By 2010 almost 90 percent of US consumers owned a cell phone. Mobile devices allowed people to take and make phone calls away from the landlines anchored in their homes and offices. Soon, with new smartphone technologies they were reading articles and books without the physical books, sending and receiving emails without computers and watching movies outside of theaters and without TVs at the time and place of their choosing.
The explosion of new communications and data transfer technologies transformed many aspects of life by making many of the routine, everyday activities more convenient and flexible. Banking has been no exception as the use of mobile communication devices has emerged as the natural new, more convenient and flexible alternative for managing banking accounts and transactions.
Over the last decade, new technologies have profoundly changed consumers’ interactions with banking institutions and their management of finances. According to the recurring, annual study of consumer payment and banking choices by the Federal Reserve Bank of Boston, consumers have been moving away from bank visits, use of checks and cash for transactions and starting to rely increasingly on more convenient and flexible banking channels such as online banking and electronic payments and a mix of debt, credit and prepaid cards for purchases.
According to the same study, almost 10% of US consumers used mobile communication devices for banking transactions in 2009. Most US large commercial banks and many smaller community banks and credit unions have started offering comprehensive mobile banking services.
Self-service mobile banking offers the ultimate flexibility and control over account management. More than any other previously available alternative, including phone and online banking, it frees consumers from the physical and time constraints of banking. Customers initiate interactions with their banks on their own schedules and from their own locations and leverage mobile communication for receiving real-time and on-demand information about their accounts and transactions.
The new flexibility does not offer convenience only, but the opportunity to save more time and eventually money for both consumers and financial institutions. Consumers benefit from eliminating the need for frequent trips to their local bank branches, the hassle and cost of mailing payments to their various service providers and the extra charges and fees associated with the inevitable late payments and occasional overdrafts due to lack of up-to-date information on balances. With continuously available account information, they can also avoid the expense of holding larger than necessary cash amounts. More flexible banking options limiting the need for branch visits allow financial institutions to save on branch maintenance and staffing expenses and to move into new market segments without the need to immediately establish physical presence in those new locations.
Account balance and transaction text messages
Mobile banking services focus on the most immediately beneficial service options. Almost all banks offer basic text or SMS deliveries of account information and configurable alerts that are triggered when the account reaches certain limits set by the customer. Banks can also send text message confirmations about recent or historical transactions. Basic account information can also be accessed on an on-demand basis: customers can request balance information in a text message instead of waiting for the bank to send the account statement.
The immediate and interactive availability of basic balance information via SMS provides customers with an up-to-date view of their accounts. With account information instantly available to them, banking clients can avoid overdrafts and the related charges and can continuously monitor their accounts both for their own spending, as well as for potential security breaches and fraudulent transactions.
Mobile balance transfers and bill pay
Increasing numbers of financial institutions offer more comprehensive mobile account management options. Customers can initiate balance transfers and pay bills from their mobile devices. Some banks offer these services via their mobile websites designed and optimized for smartphone browser use, while many recommend specifically built smartphone apps for more advanced account management. Customers pay bills and manage transfers of funds between accounts on their mobile devices in a way very similar to online banking.
Online banking has become hugely popular in the US over the last few years with almost 60 percent of consumers using it regularly. Mobile banking can support many of the same types of transactions, but eliminates the need for a computer. Not only does mobile banking allow customers without their own computer or internet access to manage banking transactions remotely, but it also empowers online customers to manage bills and transfers when away from the computer, during their commutes or other downtime. Convenience and real-time information together result in more efficient money management, saving customers time and potentially money, as well.
Mobile check deposits
The newest mobile banking option allows consumers to make deposits via their phones by using the check deposit app to enter the necessary information and by snapping a photograph of the check with the smartphone’s camera. Customer-managed, self-service check deposit outside of the branch or without an ATM ensures that any check received is quickly turned into available funds in the payee’s account, saving time for the payee and potentially money for both the customer and his or her bank.
Other uses of mobile devices in banking
Cellphones and mobile devices are used in more complementary banking services, as well. Many banks offer mobile locations services guiding their consumers to the closest banking facility or ATM leveraging the GPS capabilities built into cellphones.
Consumers and financial institutions have started leveraging mobile devices in strengthening the security of non-mobile transactions, as well. SMS messages sent to and received from cellphones are used to facilitate online banking transactions by increasing their security providing for more robust and real-time based authentication methods. Increasingly, mobile devices are also used in safer credit and debit card transactions. NFC or near field communication enabled cellphones allow consumers to pass authentication and transaction information from their credit or debit cards in a contact-free payment when the the merchant does not need to touch or pass the card through a point-of-sale payment device.
Mobile banking: the future?
Banking and technology experts agree that mobile banking will play an increasingly significant role in personal banking. It has already become a major banking channel in developed Asian countries such as Japan and South Korea.
Adoption has been slower in Western Europe and North America, partly due to the availability of well established and widely adopted alternative banking infrastructures such as a highly developed online channel. Financial institutions in these countries also have a ‘deeper’ and wider reach leaving fewer ‘unbanked’ customers or potential clients without easily accessible banking options. As a result, investments in mobile services by Western European and North American banks have remained lower than in other parts of the world.
Still, adoption of mobile banking has been increasing, especially as most services are offered free of charge for qualifying account holders. In 2008, only roughly 8 percent of US banking clients used mobile banking, a year later more than 10 percent. As smartphone technologies continue to evolve and the prevalence of smartphones amongst mobile devices increases, more and more consumers are expected to manage accounts and payments in between downloading a movie, checking the train schedule and ordering pizza – all from their trusty hand-held mobile phones.
Information about mobile banking services of major US banks:
Bank of America Mobile Banking
US Bank Mobile FAQ
Chase Mobile Banking