Who will pay for mobile services?

The UK's high street banks and telecoms companies are locked on a collision course over the costs of running next-generation...

The UK's high street banks and telecoms companies are locked on a collision course over the costs of running next-generation mobile services.

The need to support emerging mobile phone services could inflate IT running costs for the high street banks, without necessarily generating extra profit, said Kevin Lloyd, group chief technology officer at Barclays Bank. The dispute could see the extra charges passed on to customers.

With the mobile phone handset market nearing saturation, operators are keen to increase their revenues by offering data services such as content and account aggregation. This involves delivering automated and real-time updates on customers' financial transactions to mobile devices.

Analysts believe the emerging market will be boosted when third generation (3G) mobile network technology hits the market in the next few years. But the unpredictable Web traffic likely to be generated by these services will place extra strain on the banks' back-office systems, which record each transaction or information request, Lloyd warned.

Banks will need to secure more bandwidth for their networks and additional data storage to support proliferating mobile services, he added.

"It means more transactions for the bank in our back office," said Lloyd. "Although it is a great idea, what are the physical implications of an extra 300,000 hits per day [on banks' IT systems]? Will the customer, the mobile operator or the bank pay for this?"

IT directors will also have to justify increased technology costs to their company boards at a time when most are looking to trim IT spending.

Analysts agreed that the new breed of mobile services are likely to entail extra costs for banks but argued that banks risk losing customers if they do not support these services.

"If in a few years' time the majority of your competitors are offering always-on access to banking details then it could start to be a competitive differentiator," said Richard Anson, manager at KPMG's advisory services.

"I would see content aggregation positively as a way for banks to attract new customers."

But banks and telecoms companies still have to decide whether and how they will charge customers for the mobile services.

"Banks could decide to charge customers a subscription service fee for accessing information from their mobile device but they will have to consider the customers' reaction to paying for this," said Anson.

Concerns about the viability of certain mobile services comes at a sensitive time for mobile operators.

Earlier this month Vodafone launched a new payment service that allows customers to pay for digital content valued at £5 or less. The service runs on Vodafone's own network and does not require any technical support form the banks.

A spokesman for MM02, which recently demerged from the mobile arm of BT, said it is planning to introduce a range of m-commerce services in the UK.

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