Westpac CEO slams mobile data pricing

High cost of SMS has Kiwibank looking at mobile apps to deliver text messages

Westpac CEO George Frazis says the cost of mobile data is too expensive and that current pricing models are not coping with new usage patterns.

Frazis told the audience at the FST Media Technology and Innovation conference this month in Auckland that he was speaking with the bank’s technology partners about the cost of data. “There’s going to be skyrocketing data requirements, so you need a pricing mechanism that actually enables that to occur,” he said.

In one month Westpac Bank sent 71,000 texts and over 230,000 email alerts, and Frazis says in the last 12 months there were two million logins to the bank’s internet site via a mobile device — 350 percent growth on the previous year. He says the dramatic uptake in 3G mobile is changing the way the bank is interacting with its customers.

“We’ve got pricing models that are based on old usage methods and old contracts which need to be looked at going forward and effectively that’s what makes data far too expensive in terms of this new era.”

Kiwibank head of online channels Peter Fletcher-Dobson was also presenting at the same conference. When asked later about Frazis' comments he told Computerworld he thought Frazis may have been referring to the high cost of SMS.

“If you are an enterprise using text messaging with your customers, the option now is to use internet messaging instead, what George is saying is the price of text is too just high to use it on a scale that enterprises want to,” he says.

"You get messages from the likes of Facebook and Twitter that are sent across the internet, they turn up on your phone looking like text messages but they are sent via the internet and Facebook and Twitter aren't having to pay a telco to deliver those."'

“I'm assuming that's what he (Frazis) means. There's the challenge out there to the telcos to sharpen their pencil because the price of that sort of SMS communication is now being challenged by the new technology coming into play. It will be cheap, in fact it costs nothing.”

With the high adoption rate of smartphones, Fletcher-Dobson says that banks will increasingly communicate with customers via secure mobile applications and the amount of data used to send these messages is tiny. Kiwibank is currently building mobile applications.

But SMS is likely to remain a popular form of communication for some time, as Fletcher-Dobson says it is used by 99 percent of the population and doesn’t require a smartphone.

Fletcher-Dobson says the bank is actively engaged in discussions with its telco suppliers on lowering the cost of SMS delivery. He says text messaging remains costly despite the new mobile termination regulations that came into effect on May 6, mandating that the cost the telcos can charge each other to terminate a text on their networks is just 0.06 cents.

Both Westpac’s and Kiwibank’s main telecommunications provider is Gen-i. Computerworld asked for a response to the concerns raised by these senior executives and was emailed the following statement from a spokesperson:

“Gen-i has strong, long standing relationships with KiwiBank and Westpac, and we are committed to providing solutions to help them meet the demands of a competitive landscape. As you mentioned, Westpac’s CEO comments were of a general nature, not specific to an individual provider. We work closely with our clients to deliver cost-effective solutions based on market requirements, and will continue to review them to ensure they align with the changing needs of their customers.”

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