What We’re Reading: Mobile Banking, P2P Payments and Digital Wallets

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom.

  • Basel Adds Another Reason to Avoid Construction Loans

American Banker

Community banks have yet another incentive to avoid returning to construction lending despite the lure of charging higher rates for such loans. Tougher capital rules proposed by the Basel Committee on Banking Supervision will throw a bucket of cold water on any notion of making higher-risk construction loans, says Jonathan Hightower, a banking lawyer at Bryan Cave. He says a proposal for placing a higher risk-weighting on certain types of construction and commercial real estate loans could scare off many banks. Construction loans have long been a vital component of small banks’ plans for returning to profit growth.

Read more

  • Mobile Banking Spend on the Rise

Bank Systems & Technology

Retail banks are planning to invest heavily in mobile due to increasing customer demand, according to a new report from Cambridge, Mass.-based Forrester Research. Forrester surveyed members of the Consumer Bankers Association (CBA), who reported that they will spend one-third of their total digital budget on the mobile channel this year. The joint research project with the CBA’s emerging channels committee surveyed digital executives at 19 leading U.S. and Canadian banks. The findings were summarized in a two-part report, “The State Of North American Retail Banking eBusiness 2012.”

Read more

  • FIS to sell healthcare benefits business for $335M


Fidelity National Information Services Inc. said Monday that it reached a deal to sell its healthcare benefits business to investment firm Lightyear Capital for $335 million in cash. Jacksonville, Fla.-based FIS, which provides software and services for banks and other financial companies and operates the NYCE debit payments network, said the sale is expected to close by Sept. 30, subject to regulatory approvals and customary closing conditions. The sale includes FIS’ consumer-focused healthcare and health and financial network businesses, which provide benefits administration, debit card and benefit account processing and payment services to consumers, healthcare providers and payers, the company said. The business generated about $120 million in revenue and 5 cents per share in adjusted earnings per share in 2011, the company said.

Read more

  • 3 Big Banks Team Up To Launch A P2P Juggernaut

Credit Union Journal

A new product from the clearXchange joint venture of Wells Fargo, Bank of America and JPMorgan Chase may rattle the highly competitive person-to-person payments market. Send and Receive Money, which recently went into production, is pretty much just what it says, and given the considerable size of its backers (38% of banked consumers), should have plenty of reach. It allows Wells Fargo and Bank of America customers to send and receive funds transfers from other customers by using an email address or mobile phone number. Although the free service is driven by clearXchange, consumers will use it by registering on their existing online banking or mobile apps with Wells Fargo or Bank of America.

Read more

  • Tablet Interest Builds in Next Phase of Mobile Usage

Credit Union Times

The use cases of phones versus tablets are dramatically different, said John Flora, a spokesperson with Intuit Financial Services. The company has sold some 200 iPad apps, mainly to credit unions, and more deals are in the pipeline. “Tablet deployment is just at the beginning,” Flora said. As for those differences, Flora noticed that smartphone usage is “one handed, tablets are two.  With tablets, the user is sitting on a couch, or lying in bed, and spending more time on the device.”

Read more

  • HTML 5: Why Should You Care?

Gonzo Banker

As the latest release of the HTML specification, HTML5 has the potential to profoundly change the way financial institutions market and deliver their products online. What makes it worth investigating and adopting as a development toolset? Why should we push our providers to develop the next generation of solutions using this specification? What does this mean for FIs? Companies like The Financial Times and The Boston Globe that have made the move to an HTML5 private utility app did so with these goals in mind: A shortened release window.

Read more

  • Your digital wallet; Paying for everyday things with phone apps

LA Times

The growing crop of digital wallet offerings is making it easy to pay for a variety of everyday things with just a few phone taps. Smartphone apps usually email you an electronic receipt, so no more crumpled wads at the bottom of your purse or pocket. But watch out: Once you start paying with your phone, it may be hard to go back to pen, paper and plastic. Many online banks have smartphone apps that will let you check your balance and purchase history, as well as transfer funds between accounts. Apps from banks such as Chase and ING also allow customers to deposit funds by using a phone’s camera to snap a picture of a personal check.

