The chances that corporate mobile banking will take off in 2012 look promising, as early adopting banks have begun to introduce new technology and strategies designed to address security concerns, the major impediment to expansion of this exciting new banking channel.

Banks that offer commercial mobile banking services can expect to enjoy a number of competitive advantages over banks not offering such services, industry experts say, including greater client retention, improved cross-selling opportunities and the ability to acquire more new clients faster.

Wells Fargo became one of mobile banking's pioneers in 2007. Other early adopters have included Citizens Bank and Union Bank.

However, to date there has been a disconnect between research studies showing that companies want mobile banking — including advanced functions such as approving wire transfers and initiating payments — and studies suggesting that many, even most, banks had no plans to incorporate mobile banking into their corporate services offerings.

The security hurdle

So why the gap between what corporations want and what banks are offering?
The answer is largely security.

Most new technologies come with new risks. Concerns about risk are particularly abundant in the mobile phone environment, where phones may be lost or stolen or the mobile user may change phone providers. Dozens of malicious applications have already been identified on the Android market, according to published reports.

In its 2011 Security Threat Report, Sophos, the online security company, noted that despite gradual improvements in security since early 2010, emerging vulnerabilities in smart phone operating systems and software are causing a new wave of security issues. A 2011 Aite study also revealed continuing concerns over these issues. Some 58% of treasury executives surveyed agreed that security concerns would prevent them from using mobile banking.

Banks haven't always invested enough in defending business accounts because they haven't been assigned the same liability for fraud losses on those accounts as they have with consumer accounts, says Avivah Litan, an analyst at research firm Gartner Inc., in a December 2011 article in Entrepreneur Magazine ("What Technologies Banks Should Be Using to Keep Your Money Safe").

New technologies could turn tide

Though fraudulent activity continues to be a concern, new malware prevention technologies are paving the way for greater mobile banking adoption in the corporate space. Some financial institutions are offering clients free security software, such as Trusteer and Prevx, while others are requiring additional security steps on the part of their mobile banking clients, such as entering more than one PIN or password.

New bank technologies, along with businesses taking more precautions, should result in safer mobile banking in the future.

For instance, the Entrepreneur Magazine article noted above reports how Bank of America now requires business clients to enter an additional code when executing an international funds transfer via a mobile device. The bank also provides alerts whenever a mobile transaction is executed and establishes a temporary block when a mobile transaction exceeds a certain value. As an added measure of security, whenever a client receives a mobile payment into a bank account, Bank of America encourages clients to immediately transfer the funds into another account, to protect against losses resulting from fraudulent access to the account generally used for these deposits, the article reports.

Such added security measures can enhance the comfort level of businesses that want to use their mobile devices to wire money, remotely review and approve payments, or verify that payment has been received before shipping an order.

Just as has occurred in online banking's evolution since its inception, the speed and convenience of corporate mobile banking will likely eventually win out in the battle between risk and reward — and this could be the year that the tide turns.