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PCBB Banc Investment Daily March 22, 2013
Banc Investment Daily
March 22, 2013


We have always been struck by the ability of technology to jump over infrastructure hurdles in less developed countries. In Africa, India and many parts of Asia, cell phone service is widely available and it has become normal to see people talking on phones or texting even in some really remote areas. In areas like these, banking can also be inconvenient. At a recent technology conference in Barcelona, all of the cool new mobile toys reportedly had their moment to shine. However, one French company showed a clunky Nokia dumb phone, calling it the first micro-banking platform that can be used everywhere by every phone. We have spent quite a bit of time encouraging community banks to adopt mobile banking technology since the inception of that technology. The argument has always been that offering a service with this level of convenience is necessary to attract younger, sophisticated and more tech savvy customers. However, fully functional mobile banking generally requires a smart phone or at least a phone with a camera. This French company though is offering a technology that works in places where banking services hardly exist and smart phones are rare. Its technology is called Near Sound Data Transfer (NSDT) and is currently being used in 20 countries. NSDT transmits a unique coded burst of sound between phones in order to complete transaction. Doing so enables any phone worldwide to be used as a payment tool and authentication device. Since all telephones have a microphone, using a sound transmission rather than an image allows any phone the ability to capture coded data for a financial transaction. That is sort of neat if you ask us, but probably not likely to catch on in the US, given so many people like the cool factor of smartphones. Here, systems like Google Wallet rely on near field communication (NFC) for security and transmission of payments, but adoption rates remain slow. iPhones don't even have a NFC chip and the droid devices that do, may not activate if the wireless provider doesn't allow access. As such, phone companies are looking beyond NFC towards something more universal. Text messaging is one way and already widely used for mobile banking, but in general, full authentication by text is difficult and therefore less secure. It is estimated that about 3.2B people or 50% of the earth's population have cell phones. This is far more than the percentage that has bank accounts or credit cards, so it is something to ponder for sure. Technology like NSDT has the potential to bring banking services to a much larger segment of the world, so it bears watching. You might be wondering what the takeaway is for a community banker given all this. Consider that any time a new technology or idea seems like it may only be for "certain" people (mobile banking only appeals to the younger, device juggling customer who may or may not be your market niche), things can change quickly and people never make things that simple. Analysis from ClairMail finds 95% of US banking customers have a mobile phone, while internet usage sits at 70% of households. Meanwhile, Javelin predicts there will be 85mm US mobile banking customers by the end of this year. Finally, TowerGroup finds adoption and usage of mobile is increasing faster than any other channel in the history of banking. In the end, mobile serves 50% of the world in areas both high and low tech and for people of all ages, so it is here to stay.