An estimated 1.1 million consumers signed on to mobile banking in 2007 as the nation's leading banks offer that option. But the market for mobile payments is currently limited to purchase of content such as games and ringtones.

So says Charul Vyas, analyst for the emerging technologies service at TowerGroup, Needham, MA. In an extensive interview with Mobile Marketer's Lauren Mooney, Ms. Vyas discusses trends, challenges and opportunities for banks, payment service providers and consumers in the new but promising mobile channel.

As Ms. Vyas said, "Today there are no clear-cut leaders or key players in the mobile banking and payments space -- there are only competitors." Excerpts from the interview:

What is the key trend in payments and banking this year?
One of the key trends in mobile banking in 2008 will be midsize to small banks investigating and deploying mobile banking services.

To date, we have seen most of the 10 largest banks in the U.S. offer services and a handful of medium and small banks have taken the leap. As large banks see continued growth in mobile banking users, other financial institutions will take notice and are sure to follow suit.

As far as mobile payments are concerned, this space is not as developed in the U.S. market, so I think we will see more suppliers enter the space and more expansive offerings by players that are active in the traditional payments space.

Today, mobile payments are limited to the purchase of digital content to be used on the phone itself, such as games and ringtones. I don't see this changing significantly in 2008 and believe it will be a few more years before we see mobile payments that are mainstream.

Regarding both mobile banking and mobile payments, it will be yet another investment year as players in this space continue to work to build the right ecosystem and the right business model.

In addition, this space will garner media attention, as well as more technology suppliers and solution suppliers will enter the market.

How will 2008 differ from 2007 in payments and banking?
2007 was the first year of mobile banking, but some of the systems launched were very basic and limited.

In 2008, there will be a continued evolution of mobile banking services and also more intelligence wrapped around these offerings -- for example, more customer analytics, more focus on income opportunities, more attention on attracting and retaining customers.

What does this mean for marketers?
Offering a new product or service is not beneficial if no one knows about it or uses it, therefore marketing will be key to the success of mobile banking and payments.

Consumer education through marketing and advertising will be instrumental in growing this space. The most effective way to reach consumers regarding mobile banking and payments in the near future will be through traditional media outlets such as print and television advertising as well as Internet advertising.

At this point, marketing mobile banking and mobile payments services directly to consumers on the handset may not be the most logical next step, as there seems to be a lack of customer analytics on how to make the mobile phone an effective and relevant advertising channel.

What other trends do you anticipate in payments and banking in 2008?
In November, Qualcomm purchased the mobile banking supplier Firethorn, and we believe that there are more acquisitions and mergers to come.

We believe that the dominant players in the mobile, Internet, payments and information technology space will consider acquisitions that could help drive their own mobile payments and banking strategies.

In addition, we are really just getting started in the mobile banking and payments space, so there is sure to be more investment in the area and more venture-backed companies emerging.

What were some key developments in payments and banking in 2007?
Unlike the mobile banking initiatives at the start of the decade, mobile banking today is a reality and we don't think it will fade away. In fact, we believe the opposite.

In just 2007 alone, there were mobile banking deployments by nearly all of the top 10 banks in the U.S.

In addition, there has been strong uptake in mobile banking adoption. Mobile banking went from near zero at the start of 2007 to ending the year with more than 1 million active customers.

Who do you anticipate will be key players in this area in 2008?
Today there are no clear-cut leaders or key players in the mobile banking and payments space -- there are only competitors.

As the ecosystems continue to be defined, mobile operators, incumbent financial firms -- credit card companies, card associations, payments processors, etc. -- and venture-backed companies will all be key players in the coming year.

What challenges do you think payments and banking faces?
I think consumer education, getting the services into the hands of consumers, as well as consumer concerns about security will continue to be challenges in 2008.

We believe it will largely be up to the banks to educate their customers about new mobile banking offerings.

As mobile banking services continue to evolve and become more dynamic, getting these services to the handset and provisioning the devices will become increasingly important.

Regarding security, banks need to take steps to assure their customers that accessing their personal data via a mobile phone is safe and secure.

This last point will become increasingly important in the coming years as we move down the path toward mobile payments.

Is mobile payments and banking fully integrated with the other channels?
The reality is that neither mobile banking nor mobile payments are fully integrated with the other channel, and while that is ultimately the goal, we are not there yet and we won't likely get there in 2008 either.

It takes time for any new channel to become integrated with a financial institution's other channels and the same will be true for mobile.

What is the one thing marketers should do in 2008 in payments and banking?
Now that mobile banking is a reality, marketers should focus on getting the word out about the services in an effective but non-intrusive way.

In addition, there is opportunity to use smarter analytics and examine customer segmentation to make the service as relevant and useful to consumers as possible.

Click here for TowerGroup's U.S. mobile banking forecast.

This article appeared in Mobile Marketer's Mobile Outlook 2008. It is saved in the Classic Guides section on www.mobilemarketer.com. Please click here to download the PDF file.