MONITISE AMERICAS WHITEPAPER

The Critical Mobile

Banking Decision:
Why mobile banking is a key growth strategy – not just another
technology update
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The Critical Mobile Banking Decision

Abstract
Given that mobile applications touch every other aspect of today’s culture, it should surprise no one that they are
rapidly finding their way into the banking and payments marketplace. To avoid being left behind in this important market
trend, financial institutions must decide how to incorporate mobile banking solutions. This document examines how
mobility should be regarded as a strategic solution that can offer a solid return on investment. It also makes the case
for selecting a provider that has moved well beyond the pioneering stages of mobility – to offer a proven, integrated
system that supports a long-term growth vision.

I. Introduction: The Mobility Phenomenon and its Powerful ROI Impact

The newest generations of mobile devices have created a vast market for thousands of applications, ranging from
calculators, to games, to applications that touch every aspect of daily life, including education, sports, hobbies, and
health and fitness.

The scope of the trend is staggering. By the end of 2010, an estimated 1 billion mobile devices will be accessing
the Internet worldwide, and the number of iPhone applications will triple to an astounding 300 thousand.1 In the U.S.
approximately 65% of the population use mobile devices. By 2012, smart phones are expected to comprise of 39% of
those devices.2

With broad Internet access, a proliferation of applications, and increasing affordability, smart phones provide an
unprecedented level of freedom and convenience to millions of consumers across all segments of society--and are
creating expectations for even greater value in the future. Thus, it’s not surprising that with these high-mobility habits
and preferences, consumers have begun to reshape the banking and financial services industry, as well.

For strategically driven financial institutions, the trend represents the biggest win-win opportunity since the arrival of
the Internet: it’s a win for the convenience-hungry consumer and a win for the financial institution’s desire for a better
bottom line.

An evolving breed of banking consumer

With today’s mobility culture, financial consumers are demanding a higher level of convenience and choice in how they
manage payments and transactions. They want speed, round-the-clock access, real-time information and flawless,
secure execution. While a percentage of customers get some of this via conventional online banking, many more are
coming to expect it via their mobile devices.

The adoption curve is already well-defined, with 36 million U.S. adults currently using mobile banking. By 2014, that
number is expected to swell to 99 million, or 45% of all mobile phone users – a compound annual growth rate of 22%.3

1. IDC Predictions 2010: Recovery and Transformation, December 2009

2. Yankee Group Link Data: Global Mobile Device Forecast, April 2009
3. Javelin Strategy and Research, 2009 Mobile-Banking and Smartphone Forecast: Essential Strategies for a Fast-Growing, Evolving Market, September 2009

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The Critical Mobile Banking Decision

Research indicates that account balance information is the most frequent transaction type conducted by users, followed
by transfer fund requests, account transaction information, bill payment, check image view, branch/atm locator, rate
information, Payments outside network (P2P, external transfers, etc.) , and customized alerts – respectively.4

A recent survey conducted by Mercatus LLC and sponsored by Visa Inc. examined the impact of mobile financial
services, including mobile banking and payments, on consumer decision-making, specifically when it came to selecting
retail banking services. The survey indicates that banks offering mobile financial services can increase new customer
acquisition by as much as sixty percent. Mercatus managing partner Bob Hedges summed up the market implications:
“Banks that act soon, and aggressively deploy mobile financial services, will capture a clear market opportunity to
aggressively deploy mobile financial services. Banks that delay will risk losing their best customers to the competition.”5

Most financial institutions managers recognize the challenge, but many are unsure how to proceed – and may not fully
understand that the manner in which mobile banking is approached can prove critical to success.

II. Perceived Challenges of Adopting a Mobile Banking Platform

It’s possible that many financial institutions remain on the sidelines in the mobility revolution because they’re simply too
distracted by all the other changes impacting the industry. Or, more likely, their hesitation stems from an understandable
confusion over a broad range of technical and operational questions:

• If we invest in a solution, how will it address the compatibility issues associated with many types of mobile
handsets?
• How much does this cost? Will require a lot of expensive customization?
• How long will it take to implement? Will the process be disruptive?
• We already have a security compliance challenge; how will this compound it?
• If we deploy a system, how do we get customers to convert to it?
• Since many of the smart phones can access the Internet, why can’t our customers just use them to access
our online banking service?
• Why can’t we just offer a mobile alert package?

