Mortar to Mobile Part 2: Why should you care?

John Lande Iowa Banking Law Iowa Cybersecurity Law Dickinson Law Firm Des Moines, Iowa

Posted on 10/28/2013 at 10:00 AM by John Lande

In the first post of our series, we discuss the scope of the term 'mobile banking.' In Part 2, we look at why financial institutions should pay close attention to the development and proliferation of mobile banking systems. Regulators are already interested in the future of banking and payment systems. In December 2011, the Federal Reserve conducted its first survey regarding the prevalence of mobile banking use by consumers. The Federal Reserve released its findings in March 2013. The findings of this report say a lot about the future of financial services. A younger generation of financial services consumers will be using financial services without visiting brick and mortar locations. The Federal Reserve asked consumers to rank the top three ways they interact with their financial institutions. While 75% of consumers still visit a brick and mortar location, the next most popular responses are ATMs, 72%, and internet, 59.3%. What may be surprising, however, is that an increasing number of consumers are accessing financial services via their mobile phone or device. According to the Federal Reserve, over 85% of people in the United States have mobile phones. Of that number, over 50% of mobile phone users have a smartphone.

Over 85% of smartphone users reported accessing the internet within the last 7 days via their mobile device. Of the people who use the internet on their phone, 27% report using mobile banking services on their phone. This group is young and wealthy. The Federal Reserve identified the highest percentage of mobile banking users are under 35 with household incomes over $100,000 a year. These customers are also frequent users. Over 60% use mobile banking services at least three times a month, and approximately 10% visit use mobile banking over three times a week. This kind of traffic presents banks with opportunities to provide consumers with information, and also gather information about consumers' financial habits. The services that consumers seek from mobile banking providers are also straightforward. The Federal Reserve found that 86% of consumers want to check their balance via their mobile device and 53% want to transfer money. Consumers who have these services are highly satisfied with mobile banking. The Federal Reserve found that almost 95% of consumers reported being satisfied with their mobile banking services. These are services that consumers are willing to pay for. Over 46% of banks offering mobile banking services charge $12 or more per month for mobile banking services. These fees do not seem to have deterred consumers.

This represents an opportunity for banks to offer tiered mobile banking services that, for example, allow free balance checking but require a fee to transfer money. In sum, mobile banking users are young, wealthy, and willing to pay for mobile banking services. This is a group that is satisfied with basic services on their device, and they are ready to support a financial institution that offers these services. More importantly, this is a group that will continue to grow. More traditional banks may decide that they don't yet need to worry about offering mobile banking services. However, it doesn't make sense to bet against a technology that has the potential to make consumers' lives easier, and that depends for its operation on an already prolific technology.  

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

- John Lande


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