Read more

  • New bank theft software hits three continents –researchers

Reuters News

A new wave of automated hacking of online bank accounts might have stolen $78 million in the past year from customers in Europe, Latin America and the United States, according to researchers who peered into the computers of the hacking gangs. The groups used recent improvements to two families of existing malicious software, known as Zeus and SpyEye, which lodged on the computers of clients at 60 banks. While previous versions of the software have proved adept at stealing logon information, the latest variants automate the subsequent transfer of funds to accounts controlled by accomplices. The findings, to be released on Tuesday by security firms McAfee and Guardian Analytics, confirmed and expanded on research from Japan-based Trend Micro Inc that was first reported last week by Reuters.

Read more

What We’re Reading: Facebook’s Payment System, the Microsoft Tablet and Overdraft Fees

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom.

  • Facebook Upgrades Its Payment System

American Banker

Facebook (FB) is moving away from its Credits virtual currency to a more robust payment system that supports real money. At the same time, new survey data show that consumers are interested in bringing their banking business to the social network. Nearly 30% of consumers surveyed said they might one day use Facebook for some type of banking service if it were offered, according to an online survey Cisco conducted in May among 1,061 consumers in North America. Cisco published its findings June 20. Though Facebook does not currently offer traditional banking products, it is aggressively making its payment system more compatible with existing means of moving money.

Read more

  • Microsoft Tablet May Lack iPad’s Luster, But Should Sync Well with Banks

American Banker

Microsoft’s (MSFT) announcement Monday that it will soon produce its own tablet took aim at Apple’s (AAPL) iPad, but it adds another potentially important gadget to bankers’ toolboxes as they ascertain the right formula for tablets. Though Microsoft is late to the tablet party, most banks use Microsoft software in their vast chains of technology, and its software is integral to some part of core and back office operations for nearly every financial institution, experts say. Its tablet might close the technology loop by offering customers and employees a device to use in branches and in distributed or mobile work environments. “For several years, Microsoft has been talking about presenting itself as a part of the branch of the future, it has been advertising and marketing around conceptual frameworks for new branches, and it has talked about embedded software passing applications from [desktops or servers] to tablets,” says Kevin Travis, a partner at Novantas.

Read more

  • What’s Keeping the Underbanked and Banks Apart?

Javelin Strategy & Research Blog

With some of today’s big announcements at the 7th Annual Underbanked Financial Services Forum, it’s clear that the underbanked are on FIs’ minds. So why is it that banks and the underbanked are on such uncertain terms? Is it something banks aren’t doing? Is it that banks don’t listen? Are the underbanked getting their financial needs met elsewhere?

Read more

  • Hack of LinkedIn shows need for multiple passwords

News & Observer

One of the way social networks grow – their ace in the hole – is by playing on human nature. When someone you don’t know sends you a message asking to be your “friend,” do you really want to turn him down? If a woman you know on an online forum thinks you should connect to her on Google+, wouldn’t a “no” be an insult? People want to get along, so they click and their networks grow and the social networking companies prosper.

Read more

  • Chase to Drop Overdraft Fees for Purchases of $5 or Less

New York Times Blogs

As of July 22, JPMorgan Chase will no longer charge its checking account customers overdraft fees for any purchase of $5 or less. The change will help eliminate multiple overdraft fees – charged when customers overspend their account – for small purchases. Say that you have overdrawn your account and have a negative balance of, oh, $60 (probably incurring an overdraft fee of $34, according to Chase’s checking disclosure). Then you use your debit card to buy a snack for $4.50 and a cup of coffee for $3.50.

Read more

  • Banks add security layers to protect customers

Washington Post

What are the odds that the head of a company that tracks financial fraud would have his own bank account breached? James Van Dyke, president of Javelin Strategy & Research, certainly found it ironic when Wells Fargo alerted him to a fraudulent transaction six months ago. He was also glad he had signed up for a service that notifies him every time there’s a credit card transaction that occurs in his California business’s name. “At first, it seemed like a lot, but now the mobile alert is comforting,” he said.

