Banking via mobile phones has skyrocketed in recent years, says Mary Monahan, executive vice president and research director for mobile at Javelin Strategy and Research in Pleasanton, Calif.
A Javelin report released in October found that in the preceding 12 months, the percentage of mobile phone users conducting banking rose from 19 percent to 30 percent.
Mobile phone adoption has been particularly strong among younger consumers, Monahan says. She cites Javelin research showing nearly half of mobile-phone users under age 35 conduct bank business on them.
"It's convenient. People just have their mobile phones with them all the time now," Monahan says. "They've got their Facebook accounts on there, they're texting each other, and they want to do the same with their bank."
Monahan says as smartphones and other portable Web-enabled devices such as tablets become more universal, more people will expect to be able to use what are essentially portable computers to interact with their banks.
How it works
Monahan says mobile customers access their bank in three basic ways, which she calls the "triple play" -- through SMS texts, mobile browsers such as Apple's Safari or the Android browser and downloadable applications available in smartphone "app stores."
Together, those channels provide some key features that make mobile banking really useful to consumers.
- Person-to-person payments: While most banks have mobile tools that allow users to transfer money between accounts, some bank apps give mobile banking users the ability to instantly transfer funds to a friend's account at another bank. That can be helpful in a number of social situations, such as settling restaurant checks, says Ron Shevlin, senior analyst at Aite Group in Boston.
- Bill pay: Ever get the sickening feeling you forgot to pay a bill? Some bank apps allow users to arrange a bill payment then and there, Shevlin says.
- Remote deposit: For those who carry around paper checks in their wallets for days or weeks before dropping by the bank to deposit them, some mobile banking apps allow users to deposit checks remotely by taking a picture with a built-in smartphone camera, Monahan says.
- ATM locator: With the average combined fee for out-of-network ATM withdrawals approaching $4 in Bankrate's 2011 Checking Study, just withdrawing money from the nearest cash machine can be costly. Luckily, mobile banking tools can help users find the closest ATM either with an address or with a phone's built-in GPS, Shevlin says.
- Text alerts: Many banks allow customers to set up custom alerts that will let them know when their balance has fallen to a certain level or let them know when they need to make a payment, Shevlin says.
- Coupons for frequented merchants: Banks are beginning to develop the ability to send coupons for stores you frequent directly to your mobile phone, Shevlin says. While they'll have to find a balance between usefulness and intrusiveness, Shevlin says the technology has the potential to save consumers big at the register.
Obstacles to wider adoption
Despite growing acceptance among bank customers, mobile banking is still facing significant headwinds.
By far the biggest obstacle to future growth is consumers' concerns about the safety of mobile banking. The Javelin report found that of those hesitant to adopt the technology, 45 percent cited safety concerns as the main reason.
Mobile banking also faces limitations from the industry side. Many banks have yet to introduce any type of mobile functionality, Shevlin says.
"Not everybody who might potentially want to do mobile banking can because not every bank is offering it," he says. "We estimate based on vendor data that as of right now, only about a quarter of financial institutions in the U.S. are offering some sort of mobile banking capability."
So who are the holdouts? Mostly smaller institutions, Shevlin says.
"It's very driven by size," he says. "I think you'd be very hard pressed to find a bank in the top 100 by asset or deposit size that isn't offering some sort of mobile banking capability today. So it's clearly the smaller institutions, the smaller credit unions, the smaller community banks, that have not."
That may soon change, however. Shevlin and Monahan say the technology is becoming cheaper and easier for banks of all sizes to implement, thanks to out-of-the-box solutions being offered by bank software vendors. At the same time, smartphones, which offer the richest mobile banking experience, are catching on in a big way, and that will drive further growth, they say.
Still, if you want mobile banking tools and your financial institution isn't offering them yet, Shevlin says to speak up. He says part of the reason some smaller institutions aren't adopting the technology is they just haven't heard customers asking for it.
Their customer bases tend to be a little older and less adept at technology, so "they don't hear a lot of proactive demand for mobile banking," Shevlin says.