Without complete answers to such questions, financial institution managers are often tempted to take the simplest and,
presumably, least risky approach. One tactical option may be to simply promote mobile banking as an extension of
current online service; another would be to deploy a mobile “alert” solution. Such half-measure initiatives can provide a
false sense of market relevance in the short term, but will ultimately fail to deliver the ever-evolving value that customers
demand or the strategic advantages that will boost the bank’s long-term prosperity.

4. Financial Insights: Consumer Banking and Credit Advisory Service: Market Overview, July 2009
5. PRNewswire: Mercatus Study reveals banks can improve customer acquisition by up to sixty percent, December 2009

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The Critical Mobile Banking Decision

III. The Advantages of a Strategic Approach

Forward-thinking managers must realize that today’s wireless service is much more than an incremental improvement
over traditional telecommunications. It has become a transformative technology that is changing how consumers work,
play and access information, news, services and entertainment. Thanks to powerful but relatively cheap new-generation
devices, wireless service has also become society’s most ubiquitous personal technology — creating communication
pathways to new customer segments.

Properly deployed, integrated, and managed, a mobile banking solution can help a financial institution tap into this vast,
transformative movement to create significant strategic advantages:

ROI (part 1) – boosting the top line by attracting new customers, including new market segments

As suggested by a host of studies, while the growing demand for mobile banking cuts across demographic and income
categories, it represents is a particularly exciting opportunity to appeal to several market segments in particular.

Mobile banking is a must-have service for any organization that hopes to capture tech-savvy, upwardly mobile
generation-Y customers. It is also a vital offering for high-wealth customers with residences or workplaces in multiple
regions, whose lifestyles and work travel makes mobile access to financial accounts particularly important.

But as attractive as those markets may be, the largest prize is the underbanked segment, comprised of an estimated
106 million U.S. adults aged 18 and older. While data on cell phone usage among the underbanked is still incomplete,
recent research shows a pattern of adoption among younger users who have less income and education, and among most
ethnic minorities generally. As of 2004, 57% of Hispanics owned mobile phones, compared to the 65% penetration rate in
the general population. Notably, both Asians and blacks now surpass whites in terms of mobile usage, with 68% and 66%
penetration rates, respectively.”6 Wireless service for the underbanked is also driven, in part, by government-sponsored
cell phone programs for low-income consumers. With this level of penetration into the underbanked market, mobile
banking is a much more reliable channel than online banking for driving adoption of debit accounts and other key services.

ROI (part 2) – boosting the bottom line by reducing operating costs

Mobile device users are conditioned to accessing information and services through user interfaces and automated
systems. As bank customers, mobile users are far less likely to depend on walk-in visits, and they’re highly receptive to
UIs and IVR systems. That means financial institutions can expect diminishing demand for direct human interaction and
call center assistance.

Recent research estimates that this year, upwards of 70% of bank center call volume will come from mobile phones.
Half of those calls will be related to basic balance inquiry information.7 This information will be readily available via IVR
and will take less time than a phone call. Such operational efficiencies can significantly improve the quality of customer
service as well as the profitability of the financial institution.

6. CFSI Mobile Financial Services and the Underbanked: Opportunities and Challenges for Mbanking and Mpayments, April 2007
7. Celent, US Mobile Banking: Beyond the Buzz, May 2009

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The Critical Mobile Banking Decision

To fully leverage these strategic advantages of mobile banking, financial institution managers must understand the
essential requirements of a mobile banking solution.

Standing out in a crowded market by creating brand differentiation

A robust mobile banking solution can extend the financial institution’s brand well beyond traditional boundaries—into the
hand of the customer, thanks to customizable user interfaces

For small and mid-tier banking segments, there’s also a first-to-market opportunity to provide mobile banking as a
strong differentiating service. The convenience and value represented in this new service can translate into real gains in
market share.