Read more

  • Windows Phone 8: Speech, Wallet and more games on the way

Washington Post

As expected, Microsoft announced Wednesday that the Windows Phone will be more integrated with Windows 8. Just days after showing the world its Surface tablet, Microsoft continued to make announcements that indicate it’s finally ready to pull its strengths together and address some of its bigger weaknesses. Joe Belfiore, head of the company’s phone program, said starting this fall Windows phones will ship with the shared core and he promised “more apps, bigger, more important apps coming faster and beautiful games.” New Windows phones will have dual-core (and more) chips, three new screen resolutions and removable MicroSD cards. All existing Windows Phone 7.5 apps will run on all of the resolutions without any changes, Belfiore said.

Read more

How Banks Can Better Connect With Online Customers

In the world of social media, there are some industries that are simply behind the curve. Banking is certainly one. The regulatory issues, lack of clarity in FINRA policies and security concerns on both the technology and communications front have left bank marketers in the grey, if not the dark, about moving forward with social media marketing efforts.

But as consumer behavior continues to shift to include more time and attention on social networks like Facebook and Twitter, banks have been forced to evolve. Fortunately, so have the regulations. FINRA’s updates of early 2010 brought some clarity to what banks could and could not say and do on the social web. As a result, more banks are diving into social. But are they doing so well?

Large brands like Citi, with its hiring of social media customer service pioneer Frank Eliason away from Comcast, and Wells Fargo, with an innovative group blog strategy, have won some early fans from customers in the online space. AMEX’s Open Forum is a solidified business resource for many, offering the brand valuable exposure and trust from online audiences. Even small banks like 1st Mariner in Baltimore have caught the eye of analysts and storytellers from the social media world.

So what can your bank do to better connect with online consumers? Having spent the last few months researching online conversations around banks and bank products, I discovered five core tactics every bank can execute to improve its online credibility with customers.

1. Nail Down Your Policies
No one in your organization will know what to do with online conversations until you tell them what they can do. Whether you empower the entire organization to engage online or just one person from your marketing team, developing a solid social media policy that addresses who, how and why you’ll engage customers online is the first and fundamental step in connecting with customers online.

2. Find The Channel That Matters Most
One of the worst mistakes your bank can make is dividing your attentions among too many channels. You’ll dry up your energy, time and resources tending to a blog, a Facebook page, a Twitter account, a LinkedIn page, a Google+ page and more. Do some research to find where the core customers you’re trying to serve are and focus your energies in those one or two places. Having trouble finding where those customers are? Just ask them. They’ll tell you.

3. Sell Your Expertise, Not Your Catalog
Content is what drives social media success, so you’ll need to come up with information to share on these social channels and sites. Your instinct, as a bank marketer, is going to be to tell your audience all about your low rates and your latest promotion. Brace yourself, but your customers don’t want to hear that. They want helpful tips on managing or saving their money. They want to know what the latest legislations means to their bottom line. They want to know why they should care about the European economic crisis. You and people within your bank are really smart about lots of things besides your latest deal. Focus there.

4. Focus On Nimble Technology
The online consumer is pre-disposed to apps, gadgets and tech. So you’re going to need to make sure your online banking, mobile website and even mobile apps are spit-shined or you’ll need to ready yourself for some explaining. While customers are certainly concerned about their privacy and security around their financial information, innovations like mobile apps that help manage your credit cards and online softwares that make personal finance less like spreadsheet hell and more simple are forcing your hand. You’ll need to be up to speed with quick, easy and mobile technology to satisfy that online customer.

5. Be Clear About Fees
If the September 2011 fee increase announcement by Bank of America taught us anything, it’s that $5 is a big deal to most Americans. Consumer perception is that banks are wealthy because they gouge customers for an additional nickel, dime or dollar anywhere they can. Our online analysis of conversations around fees showed over 60% to be negative, far more than other topic areas reflected. Customers don’t like you taking their money, ever. So be sure to adequately communicate what your fees are and why they’re used so your customers are informed and less likely to complain about them. And if you want to make a big splash, get rid of a few (like ATM fees). It shows up in the online buzz!

