project management and marketing issues are the options and choices related to security and authentication in the new mobile channel. Lastly, the difficulty that financial institutions face when creating the business case for entering the mobile channel as an extension of banking services is explored. Keywords: Mobile banking, mobile alerts, SMS, text messaging, mobile commerce, mobile security INTRODUCTION This paper introduces the reader to the accelerating trend in the US towards mobile communications and the rapid adoption of a new language that supports communication using mobile text messag- ing. The impact that the new mobile chan- nel and new mobile language will have on financial institutions as they compete to attract new customer is examined. The types of text messaging and mobile serv- ices currently defined as mobile banking and the challenges inherent in offering services in the mobile channel are dis- cussed. The paper should help the reader frame the right questions to ask when considering an extension of financial serv- ices into the mobile channel. Consumers and businesses are living in the ���age of wireless���. The adoption rate of wireless phones continues to grow globally 2.17 billion people were using Janet L. Kapostasy joined CardinalCommerce as Vice President, Global Financial Institution Services in early 2006. The majority of her career prior to joining Cardinal was as an Execu- tive in the financial services industry, with ex- perience in finance, operations and strategic planning. Ms Kapostasy has a BA in Busi- ness Management, a BA in Accounting, and an EMBA in International Business from Case Wes- tern Reserve���s Weatherhead School of Manage- ment, and is a Certified Public Accountant. ABSTRACT A cultural communication change is happening around the globe. The world is going wireless. This paper discusses the evolving trend of wireless communications and how it relates to future business marketing, planning and ac- tivity. In particular, it examines the impact that text messaging and using mobile devices as a preferred method of communication across speci- fic generations in the US will have on financial service institutions. As the text messaging generation is entering the job market and becoming the next core customer segment, financial institutions need to identify ways to attract this group to maintain and grow their businesses. The unique challenges that finan- cial institutions will encounter in the race to gain the business of this core market seg- ment are discussed. The choices and challenges facing each financial institution, including types and venues of mobile services and timing and target markets of service launches are examined. Additionally, reviewed alongside Adopting mobile payment channels: Key challenges for US financial institutions Janet L. Kapostasy Received (in revised form): 15th November, 2007 CardinalCommerce Corporation, 6119 Heisley Road, Mentor, OH, USA. Tel: 1 440 352 8444 Fax: 1 440 352 1646 e-mail: jkapostasy@cardinalcommerce.com Journal of Payments Strategy & Systems Volume 2 Number 2 Page 167 Journal of Payments Strategy & Systems Vol. 2 No. 2, 2008, pp. 167-174, Henry Stewart Publications, 1750-1806

mobile phones at the end of 2006, a 23.5 per cent increase compared with the pre- vious year.1 An interesting related point to consider is the lack of boundaries that the adoption of wireless continues to experience. Developing countries and economically mature countries continue to see significant segments of the popula- tion migrating to wireless. In 2006, China had the most mobile subscribers, followed by the US and then Russia.2 In the US market, a subtle change is occurring. In 2005 in the US, there were 207.9 million wireless subscribers, and 6 per cent of households were ���wireless- only��� households in 2006, there were 233 million wireless subscribers, and 12.8 per cent were wireless-only households.3 The growth in wireless-only households was over 100 per cent, while the increase in subscribers was only 12 per cent. It ap- pears that the trend to be wireless-only is gathering steam in the US, and is begin- ning to align with the wireless com- munication trend in developing nations lacking infrastructure to support other communication channels. The adoption of wireless has spurred another trend that is growing exponen- tially: SMS messaging as the ���convenient��� method of communication. In the US market, the volume of SMS messages has increased by over 90 per cent every six months since the last half of 2004.4 During December 2006, 18.7 billion SMS messages were sent in the US.5 Best estimates place the SMS traffic in Europe at four times that total6 or approximately 75 billion messages monthly. In the UK, the adoption of text messaging soared, 4 billion messages in December 2006, 41.8 billion messages for the 2006 year, with a peak daily total of 214 million messages sent on 1st January, 2007.7 Until just a few years ago, text messag- ing was a novelty, and now it is pervasive and hard-wired into our behaviour, ac- cording to Jim Ryan, vice president for data services at AT&T���s wireless unit. What started as a trendy college tool has grown into an essential communication tool. The ���right now��� feature of text messaging is a convenience feature that affects the way text messaging consumers look at other services. In the US market, customers are willing to wait only 37 seconds before abandoning contact with a call centre call ��� the shortest abandon time in the world.8 The same enquiry routed through a text message takes the on-hold wait out of the customer ex- perience. The first question that comes to mind for financial institutions, which begs an answer, is ���How will this rapidly grow- ing communication and distribution chan- nel change the way a bank or credit union interacts with its customers?��� There is, however, another more fundamental question that needs an answer to really get to the heart of the matter for a finan- cial institution: ���How is my customer base changing as a result of the growing mobile channel?��� The mobile channel itself is not what will change the interac- tion between a financial institution and its customers the changing customer profile and preference will drive change in the industry. The demographics of the market that financial institutions serve are changing. Although the basic changes in the cus- tomer group seem to be universal, this discussion looks at the US market specifi- cally. Financial institutions continue to be challenged to find ways to grow their core deposits. The Baby Boomer gener- ation, the generation of ���savers��� is ageing. The retirement savings are being spent as intended, to supplement retirement in- come, or funds are being withdrawn in total under the direction of the executor or the beneficiaries. The subsequent gen- Adopting mobile payment channels Page 168