Enhancing market staying power by increasing customer satisfaction and loyalty

In a highly competitive banking environment, customer retention is more important than ever. Offering existing
customers a valuable new service demonstrates a financial institution’s commitment to innovation and convenience. It
also extends the value of existing products by giving customer anytime, anywhere access to those products.

IV. The Key Requirements for a Strategic Mobile Banking Solution

As a strategic initiative, the selection and deployment of a mobile banking solution deserves a thorough and deliberative
process. Among other factors, the decision must take into account the existing IT environment, the impact on current and
future services, administrative requirements, and the ease of market delivery. The most critical requirements are as follows:

An end-to-end platform architecture

Mobile banking is not a feature or a tactical service – it is an important strategic asset. As such, a mobile solution
should not be pieced together or simply bolted on to other systems. Instead, it should be designed as be complete,
end-to-end platform that is:

• Modular — to enable incremental deployment

• Scalable — to enable growth while maintaining optimum performance and reliability
• Easy to integrate into existing IT and business environments, and leverages existing, trusted assets such
as EFT networks, ATM switch infrastructure, and mobile carrier networks
• Easy to manage and deployable as on-site or hosted solution
• Accommodates future functionality

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A pure-play mobile solution

Financial institutions should avoid the mistake of trying to convert a conventional online solution into a mobile banking
solution, because no amount of re-engineering can properly address the unique aspects of wireless telecommunications
services, and devices. Likewise, any mobile solution requiring online banking as a prerequisite excludes a valuable
customer segment, as research indicates that only 40% of the US population use internet banking.8 Effective mobile
banking requires a purpose-built solution that includes:

• Designed-in compatibility with the functionality specifically designed for mobile phones (payments, peer-
to-peer, alerts, etc.)
• Compatibility with any handset
• Compatibility with and any carrier
• Global functionality — to work wherever carriers provide service

Robust delivery package

A key to any mobile banking service is to provide customers access on any mobile network and any handset – and
not only to users of high-end phones like an iPhone, Blackberry Storm or Palm Pre. In providing an optimal customer
experience, it is imperative that the customer is provided with the best solution for his or her financial institution, network
operator, and handset. A solution’s delivery package should include a “triple-play” offering:

• SMS services: Uses text messaging to deliver information. It’s the simplest version and is supported by
the most phones.
• Downloadable application: Requires the consumer to download an application to his/her mobile phone.
Once downloaded, it’s the easiest to use and is also expandable for more sophisticated services like
mobile payments. Industry research indicates that as smartphones become even more mainstream, the
downloadable application may become the preferred method for mobile banking.9
• Browser access: Uses secure browser technology to access a mobile application. This method eliminates
carrier dependencies and the need to download an application. It’s important to remember that a true
browser solution should not be a re-rendering of internet banking.

Intelligent Provisioning

It is fundamental that the triple-play offering of any mobile banking solution should not be viewed as three different
services, but as three separate access channels to the same core services. This not only provides a major step towards
mCommerce and peer-to-peer payments, but also provides financial institutions a low risk entry into mobile banking
while providing a clear line-of-sight to new and enhanced services without the need for additional costly and time-
consuming integrations and customer migrations.

8. Celent, Mobile Banking Vendors: Tackling Technology - Distribution Tradeoff, September 2007
9. Financial Insights: Consumer Banking and Credit Advisory Service: Market Overview, July 2009

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The Critical Mobile Banking Decision

Any mobile banking solution should be able to provide an optimal solution to every single customer without the end-user
having to do any heavy lifting, including providing a multitude of handset details when registering or requiring the user
to re-register when upgrading from an SMS service to a downloadable application or browser service. A mobile banking
solution should be comprehensive and integrated for ease of use and upgrading.