Social media practitioners will tell you the best way to connect with consumers online is to just be present, be honest and be consistent. But you also have to make those connections mean something to your bottom line. Whether you approach social media marketing as an effort in customer retention or customer acquisition, that philosophical position will lay a nice foundation. Following the steps above will fine tune your efforts and help you begin to turn conversations into conversions.

Jason Falls is the CEO of Social Media Explorer and author of The Conversation Report: What Consumers Are Saying About Banking, a new market research report from his company. You can find Jason on Twitter @JasonFalls, Facebook or connect with him on his blog, Social Media Explorer.

What Real Customers Are Saying About Banks

If you asked the average American if they felt positively or negatively about their bank, how do you think they would answer? Now consider the same question while keeping in mind the country is currently clawing its way out of a recession, the mortgage crisis is still affecting millions of Americans and their bottom lines and the Occupy Wall Street movement hasn’t exactly disappeared?

Would it shock you to know that most Americans would answer that they feel positively about their bank? That’s what my company’s recent research into online conversations about banks revealed. In fact, looking at conversations that feature the top 25 banks according to assets as ranked by the FDIC, only two have less than 60% positive marks. Even major banks, like Citi and PNC, were above 70% positive in online conversations.

Granted, Bank of America, which in many ways instigated the Occupy Wall Street movement with its September 2011 rate hike (quickly rescinded but not before the public conversation could go awry) dominated online conversations in 2011 among the banks and it was one of the two under that 60% positive threshold. But even with BOA’s miserable year in the public eye, its positive to negative ratio was 1:1. Half of the people talking about Bank of America last year were speaking of the company in positive light.

Anecdotal assumptions like, “no one likes their bank,” or “no one likes Bank of America,” can be more easily overturned today thanks to online monitoring and listening platforms. That’s why we spent the last few months researching what consumers were saying about banks and bank products. Among some of the other surprises we found include:

Customers Are Fickle - Several banks we reviewed got high marks for customer service. But, they also got low marks for it. This tells bank marketers that no matter how good you are, someone will always think you’re bad. Having processes and policies to deal with negative feedback is an imperative.

You Don’t Have To Be Big To Make An Impact – After finding the major products and themes consumers of the top 25 banks discussed, we removed any brand bias and searched the web for conversations about the topics. While analyzing conversations about Automated Teller Machines, First Fidelity Bank (Oklahoma) appeared multiple times. Its ATM fee policy thrilled fans enough to elicit online responses. And ones that were found by a national research focus. The insight for marketers here is that thrilling your customers creates buzz and not many of your competitors are doing that.

Advertising Works – The single biggest online conversation impact we found among the larger banks was the amount of positive conversation that focused on the advertising campaigns for Capital One and HSBC. Capital One’s “What’s In Your Wallet” vikings and Jimmy Fallon ads accounted for over 60% of the positive online conversation around the brand. But it’s not just funny TV spots that emerged as effective in driving online buzz. HSBC’s advertising campaign focuses on posters and billboards primarily placed around airports. The “Different Points of View” campaign accounted for 23% of its positive online buzz. Apparently, good ads are worth the investment.

Certainly, looking at online conversations comes with its own limitations and biases. We were not able to ask direct questions of consumers as with traditional market research made of focus groups and surveys. But with our approach comes certain bias elimination, too. Finding online conversations means the consumer isn’t biased to answer one way or another because they know they’re being monitored or interviewed. We mined raw conversations of people speaking freely on their respective social networking site, forum or blog.

This in-the-wild conversational analysis isn’t necessarily better than other forms of consumer insight. But it sure is different and as revealing. It shows us that our assumptions are often wrong, consumers will always surprise you and there are plenty of opportunities to be had for brands in the online space.

