By Mark P. Dangelo
As the holidays approach, one of the most asked for gift genre’s surrounds (i)ndividual gratification devices – iPad, iTouch, iPod, iPhone, and iShuffle. Since Apple’s initial 2001 device series début, a breadth of new consumer behaviors and technology solution industries have been developed. Moreover, robust “App Stores” have been created to promote adoption, spur entertainment sales, and lock-in loyal consumers with premium content and pricing.
As these devices have gained in sophistication and functionality, new mobility market segments have been formed and expanded within healthcare, finance, entertainment, capital markets, and even housing. And, how can you argue with such stellar success in the last decade?
The i-Reality
With nearly 300 million iPod’s, over 60 million iPhone’s, and 10 million iPad’s (from zero in just 9 months in 2010), the widespread consumer utilization of “i-like” devices has forever altered the interfaces and interactions within the global consumer base of 25-45 year olds. This is a profitable bracket within a growing affluent segment that has an average yearly income above $50,000.
And, that is just Apples’ success. Full-featured tablets are now being offered from stalwarts Samsung and Rim (i.e., BlackBerry) as the size of the tablet and netbook markets for 2011 are projected to reach 75 to 90 million units. Additionally, there are predictions that the demand for these new tablets alone will grow 150% to 180% per year until 2012, reaching an annual sales volume over 60 million units by 2013.
Looking beyond the most recent mobility offering of tablets, there is a growing base of smart devices that reached sales of nearly 400 million units in Q3 2010. Of that number, nearly 25% were attributed to open source operating systems such as Google’s Android.
Estimates now place the number of sophisticated mobile devices at nearly 6 billion in just five years – roughly 90% of the global population with 85% having a built-in QWERTY keyboard (physical or digital).
So while the markets for these device classes grow at hyper rates, why is it important to those in the housing and financial markets?
Banking, Finance, and Housing
Today, there are approximately 18 million Americans who use some form of mobile digital cash or banking services – a 50% increase since 2009. What is more, nearly 60% of the retail population wants mobile cash, credit card replacement, shopper programs, and of course, bill paying.
Similar to the ideas behind TSA mobile check-ins at the airport, consumers could use two-factor identification (i.e., a secured, mobile device and something unique to the user such as a fingerprint or code),to not only purchase goods, but to pay taxes, send confidential information, and even shop for and purchase a home. As consumers continue to frustrate traditional behavior models, the use of mobility devices and applications, even during tough economic times, is becoming the “new normal.”
Today, there are nearly 1 billion mobile users who do not have any consistent retail banking services – an untapped, minimum equivalent of nearly $10 billion in top line revenue. Those trends are expected to increase another 70% in just 24 months. The business case that was once singularly focused on areas of “nice” or “elastic” are now evaluated against bespoke solutions of “concrete” and “regulatory” (see May 2010, MBA NewsLink, “In Times of Renewal, Everything has Value – Not Everyone Sees It”).
For homeowners increasingly burdened and frequently aloof, the internalization of mobile services within their daily lives continues to witness an expansion in services, functionality, and features. The result is that promising mobile offerings are not only being delivered for origination, but new functionality is being planned for servicing and securitization tapping into atypical behaviors in effort to create profits and stickiness within consumer classes.
For the enterprise, the introduction of robust tablets provides new mobility and features for capital markets, exchanges, clearing, and even settlements. These new mobile channels may offer new integrity and differentiation to financial products and the investors who fund them.
As mobility’s capabilities expand, banks will increase their householding, cross-selling, and recovery of troubled assets, while decreasing their costs for customer services (e.g., VRU’s, ATM’s), product sales, and marketing.
Whereas consumers will sacrifice their landlines, homes, and even communities, they have a growing and permanent attachment to their mobile solutions. Yet, mobility is not all good news as the markets rebalance and seek a new bottom – a double bottom. What are the risks and immaturities surrounding mobility?
Downside Risks
Mobile challenges remain and are increasing in sophistication. By 2012, over 60% of all mobility applications will be dependent upon data from a remote server somewhere in the cloud. However, with the widespread use of data come challenges with security, privacy, and even countermeasures (e.g., network, device, and remote destruction of data while a device is powered off).
Additionally, whereas many groups will focus singularly on the “i-like” devices, the growing market power resides within the commonality of their operating systems resulting in a race to dominance among the four largest tablet and smart phone players – Apple, Google, Microsoft, and Nokia. The wildcard vendor that is the most common for the enterprise is BlackBerry – for numerous reasons not the least of which includes a perception of “trailing” innovation within the expanding space.
With the convergence of complex mobile operating systems, the common platforms criminals and hackers have been seeking are starting to arrive as the scale and volumes have reached a level that works in their favor.
Already, there are 1,500 malware signatures for smart phones – a rapid increase in number and sophistication in the last 12 months. Within the last 30 days, there have been significant security flaws for mobile banking applications, including those operating with Android and iOS. Correspondingly, it is astonishing that less than 10% have any credible protection for this growing base of malware, theft (financial, transaction, and identity), and information loss.
To make matters worse, IT departments are ill-prepared for dual use mobility (i.e., personal and corporate apps within a single mobile device). With or without explicit permission, over 80% of mobile users are dual users and a majority of them behave within this operating model every day.
As mobility grows, the “cat-and-mouse” game that transpired against rudimentary exposures is being replaced with determined and highly developed intrusions orchestrated by very skilled delinquents.
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The ability and underlying need to profit from the growing “i” devices has ostensibly arrived. However, the approaches and techniques needed to exploit the evolution of mobility have not reached a maturity that provides for the non-repudiation or bullet-proof operating environment that must be present to secure sustainable consumer trust.
As 2011 arrives, look for an expansion in the ancillary markets surrounding the devices and their common operating systems – new programming methods (QoD), testing and harnesses (QoS), data management, and security.
What is more, processes and deployment will alter the value equation of mobile profits and underlying market expansions. The “i’s” have framed the markets – but they represent only early generations in what will prove to be a longtail series of offerings across the mobility segments.
For finance and housing, first-movers will find initial success against a growing base of subscribers. Yet, will the industry segments be willing to funnel investments from cash-generating legacy systems into embryonic mobile applications and a consumer base that they don’t understand? How will it impact costs? What are the profit models and transformations? Where can an organization turn for answers?
Whatever you believe, it is never wise to ignore the markets – and its consumers. Mobility has arrived for the masses across finance, banking, capital markets, and housing.