A rich set of market-ready features and functionality

A robust mobile banking solution should provide users a lot more than simple alerts. A complete solution will help a
financial institution project a differentiated and competitive face to the market by providing a deep set of capabilities
that answer customer needs. Those capabilities should include basic pragmatic account management and payments
services consumers have come to expect:

• Text Message and Alert capabilities

• Balance Inquiry and Mini-Statements
• Bill Payment
• Transfer Funds
• Credit, debit, and prepaid functionality

Just as important, in a market where customer demand is constantly evolving, the solution should anticipate and
accommodate future high-value capabilities such as:

• Expedited bill payment

• International remittances
• P2P Payments
• Near field communications (NFC) integration
• Coupons and vouchers
• Shopping

Mobile banking has already reached the “tipping point” with adoption gaining traction and end users transacting via the
mobile device on a regular basis. Financial institutions looking to implement or improve a solution require a platform that
is ready-made for integrating technical advancements. Those that don’t will be left out of the race.

Complete security and compliance

Any solution that enables mobile banking and payments must provide bank-grade security. It should meet all relevant
bank regulatory and PCI compliance requirements — and that security must extend to the application for the mobile
handset itself. Key security features would include:

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• Built-in card and pin Identification, authentication, and verification for the registration process
• Triple-DES password encryption with Hardware Security Module key exchanges.
• Transaction limit flexibility — to enable banks and financial institutions to set and manage their requirements

Customer education and adoption elements

Beyond the technical aspects, mobile banking must be simple and intuitive to the customers. That’s why a strategic
mobile banking solution must make adoption quick and simple, but should also incorporate the transfer of important
knowledge and guidance to help financial institutions go to market successfully. Key adoption requirements are:

• A handset application is easy for users to download

• User-facing adoption kits
• User-facing product demos
• Training materials for FI personnel
• Customizable marketing and sales materials for FI personnel

Proven track record

It’s not enough that the technical and operational requirements detailed above are merely promised. Mobile banking
is the convergence of banking applications, wireless communications, and consumer experience that must all work
seamlessly and securely. If a financial institution intends to launch a mobile banking service that’s complete and
competitive, and do so with confidence and in a timely fashion, management must look for solutions whose functionality
and reliability have been proven in the market.

As of this writing, the Monitise Mobile Money Manager can supply all of these elements, as well as supply other key
requirements needed to implement a successful mobile banking platform. The Monitise Mobile Money Manager platform
currently handles more than 25 million transactions worldwide per year to over 1.75 million customers globally. It is fast
gaining recognition as a strong industry standard by industry analysts and financial organizations of all sizes.

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V. Case Study: H&R Block leverages mobile applications

to help underbanked consumers manage their prepaid card accounts

H&R Block’s tax professionals help underbanked clients establish good financial habits by offering them H&R Block
Emerald Prepaid MasterCards at the company’s nationwide network of more than 11,000 tax offices across the country.
Three million Emerald Cards were issued in 2009.

In May of 2008, the company decided to boost the value of its prepaid card by piloting text message capabilities,
enabling Emerald Card holders to access real-time information for their H&R Block Emerald Card accounts, including
account balances inquiries and account reload alerts. This service was a natural fit for Emerald cardholders, who are
largely underserviced and underbanked - many without routine access to a desktop or online banking and needing, as
much as any population, to keep a tight rein on their finances. This service was made available by FIS Mobile Financial
Services, with technology provided by Monitise Americas.

Currently, mobile phone text messaging on the H&R Block Emerald Prepaid MasterCard is being offered at over 1,500
of the company’s retail tax offices and to callers of their Call Center.

Preliminary results for 2010 indicate strong enrollments numbers and that consumers have been actively using the text
message banking service. On average, each enrolled cardholder generated 29 alerts and 4.5 balance inquiries in a
one-month time period. The company plans on expanding its offering of mobile features through more of its tax offices.

“We are thrilled with the recent adoption and usage figures from our text messaging offering to our Emerald Cardholders
for this 2010 tax season, and we are proud to lead the way in offering innovative methods for customers to access their
card accounts”, says Kevin Morrison, H&R Block’s assistant vice president of card programs.

