Wesabe today launched a mobile version of their personal finance management application. Like other mobile applications, it’s a slim down version of their Web application with the ability to enter cash transactions.

From their Wheaties for Your Wallet blog:

We’ve had a number of people testing out the mobile site, and the feedback we’ve gotten the most often is that entering cash transactions from the road is a huge help. If you’re waiting for the barrista to make your favorite coffee drink, call up Wesabe Mobile and drop the cost of that drink into your accounts, and you’ll have a way to test the much-touted latte factor for yourself.

When you enter a cash transaction, we treat your entry like we treat the imports that come in from your bank. You don’t have to worry about entering the full merchant name or the full set of tags from your phone keypad. Instead, enter just enough detail so that you’ll be able to remember what the transaction was. When you get back to your computer, the merchant will show up as “unedited” in your Wesabe account, and you can clean it up and enter more detail then — when you have a full keyboard to work with.

How secure is secure enough for online banking? With identity theft on the rise, the answer increasingly is that it’s  never enough, which explains the rise of two-factor authentication features. These are typically one-time passwords that are generated and displayed to an offline device, usually a mobile phone or fob. Recently, several banks have launched such services, with Bank of America leading the way in the U. S. with its SafePass.

Here’s a quick summary of the service:

Getting Started

To use SafePass, the first thing you do is add SafePass to your account by setting up and enabling your mobile device. It’s interesting to note that they opted to support only mobile devices, and not email, regular phones or even a fob. I can only guess it was done to simplify the initial release, while using a fairly ubiquitous device that people are sure to have by their side.

You start by registering your mobile number by entering it and hitting ‘continue.’

Once you’ve registered your mobile phone, it’s still not usable until you’ve enabled it. You’re then presented with options to enable it now or later. It’s a mystery why the registration is separate from the step to enable it, but on the plus side, so far the process is fairly clear and intuitive.

You’re almost done. Selecting ‘Yes, Enable Now’ takes you to a page with information to ‘Send SafePass Code.’ The module itself requires both Flash and Javascript to work properly. Selecting ‘Send SafePass Code’ sends an SMS message with the code to your registered mobile number. I received this message in seconds.

You’re then immediately prompted to enter the code you just received on the same screen. If entered correctly, the SafePass module displays a confirmation message.

Putting it to use

OK, now that you’ve enabled the mobile number to use SafePass, you can use it immediately on one of the supported online banking functions. In this example, I used it to add a new Bill Pay payee. Adding a payee displays the normal payee screen, but you now have that familiar SafePass module to send a SafePass Code. The process is identical to the process of enabling your mobile number during the setup process above. The ‘continue’ button is disabled until you correctly enter the one-time code that is sent to your mobile number.

After correctly entering the 6-digit code, you then proceed as normal with adding your payee. Adding another new payee simultaneously in the same session does not require you to send and enter another SafePass Code.

Setting Preferences

In addition to the features required by SafePass, you can change your preferences to require it to sign on to online banking or to use it instead of SiteKey. If you’re not happy with it, or simply don’t want to deal with the extra hassle, you can also remove it completely from your account.

Conclusion

The main idea behind SafePass is to prevent online fraud even if someone hacks into your online banking account. By requiring another authentication method that’s not online (i.e., two factor authentication), the belief is that it’s a lot harder for a fraudster to have both your login information and cell phone.

Bank of America does a good job of integrating SafePass into the existing online banking experience, while making the overall experience easy to understand and consistent. By creating a standalone SafePass module in Flash, the process to send, check and enter the code is seamlessly integrated into the site without ever adding extra pages. The familiar interface makes the process predictable and smooth across the site.  But you do get the feeling that this is a stopgap measure, a pilot of sorts to test the waters before making it required for everyone.  One can’t help but wonder whether this would make online banking more or less attractive to users, or whether there’s another method that doesn’t require digging around for a mobile phone to complete a transaction. Here the alternatives are increasing, including biometrics and authentication cards similar to what U.S. Bank announced yesterday, which generate their own one-time passwords. But in the meantime, this approach to two-factor authentication excels in making it harder for fraudsters, while not as hard for the rest of us.

With the rise of news feeds delivering just about any kind of information when and how you want it, are bank feeds far behind? Well, the reality is that the future is now. Behold automated bank feeds. Sites like Yodlee, QuickBooks and New Zealand’s Xero work with banks to collect and automatically import your financial transactions with your authorization. It’s a read-only view of your financial activity, whether it’s from your checking or credit card accounts. Your transaction information is then fed into your desired application, which acts as a virtual ‘news reader’ of your information. This is a service that small businesses have had for a while, but it’s slowly coming to consumers thanks to services such as Geezeo, Mint.com, Quicken and Wesabe. The demand for bank feeds should increase as feeds in general become more prevalent, with users getting more control over how they receive their data.

