Jeff Peiffer was so frustrated that his bank didn't offer an app for his phone that he made one himself, put it online — and watched it become one of the top finance downloads for Android handsets.

The success of Peiffer's software offers an important lesson for financial companies that have not yet developed apps for phones using Google Inc.'s operating system: Android users are among the most active mobile banking users.

Many banks are not meeting that demand, however, and observers say that by neglecting that market banks are training people to be more accepting of third-party software, an approach that could cost them users in the long run and, in the wrong hands, might also open the door to fraud.

"There's a massive potential that's completely unfulfilled at the moment" by banks, Peiffer said.

Peiffer introduced the Android Banking app in February. It initially let customers of JPMorgan Chase & Co. (where Peiffer banks) view balances, transfer funds and pay bills. He has since updated the app to support customers of PNC Financial Services Group Inc., BB&T Corp. and, as of this week, Huntington Bancshares Inc. Peiffer said that he adds new banks based on demand — next up is Fifth Third Bancorp.

"I actually built the app mostly just because I wanted it for my own accounts," said Peiffer, who writes software for a health insurance company and says he worked at JPMorgan Chase until 2008.

At midday Wednesday, Android Banking was No. 4 in the Android Market's list of top financial apps for sale; Peiffer said it has bounced around the top 10 recently, but is often in the top five. More than 5,000 people have downloaded the $2.50 app.

James Van Dyke, the principal and founder of Javelin Strategy and Research, said Peiffer's success is a sign that the market for mobile banking is moving faster than banks have been responding.

"Banks have been a little slow to understand the pace by which mobile is unfolding," he said. "It's kind of like the early days of online banking."

But banks ignore Android at their own peril, he said.

"The users that have the highest usage are those on Android right now," Van Dyke said. "If the consumer is going to one of these" apps developed by third-party providers, the banks "have lost control of the experience."

Banks that do cater to Android users have seen strong demand, with adoption rates by customers exceeding those for apps designed for Apple Inc.'s iPhone or Research in Motion Ltd.'s Blackberrys. A March survey from Javelin Strategy and Research further determined that mobile banking users on Android handsets log in more frequently than iPhone users.

Bank of America Corp., Wells Fargo & Co. and USAA Federal Savings Bank offer Android apps, as does Intuit Inc.'s personal financial management service, but many other banking heavyweights have yet to make their presence known on the Android Market.

Peiffer once offered a version of his app for Wachovia Corp. customers, but shut it down at the bank's request. Peiffer said he does not mind pushback from banks that plan to roll out their own Android apps. However, he was disappointed at Wachovia's response; because Wells Fargo purchased the company, he does not expect Wachovia to support its customers with its own Android app. Wachovia customers whose accounts have not yet been converted to Wells Fargo's systems can use the San Francisco banking company's mobile website but not its Android app.

Arah Erickson, Wells Fargo's head of retail mobile banking, said that after introducing an Android app in May, the banking company saw a "very significant volume" of downloads, though she would not provide exact numbers.

She could not comment on Peiffer's app or his interactions with Wachovia, but said that banks face the same challenges in mobile as they do online, including steering customers away from fraud.

It is a well-founded concern — last year First Tech Credit Union in Beaverton, Ore., alerted customers to a mobile banking app from a developer called "Droid09" that it suspected of stealing financial data. That app has since been removed from the Android Market.

Erickson said her company's response to this issue is to provide its own app. "We're saying, if we're putting the Wells Fargo logo on an application, that we are doing everything we can to protect our customers'," she said.

Van Dyke did not think security would be a major problem when dealing with third-party apps, since scams would receive negative feedback and quickly sink into obscurity. "I think it will be self-regulating," he said.

Aaron McPherson, a research manager for payments at IDC Financial Insights, said that the question of trust is more important — banks should be aware of where their customers are typing in their passwords.

Financial companies have reputations to uphold and investors to answer to, but independent developers are not as accountable, he said. "I don't mean to get on this guy's case, but I would never, ever use an app that was not approved by my bank," McPherson said.

For independent developers to take up that role "is every bank's nightmare scenario," he said, because "he's training consumers that it's OK to give your credentials to some app you downloaded" without a clear bank affiliation.

"Let's say this guy's honest … there must be 10,000 fraudsters out there that noticed this is [close to] the No. 1 app," McPherson said. "I don't question these … [developers'] motives, but I do question their wisdom."

Though Android Banking's success demonstrates there is demand among banking customers for better mobile access, McPherson said it may not be the best idea for banks to develop a dedicated app for each platform. Since there are so many platforms, "Where does it end?" he said.

Instead, banks may consider working with an established aggregation provider like Intuit, McPherson said. "Independent developers, I just don't think, should be getting involved."

Merrie Betbeze Tolbert, BB&T's vice president of corporate communications, said by e-mail that BB&T is planning apps for Android and BlackBerry "in the near future." It has an app for the iPhone, which Tolbert described as "a great market entry point since Apple has the most mature mobile app store available, and the utilization of financial services is high among those users."

JPMorgan Chase, PNC and Huntington did not provide executives for interviews.

Peiffer said he has made "a decent amount of money," though he would not say how much. The app is "doing pretty well and there's definitely demand," he said.

JPMorgan Chase offers apps for the iPhone, but not Android. And like many other financial companies, it offers a website designed to be accessed by mobile phones' browsers.

Peiffer said these sites are "very bland." Banks "keep them very, very simple so that less-powerful phones can handle them, but that also made them look and act horrible for smart phones like the Android."

Peiffer's app is "basically, at its core, a Web browser," he said, that lets users log in to their accounts and read transaction data in a window that is formatted specifically for Android phones.

Peiffer said some prospective users have questioned the legitimacy of his app. He tries to allay their concerns by explaining that the app reformats Web pages without storing sensitive data.

Peiffer has also found that charging a fee inspires more confidence. People "want somebody with a vested interest in maintaining the app," because it demonstrates that they have a motivation to maintain that trust, he said.

Peiffer responded to Wachovia's opposition by developing another app for users, so Wachovia customers using Mint's service could access the account data they aggregate with Mint. Intuit has since released a Mint app.

Peiffer said that despite his own financial interest in keeping his apps online, he would be happy to see more pushback from banks — as long as they are willing to fill the void.

"If they have their own official app and they want me to pull support … I'm fine with that," he said. "My real goal is to help encourage these banks to put out an official app and stop neglecting" the Android system.

This story has been reprinted with permission from American Banker.

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