Jason Falls is the CEO of Social Media Explorer and author of The Conversation Report: What Consumers Are Saying About Banking, a new market research report from his company. You can find Jason on Twitter @JasonFalls, Facebook or connect with him on his blog, Social Media Explorer.

What We’re Reading: Gamification, Tablets and Password Security

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom.

  • What Can Bankers Learn From Gamers?

American Banker

The qualities that make games so compelling — the immersiveness, the need to collaborate with others, the fun and even the killing — could all be harnessed by banks in their mobile applications to help their customers understand their finances and reach specific goals such as savings and debt reduction. This is a point made by Jane McGonigal, director of games research and development at the Institute for the Future in Palo Alto, in the keynote speech at the Mobile Banking and Commerce Summit in San Francisco Sunday. McGonigal is a designer of alternate reality games that are designed to improve people’s lives and solve problems. She has created games for partners such as the American Heart Association, the International Olympics Committee, the World Bank Institute, and the New York Public Library.

Read more

  • U.S. tablet usage hits ‘critical mass,’ ComScore reports


Nearly one in four smartphone owners also make use of tablet computers, according to data from the market researcher. In just the two years since the release of Apple’s iPad, the U.S. tablet market has reached a “critical mass,” with nearly one in four smartphone owners also using a tablet in the three-month period ending in April, according to data released by market researcher ComScore. Tablet use among smartphone owners has more than doubled in the past year, going from 9.7 percent last year to 23.6 percent this year, ComScore found. By comparison, only 10.4 percent of feature phone owners also use a tablet, “suggesting that smartphone ownership is highly predictive of tablet adoption in the current market,” comScore said.

Read more

  • How Companies Can Beef Up Password Security

Krebs on Security

Separate password breaches last week at LinkedIn, eHarmony and Last.fm exposed millions of credentials, and once again raised the question of whether any company can get password security right. To understand more about why companies keep making the same mistakes and what they might do differently to prevent future password debacles, he interviewed Thomas H. Ptacek, a security researcher with Matasano Security.Ptacek is just one of several extremely smart researchers I’ve been speaking with about this topic. Below are some snippets from a conversation we had last week.BK: I was just reading an article by Eric Chabrow, which pointed out that LinkedIn — a multi-billion dollar company that holds personal information on some of world’s most important executives — has neither a chief information officer nor a chief information security officer.

Read more

  • Card-Linked Offers in the Wild: Bank of America, Capital One and Fifth Third

Net Banker

They are starting to see more card-linked offers (aka merchant-funded rewards) in the wild: Bank of America: Consultant and former bank exec Tom Noyes showed off his BofA offers, BankAmeriDeals powered by Cardlytics, on his FinVentures blog earlier this week. Capital One: For the past four weeks, he has been receiving FreeMonee offers from Capital One. Fifth Third Bank: He doesn’t know how long it’s been there (the service was announced in late Feb), but today he noticed that Fifth Third has a link up on its homepage to Prewards, the edo Interactive-powered rewards programs. Bottom line: Card-linked rewards are great for consumers and banks, and hopefully they will prove to be equally valuable for the merchants who pay for the whole thing. If so, it could usher in a whole new era of ad-supported banking.

Read more

  • More Debit Card Follies and Abuses

New York Times

The federal Consumer Financial Protection Bureau needs to bring transparency to debit card banking. The Federal Reserve made a good regulatory start in 2010, when it required banks to get account holders’ consent before enrolling them in overdraft ”protection” programs that could cost them $35 each time they used a debit card and overdrew their account — the cards provide no warning of insufficient funds. Customers who did not opt in would have their purchases declined.The regulations were sound, but consumers immediately complained that some banks failed to explain the opt-in policy or even pressured customers into taking it by saying that their debit cards might no longer work.

Read more

  • Banks Say Walmart, PayPal Biggest Threats to Business


Nearly as many senior banking executives are concerned about competition from new financial market entrants, like Walmart and PayPal, as there are bankers worried about competition from the industry’s biggest players. According to the KPMG Banking Outlook Survey, 28 percent of 100 senior banking respondents said those new market entrants posed the biggest threat to their business. In comparison, 32 cited national banks as the biggest threat. Regulatory pressure, an interest in online and mobile, and an eye for the underbanked consumer were other popular themes that garnered attention in this year’s edition of the annual banking survey.