In addition to expanding the notion of news feeds, Facebook has shown that there’s at least four types of personal data: private (my eyes only), friends only, in my network, and for the general public. This can be further broken down into shared data that is read-only versus read-write. Financial data tends to fall mainly into the private category, with read-only access given to a select few ‘friends’ such as your accountant or spouse. Bank feeds provide a way to receive your private financial data as ‘read-only’ that is both secure and encrypted. Because it’s read-only, a fraudster who gets access is limited to what they can do with it — only transaction information would be displayed, and not personal or sensitive information. Ideally, for this to take hold, there would be a universal standard for receiving bank feeds similar to the RSS standard for news feeds. There would then be a standard way to authorize a desired bank feed that can be displayed when and where you want it versus going to a 3rd party such as Yodlee. And given the sensitivity around financial data, a level of control is needed, such as what information gets sent and when.

Some of the benefits of bank feeds are abvious, such as the ability to track your latest transactions and check your balances, but the real benefit lies in what you can do with the data. Bank feeds allow you to:

• monitor fraud activity
• track for unexpected fees
• gain more control over what’s happening to your money
• organize and analyze your finances using whatever Web app or software you like
• standardize transaction information

If bank feeds take hold, it expands the notion of what online banking can be. Online banking then no longer relies on going to your bank’s Website to manage your money. You’d only go to your bank to move money out, which potentially make widespread use of bank feeds toast unless they can be monetized.

Chris Skinner in his blog post “Bank strategies are fundamentally flawed” writes that banks should stop thinking of channels and just recognise that they are IP-enabled. He bemoans that banks have been left behind in the internet revolution, and that…

The ATM, call centre and internet channels were all built as layers of cake created when the physical branch was the foundation. The electronic channels were built as ancilliary to the core branch channel. That is why they were often separated and have this chasm of non-integration between each other, as banks were built on a physical distribution model where electronics were layered on top.

This got me thinking: what if your bank branch was like the Apple Store? Instead of the bank teller counter, you’d have the Genius Bar. Instead of ATMs dispensing money and information, you’d have stored value cards and the internet to do online banking. To get in-person advice or if you’re experiencing problems with your checking account, you could go online and schedule a time with a virtual Concierge to get help. Instead of your financial information and applications sitting on multiple systems, they’d have just one operating system (so to speak) that’s constantly upgrading its performance and security. Instead of product brochures, you could walk into a store and talk with a “specialist” who’s passionate about their product — I can dream, can’t I?

But you get the picture. If we see the world as completely IP-enabled, then connectivity and access would be paramount. All your bank functions and information would be integrated so that you could get to them from any IP-enabled device. While we’re not there yet, both technology and our perceptions of money have a long way to go before the “world is populated by digital natives.” For banks, that means rather than adding different products and services to their existing lineup, banks ought to merge, simplify and enhance their current offerings. Rather than creating 10 different savings accounts, offer just a few with the ability to customize.

What the success of the Apple Store also tells us is that no matter how digital we become, face-to-face contact and interacting with the product (even one as ephemeral as financial products) are essential to building lasting relationships. Banking is more than just moving money around, it’s about how we live, who we trust and how best to make use of the money we have.

Banks are already taking a page from Apple, with the likes of Wells Fargo adding Online Stations in their stores (Wells Fargo’s term for their branches). ING Direct has their Cafes, which unlike the Apple Store, is not nearly as elegant and subtle about their branding. But it is a hopeful sign that banks are beginning, albeit slowly, to understand the relationship between the digital and literal worlds in which we inhabit. Having one does not mean losing the other, but it does mean that they have to talk to each other.

James Fallows, one of the more prolific and curious writers around, writes in his blog about the 3 ways he has paid for transportation in China. It is a technology shift that is, as he puts it, happening in real time and rapidly changing how we think about money.

The joys of never having to find change for taxi fare are hard to imagine until you’ve experienced them. (Plus the joys of flat-fare non-tipping, a subject for another day.)

Steve Case’s new venture, Revolution Money, just launched MoneyExchange, a PayPal-like service for sending and requesting money online from other people.

Just like PayPal, it lets you create a free account, link your bank account to it, and you’re off and running. Its user interface is clean and very much in the Web 2.0 mold. What is less clear is how it’s revolutionary other than their claims of security and privacy, which is a good start. But unless they roll out some truly unique features, it’ll be a long road ahead to compete with PayPal.

We recently reported on M-Com, a New Zealand mobile technology company that provides one of the best mobile banking experiences around, including Person-to-Person payments and mini-statements. Well, it appears someone was listening. Banking Unwired has learned that Washington Mutual is set to become the first U.S. bank to use M-Com to deliver its mobile banking solution. As of today, it’s not known which version of the M-Com solution the bank will be using, whether it’s the mobile browser version (WAP) or the more robust downloadable one. Hoping to learn more soon.

The recent announcement from Wachovia is another sign that mobile banking is the next killer app. Banks are pushing the idea of banking on the go, carrying one’s bank with them and the idea of anytime, anywhere banking. Unlike online banking, the message of mobile banking is more about lifestyle. While the features tend to be merely a small subset of current online banking ones, the allure of mobile banking for consumers is simple: one’s relationship to their bank should not be restricted to the computer or branch. Managing one’s money and spending it are not complicated things, and should be easily accessible and immediate.

