Success eludes mobile banking

This time last year, all the high street banks were vying with one another to roll out their mobile Internet plans, partnering with mobile network operators and making futuristic announcements. But a year on, the wireless banking vision remains a disappointment to industry observers and a frustration to consumers.

The reason, analysts say, is that essential technology making such services usable simply hasn't materialised as planned, meaning yet more waiting for a mobile Internet future that was promised two Christmases ago.

Most high street banks have launched mobile services based on WAP (wireless application protocol), the Internet standard for GSM phones, with the exception of Barclays, which is launching its service next month. But banking via WAP is unpleasant enough that takeup has been less than phenomenal.

"There's a frustration and a lack of interest from the end consumer's side," says Shum Singh, a senior analyst with Durlacher. "You have to wait 30-40 seconds to log onto your service, then once you're on your homepage you can get knocked off. On the banking side, there are some WAP sites that haven't been that functional."

It wasn't supposed to be this way. Last spring, in the wake of a massive hype campaign around WAP, banks like NatWest, Barclays and Abbey National all issued futuristic-sounding announcements. Their customers, they promised, would soon be able to make balance inquiries, transfers and bill payments from anywhere, with instant alerts informing them of changes to their accounts.

But they were betting that by now, consumers would no longer have to rely on the ordinary, circuit-switched GSM network to access their services, but would have access to a new radio technology called GPRS. GPRS (general packet radio service) eliminates problems such as having to dial up to a service provider.

But for a variety of reasons, GPRS isn't widely available. British Telecom (quote: BT) is the only UK network to have rolled out commercial GPRS, and even BT is hampered by the fact that there are only a limited number of handsets available using the system. Motorola is the only manufacturer to have brought a GPRS handset to market, though Nokia recently unveiled its handsets.

"The banks invested a significant amount of money thinking that GPRS would already be in place," says Singh. "One of the obstacles has been upgrading networks and enabling more value-added type services. Therefore to some extent the applications and services already available have experienced limited success."

Two other factors hampering GPRS are billing systems and technical glitches. Billing, trivial as it may seem, is a major issue for network operators, who face adding data-based billing onto their current per-minute billing systems. And both handsets and networks suffer from the technical problems that affect any new technology.

The problems all raise questions over whether network operators will really be able to make expensive investments in next-generation 3G technologies pay off.

Still, once the technical obstacles have been removed, observers say mobile financial services will be one of the most compelling types of application out there. Banking and particularly share trading have become a huge success in the US, where reliable two-way pager networks already provide some of the capabilities of GPRS, such as an instant, always-on connection.

A new version of WAP, release 1.2, will also improve services by adding colour support, Java and better efficiency.

The positive experience of Internet banking could point the way to similar success with mobile services. Barclays says it is the largest UK online bank, with 1.9 million users, and remains optimistic that the advantages of the Internet will translate to mobile phones. "We have seen phenomenal demand among consumers for our existing online banking service," says a Barclays spokeswoman. "We are committed to exploring new technologies."

She said Barclays is considering bringing banking to PDAs as well, though it has not yet made an announcement.

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