Read more

Video: Turning Ordinary into Extraordinary

CeCe Morken, senior vice president and general manager of Intuit Financial Services recently presented the opening keynote at the Barlow Research National Client conference. This is the final part of the video series that we’ve been highlighting on Banking.com.

Video: Mobile and Social Can’t be Ignored

CeCe Morken, senior vice president and general manager of Intuit Financial Services recently presented the opening keynote at the Barlow Research National Client conference. This is part five of the video series.

What We’re Reading: Mobile Check Deposit, ATMs and Mobile Wallets

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom.

  • Half of U.S. Consumers Would Use a Mobile Wallet: Survey

American Banker

Emerging mobile wallets may pose a bigger risk to banks than many realize. Nearly half of U.S. consumers are interested in using a mobile wallet to help them manage card payments, and many of those would consider a provider that is not a bank, new survey data from the financial consulting firm Carlisle & Gallagher Consulting Group suggest. Among consumers interested in mobile wallets, 80% said they would consider PayPal as their primary bank if it offered banking services, and 60% said they would consider Google, according to the survey. Apple won over 60% of respondents, even though it does not currently offer a digital wallet.

Read more

  • Monetizing Mobile Check Deposit

American Banker

Winston-Salem, N.C.-based BB&T Corp. may be a super-regional, but the bank’s acquisitive yet conservative deal-making has garnered it national notice in industry and analyst circles. BB&T has in the last 10 years more than doubled its assets to $174.8 billion, making it one of the largest regionals in the world and the 13th largest bank in the U.S. As this once quiet Southeastern bank rises more swiftly to national prominence, it’s working on its mobile offerings. BB&T released April 30 one of the most strongly desired mobile banking features – mobile check deposit – to its retail and business customers.

Read more

  • Mobile Banking: Predicting the Risks

Bank Info Security

Mobile security threats can be managed through testing and strategic risk-mitigation strategies, says Keith Gordon, who oversees authentication and security strategies for Bank of America’s consumer online and mobile banking units. A mobile banking pioneer, Bank of America has come up with some innovative ways to anticipate mobile threats. This top-tier bank has seen its mobile-user base explode, increasing by nearly 3 million users in the last 12 months. It now has more than 10 million mobile users.

Read more

  • Long Live the ATM: Automated Teller Machines Are Still An Important Delivery Channel for Banks

Bank Systems & Technology

The automated teller machine may not be as hot as other banking channels, such as mobile, but the ATM remains a critical component of banks’ multichannel delivery strategies. Perhaps because they’ve been around for more than 40 years, ATMs just don’t garner the excitement of newer channels, such as mobile. But the ubiquitous ATM — used by 85 percent of consumers, according to a recent Mercator Advisory Group report — is still delivery channel royalty. Even as banks introduce and build out new delivery channels, ATMs will remain an important part of the mix, notes Ken Patterson, VP of research operations and director, credit advisory service, for Maynard, Mass.-based Mercator Advisory Services.

Read more

  • Prepare for “smartphonatics”

Fierce Finance IT

What do you call someone who is a fanatic about their smarrtphone? Aite has dubbed this group “smartphonatics.” The research outfit coined the term after looking at mobile banking and payment adoption in 14 countries. It describes this group “as people who change their shopping, financial and payment behavior as a result of owning a smartphone. The report makes the claim that Smartphonatics’ behavior is shaping consumer needs and requirements for mobile payment and banking solutions, and sets the bar for how financial institutions and retailers will have to respond over the next five years to stay competitive.”