“The mobile technology provided by Monitise Americas has helped H&R Block continue to build loyalty for our tax
business as well as provide a very distinct convenience factor for our customers. Clients can use the Call Center to
check on their tax refund or they can send a simple text to receive their account balance on their mobile handset.
Likewise, they can receive account balance updates via text message notifying them their card has been used and
providing their new card balance. This benefits not only the consumer by saving them time and protecting against fraud,
but reduces our call volume and operating costs. It’s a win-win situation. We look forward to continuing our relationship
with Monitise and rolling out enhanced features as they become available.”

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The Critical Mobile Banking Decision

VI. Conclusion

Mobile banking is becoming a critical success ingredient for financial institutions because it extends the value of
existing services, creates competitive advantages, and dramatically strengthens the relationship with customers. It
offers a compelling two-punch ROI opportunity: by attracting new customers (including entire new market segments)
and by significantly reducing operating costs through customer service automation.

Because this is such a strategic capability, it’s imperative that financial institutions invest in a world-class solution that
is complete, flexible, and proven. Senior management should avoid incomplete and patched-together solutions and
re-engineered versions of conventional online services. Essential requirements include a true platform approach,
functionality specifically developed for mobile networks and devices, and a flexible, scalable architecture.

The uniqueness of the Monitise approach is that it is all about establishing collaborative, interoperable ecosystems, connecting
the mobile and banking industries with existing financial infrastructures. Connectivity is the only way to sustainability.

Monitise is a true veteran and global leader in the mobile financial services space, providing mobile banking services
since 2006 with its initial launch in the UK. Currently, Monitise plc provides Mobile Money services to over 55% of the UK
banking market, including some of the world’s largest banks such as HSBC, Lloyds TSB, RBS, NatWest, and first direct.

Currently in the United States, Monitise Americas has over 200 financial institutions partners signed up for its Mobile
Money service (up from 60 financial institutions in February 2009) and has partnered with the leading payments
providers in the market today, thus enabling access to the Mobile Money solution to virtually all cardholders in the US.

In addition to the UK and the US, Monitise has announced forthcoming launches in India, Africa (through a joint venture
with Paynet, supported by a US $1.5 million grant from the Africa Enterprise Challenge Fund) and Hong Kong, as an
initial deployment in Asia.

However, the crowning achievement of Monitise’s international growth was achieved in June 2009, when it struck a
global deal with Visa International, the world’s largest credit card company, to offer its services to more than 1.7 billion
card-holders around the world. The agreement validates Monitise’s open-ecosystem approach and provides a platform
for future growth as the company enters 2010.

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VII. About Mobile Money

The Mobile Money platform is the leading solution for mobile banking and payments services, empowering
consumers to perform banking and payment transactions using a single consistent interface – regardless of their
choice of mobile operator or bank. It leverages secure, trusted assets such as transaction processors and switches, bill
pay platforms, and mobile networks to deliver its unique solution.

In North America, Mobile Money is delivered by Monitise Americas to financial institutions, credit unions, retailers, and
card issuers. In the United Kingdom, the Mobile Money solution is delivered by Monitise plc.

The solution has been the recipient of numerous awards and recognition from industry pundits across the globe. Some
of these accolades include the Retail Banking Innovation Award (2007), the Innovation in Messaging Award (2007), and
recognition from the prestigious World Economic Forum as a “Technology Pioneer”.

VIII. About Monitise Americas

Monitise Americas is a joint venture between FIS, one of the world’s largest providers of banking and payments technology
to financial institutions and businesses worldwide, and Monitise plc (MONI.L), a specialist in mobile banking and payments
technology. Monitise Americas provides mobile banking and payment services to North American financial institutions
predicated on an “ecosystem” principle, which allows multiple mobile carriers and financial institutions to deliver services
over a single platform. Current partners of Monitise Americas include FIS, NYCE, Everlink, Corporate Network eCom,
and eCommLink.

Monitise Americas | 72 Clifford Street, Suite 300 | Providence, RI 02903 | T: (401) 276 8340 | www.monitiseamericas.com

2010 by Monitise Americas, LLC. All rights reserved.