As reported by the Federal Computer Week, the IRS has plans to launch “My IRS Account” next year:

My IRS Account will initially let taxpayers look at three years’ worth of their tax data history.

IRS’ goal is to have an online, secure set of self-service applications for taxpayers to deal with IRS similar to functions consumers enjoy with online banking.

OK, so government is a tad slow, but better late than never. It’s interesting to note that as more personal finance tools are going on line, so to is our financial data and delivery. Tax information has long been the private domain of you and your accountant. Even your closest family member dare not inquire about your taxes or income without a quick rebuke. So if your taxes are online, what does that say about our sense of privacy and security. In an intriguing New York Times article “Securing Very Important Data: Your Own” the author argues that users love having access to all this data and are not perturbed by identify theft and security concerns. However, customers have spoken in others ways, and security and privacy remain key obstacles to using online finance and banking applications.

At the end of the day, it comes down to a matter of trust. Users for the most part assume, perhaps blindly, that their banks will keep their information private and secure. Users know that this underlines their every interaction with their bank, and that if anything does happen, their bank will be on their side. And so while banks and government are high on the trust factor, others who are encroaching in that space will be well served to build an equally strong reputation. In other words, build it and they will come.

Online banking is in a precarious position these days. The Web-based, rich internet application revolution of Web 2.0 is here to stay, while online banking remains stuck in decade-old technology. It lags far behind even more traditional mainstream Web applications in interaction design, speed, ease of use, and capability. It’s no wonder that several new technology start-ups have already lapped existing banks in delivering key financial services we commonly associate with banks, such as:

• Mobile Payments (OboPay, PayPal)
• Financial Management and Analysis (Mint.com, Wesabe, Geezeo)
• Account Aggregation (Yodlee, CashEdge)
• Bill Pay (Billeo)

Other companies are simply using technology to bypass banks altogether, in areas such as:

• P2P Lending (Kiva, LendingClub, Virgin Money, Prosper)
• Online Payments (Google Checkout, Amazon Payments)
• Social Money (Buxfer)

Despite being exponentially outnumbered and outspent, these companies are providing a glimpse into what online banking can and should become. Granted many of these companies are targeting a niche audience (typically young and more tech savvy), they are also about innovation. When Wells Fargo became the first major bank to offer online banking during the fledgling years of the internet, few would have guessed it would become as ubiquitous as it is today. Innovation by definition means going into uncharted territory, but it also means resolving an unmet need. Aside from a handful of banks, few actually create new functionality. Usually, they leverage other, more nimble technology players. In the recent Finovate conference highlighting the top 20 “innovative companies in the financial, banking and lending industries,” none (repeat none) of the companies were actually financial service firms. The question is why?

The easy answer is that banks are by nature slow to act and risk aversed. The other possible answer is that technology is not a bank’s core competency — banks sell financial products, not technology products. Another explanation is perhaps the least obvious one: banks have not found a way to monetize and thereby prioritize building new online services for their customers. While direct banks have seen the value of online services, especially as a way to cut cost, retail banks feel compelled to maintain a common level of service for both online and in-branch customers. This is changing, albeit slowly, with the likes of Citibank and E-Trade creating online-only accounts, but the rate of change elsewhere is barely noticeable.

As Google’s Eric Schmidt is apt to say, “Don’t bet against the Internet.” But ironically, by not aggressively seeking to improve online banking, banks may be making their riskiest bet to date. Much like a software company improves its products, banks ought to continually improve their offerings through integrated, customer-focused applications that make money both less painful and perhaps a little more manageable. Only time will tell if banks ante up.

In a move sure to set a precedent, Bank of America is the first banking application featured on Apple’s iPhone App directory.

Here’s their intro:

Bank of America Mobile Banking is available to all Online Banking customers. With Mobile Banking you can use your iPhone or iPod touch to easily and securely check your balance, pay your bills, transfer funds, or find a nearby ATM or banking center. It’s easy, fast, and convenient — just use the Safari browser on your iPhone or iPod touch to go to www.bofa.mobi and you can get started.

Although other banks have mobile banking Websites that work equally well on the iPhone, they’re the first to proactively promote it as an iPhone app. It’s a smart move given that many sites still need to tweak their interface code to be optimized on the iPhone screen. As a result, iPhone users are often frustrated with their experience on sites that are not optimized.

Sites like Facebook have led the way in adapting their site to the iPhone, and it’s no easy task (hear Techcrunch’s interview with the developer behind the iPhone Facebook for his take). The challenge with iPhone is that designs that work on most mobile phones look pretty bad on the iPhone, and sites designed for a full-screen monitor are cumbersome to use. But with the challenges also come an amazing array of opportunities, such as increased screen real estate, animation, and a growing list of developer tools. And with the recent announcement by Steve Jobs of a developer kit for 3rd party applications coming out in February 2008, it’s more critical than ever that Websites optimize their sites.

With the iPhone, while form follows function, for many Websites, that means having to add more functionality just to keep up. And although early adopters don’t always win out, for this captive audience, the best products usually do.