins and security available to their online banks. Mfoundry, the company that built the Citi Mobile application, says that if a customer looses their cell phone they can call Citibank and the entire application will be deleted from the phone. Firethorn said their applications would have a similar function.

Extending Mobile Banking

Banks are hoping to extend mobile banking as technology improves.

Citibank has two ongoing cell phone trials. The first is a partnership with MasterCard, AT&T, and Nokia that places chips in cell phones allowing Citi debit and credit to make payments by waving the cell phone at a participating store’s register.

Citi’s other pilot is with Obopay that lets debit and credit customers transfer money between mobile phones. Analysts say even more revenue is possible in the coming years when more functions are added to cell phones like international transfers, and booking travel arrangements.

While mobile banking is relatively new, the service has shown some traction with customers. Citi Mobile says it had more subscribers than expected while the service was being piloted around the country in the spring. Wachovia Mobile says their service has been getting about 50,000 unique visitors a week since its launch.

Celent predicts that by the end of 2010, 35% of all online banking households will be using mobile banking.

"It's not a matter of if" mobile banking will take off, says Bob Egan, chief analyst at TowerGroup, "it's a matter of when."

Joseph Pisani is a news associate at CNBC.com. He can be reached at [e-mail].