Read more

  • 5 Ways Banking is Changing Fast

Go Banking Rates

When bank ATMs first started appearing in the U.S. some 40 years ago, they were hard to miss. Recent innovations have been much more stealthy — but just as groundbreaking.In case you’ve missed them, here are five contemporary, cutting-edge technologies that are quickly changing banking:Online Banks: The advent of the internet has not only given people the opportunity to bank online, it’s also presented banks with the opportunity to serve customers online exclusively — as in, without brick-and-mortar branches. Mobile Banking: Download a bank’s mobile app onto your smartphone and you can do your banking on the go. Common mobile features include allowing you to check your balance, view recent transactions, transfer money between accounts and find ATMs.

Read more

  • On Campus, New Deals With Banks

New York Times

College campuses have long been attractive hunting grounds for financial institutions looking for new customers. In recent years, however, their efforts to woo students have gotten banks and other financial institutions in trouble with regulators. They are now effectively prohibited from providing gifts to students who sign up for credit cards. And the colleges themselves can no longer be paid by the lenders to steer students to student loans.

Read more

What Small Businesses Can Teach Us About Technology

For the majority of businesses, IT is a DIY proposition – do it yourself. That’s because most businesses are small businesses, which makes information technology decision-making at the Mom and Pop shops a DIY affair, far different than their larger business counterparts, where procurement is a managed process.

While the mechanics of technology decision-making for SMBs differ from those at large enterprises, their early embrace of the “Bring Your Own Device,” aka BYOD, strategy has lessons for the industry as a whole.

Try replacing a small business employee’s iPhone with a business-friendly BlackBerry and see how far you get. Chances are employees are using their own phones on the job. This consumerization of IT, in which consumers bring their own devices to work, is increasingly the rule at SMBs, not the exception.

This raises many questions for employers.

  • How can I connect these devices to existing services, including email and payment processing?
  • How can I protect against loss or theft?
  • How do I make sure company data doesn’t leave if the employee finds a new job?

The costs associated with these questions sound extreme, but the benefits of a BYOD strategy will, in most cases, more than offset the costs. Not surprisingly, when employees use devices they like and have chosen for themselves, they’re happier.

And there are hard savings as well. By putting employees in charge of their technology, a BYOD strategy also shifts the responsibility for managing and maintaining – and in some cases, purchasing – that device to the user, reducing the overall company’s technology costs. The small business that lets its people use their iPhones is the small business that doesn’t have to buy them corporate devices.

Aside from the discussion of benefits and downsides, a bigger question remains: Why is BYOD so popular?

The answer lies in a simple but infrequently acknowledged truth: Most business technologies deployed to users aren’t designed for users. They’re designed instead for buyers, whose agenda is far different than their individual employees. For decades, enterprise technology vendors courted CIOs, IT managers and other buyers with promises to make their life easier: automate deployment, ease the pains of management, and lock down individual devices so that users required permission to install even a new browser. The user experience, the interface’s aesthetics and any functionality not directly related to the business were afterthoughts, if they were thought of at all.

And then everything changed.

Five years ago this past January, Steve Jobs unveiled the iPhone, forever transforming the way we communicate. For the first time, users had a device that was designed not for the employer and not for the carrier, but for no one other than the person using the device.

With its first mobile phone product, Apple not only leapfrogged every other device manufacturer on the planet, they completely reset users’ expectations. No longer would we have to settle for a device that was clumsy and awkward to use – which described virtually every device built for businesses. Users revolted and embraced, and today you see iPhones, iPads and dozens of other consumer-focused devices tacitly, even explicitly, supported within the enterprise.

For the businesses, then, the lesson is simple. Think carefully about who your customer is and who you’re building for. Because if you forget about the person who actually has to use your product, you can be sure that someone else won’t.

*This post originally appeared on the Intuit Network

About Stephen O’Grady:
Stephen O’Grady is an industry analyst and cofounder of RedMonk. He is based in Maine, a frequent traveler, ardent RedSox fan and focused on helping companies understand developers better and, in general, helping developers do what they do best. He is a paid contributor to the Intuit Network.

Video: How Love Enters the Equation with Small Business

CeCe Morken, senior vice president and general manager of Intuit Financial Services recently presented the opening keynote at the Barlow Research National Client conference. This is part four of the video series.