Mobile Banking Was Already Huge in 2013 and Just Getting Started
Book: Bank 3.0: Why Banking Is No Longer Somewhere You Go But Something You Do Author: Brett King ISBN: 978-1-118-58963-2 Publisher: Wiley (2013)
Chapter 6 is where Brett King gets genuinely excited. And honestly, reading it back now, he had every reason to be. Mobile banking wasn’t the future. It was already happening. Banks just didn’t want to see it.
The iPhone Changed Everything
King starts with the iPhone launch in July 2007. And the most important thing about the iPhone wasn’t the touchscreen or the design. It was the App Store.
Before the iPhone, nobody used the word “app.” There were Java games you could download to your Nokia, but nobody cared. The user experience was bad and there was no marketplace to speak of.
By the time King was writing in 2012-2013, the numbers were wild. 600,000 apps for Apple. 400,000 for Android. Over 30 billion downloads on the Apple side alone. App revenue hit $15.1 billion in 2011, and projections put it at $70 billion within four years. That revenue was literally zero in 2007.
And yet there were bankers sitting around saying mobile payments would take “years” to take off. King quotes one from a Twitter debate: “I can see it, just not for some time…” That’s the kind of thinking that gets industries disrupted.
Your Phone Is More Personal Than You Think
King makes a case for why mobile is different from every other channel, and it’s a good one. The phone is personal. It’s yours. You carry it everywhere. You sleep next to it.
The stats back this up. Two-thirds of American mobile phone owners slept with their phones nearby. For 16-29 year olds, that number was over 90%. And 75% of Americans were using their phones in the bathroom. Among 28-35 year olds, that was 91%.
Gross? Sure. But the point stands. No other device has that kind of intimacy with its owner. Not a laptop, not a TV, not a desktop computer. Your phone is the first thing you look at in the morning and the last thing you touch at night.
For banking, this matters because mobile adds something no other channel can: context. Your phone knows where you are. It knows what time it is. If you’re standing outside a house and searching for mortgage rates, that’s a completely different moment than sitting at a desk browsing. A smart bank could use that context to serve exactly the right product at exactly the right time.
King gives a Foursquare example that feels dated now, but the principle is solid. Location-aware financial services. Banking that shows up when and where you need it, not just when you walk into a branch.
Banks Had a Blind Spot
One of the more interesting structural problems King identifies is how banks separate their cards business from their banking business. These are usually different divisions, different teams, different priorities. The only time they overlap is the debit card or internet banking.
But on your phone, that separation makes zero sense. Customers don’t think “now I’m doing banking” and “now I’m doing payments.” They just want their money to work. Having one app for checking your balance and another for paying someone is ridiculous.
King argues that mobile was about to collapse these two worlds into one. Payments and day-to-day banking, all in one device. That’s a huge organizational challenge for banks, but also a massive opportunity. If you could see your balance before and after every purchase (something plastic cards, checks, and cash never offered), the relationship with your money becomes way tighter.
The problem? Most big US banks at the time were waiting around for someone else to build the wallet. ISIS, Visa, MasterCard, Google Wallet. They were outsourcing the future of their customer relationship to tech companies and card networks. King saw this as a guaranteed way to lose control of the customer experience.
M-Pesa and the Unbanked
This is the part of the chapter that really puts things in perspective. While American banks were debating NFC standards and mobile wallet strategies, Kenya had already solved mobile banking for 15 million people.
M-Pesa started in 2006 as a project funded by the UK government to help collect microfinance loan repayments. The idea was simple: let people use their mobile phones to send and receive money. When it launched, over 70% of Kenyan households didn’t have bank accounts.
The growth was insane. 19,000 subscribers in the first month. One million within a year. 15 million by 2012. Almost half the country’s population. The World Bank estimated that 25% of Kenya’s GDP was flowing through M-Pesa annually.
With 37,000 outlets and agents across Kenya, M-Pesa’s reach was 50 times greater than the top four banks combined. And here’s the stat that hit King the hardest: in Kenya, you could SMS someone money and use a feature phone to withdraw cash from an ATM. In the US, you still needed a checkbook and a plastic card. Which country had the “advanced” banking system again?
King also drops a stat that’s hard to forget. Out of 6 billion people on the planet, 4.8 billion had a mobile phone while only 4.2 billion owned a toothbrush. More people had phones than basic dental hygiene products. That’s the reach of mobile.
The lesson was clear. If you want to bank the world’s unbanked population, the phone is the way to do it. Not branches. Not ATMs. Phones.
Smartphones for Everyone
In 2012, only about 15% of the world had smartphones. But the trajectory was obvious. Smartphone sales were accelerating fast, going from 26% of all handsets in Q1 2011 to 34% by Q4 that same year. Smartphones were already outselling PCs.
Eric Schmidt predicted at Mobile World Congress that $400 smartphones would drop to $100 on contract by 2013, and hit a $70 price point without a contract. Those $70 phones would then re-enter the market at $20 a year later. By 2015, 70-80% of the world’s population would be able to afford one.
Apple was selling 377,900 iPhones per day in Q1 2012. That’s higher than the world’s average birth rate of 371,000 per day. More iPhones being born than babies. That’s a wild stat.
Android was powering 50% of shipped handsets, up from 25% just a year before. The open platform that let manufacturers install it for free was winning the volume game while Apple won the premium game.
What About the Future of Apps?
King closes with an interesting prediction about HTML5 potentially replacing native apps. He thought the App Store had maybe two to three more years of dominance before browser-based app-like experiences took over.
That prediction didn’t quite pan out. Native apps stuck around much longer than expected. But King was right about the underlying problem. With 600,000 apps in the store, discovery was already a nightmare. Finding what you needed required knowing the exact name. Apple even bought Chomp, an app comparison tool, for $50 million to try to fix the search problem.
The cross-platform headache was real too. Banks had to support iOS and Android at minimum, with Windows Mobile lurking as a potential third platform. (Spoiler: it wasn’t.)
My Take
This chapter holds up remarkably well. Almost everything King predicted about mobile banking came true. Mobile did become the primary channel. Payments and banking did merge on the phone. Smartphones did become affordable enough for most of the world. And banks that waited too long to figure out mobile did lose ground to companies that moved faster.
The M-Pesa story is the most powerful part. It shows that when you remove the barriers and meet people where they are, adoption happens at speeds that surprise everyone. The “advanced” economies were actually behind because they were weighed down by existing infrastructure and institutional inertia.
If King asked most bankers in 2008 when mobile banking would go mainstream, they’d have said “not in my lifetime.” Five years later, it already had. That’s the speed of change when the technology matches a real need.