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Banks boost mobile capabilities

By Claes Bell · Bankrate.com
Thursday, January 27, 2011
Posted: 7 am ET

Americans love their smartphones: an average of 61.5 million Americans owned a smartphone in the final quarter of 2010, according to comScore. And although a lot of bank customers aren't too crazy about banking on those smartphones yet, banks are continuing to push mobile banking for their checking accounts, savings accounts and other products.

Mass adoption of smartphones is pushing mobile banking forward (photo by ALT1040)

Mass adoption of smartphones is pushing mobile banking forward (photo by ALT1040)

A new study Corporate Insight, an industry research firm, finds that of the 16 large banks they survey, all but one offer some kind of mobile banking option to accountholders. Here are some of the other highlights from the study:

  • Chase is the top-performing firm, with Bank of America and Wells Fargo also receiving high marks for their mobile banking features and options.
  • Standard mobile banking features currently include the ability to check account balances, view recent transactions and conduct in-house fund transfers, though several firms include the ability to execute external transfers as well.
  • All but one of the firms monitored by Corporate Insight enable clients to locate nearby ATMs or branches while on the go.
  • 40 percent of banking firms offer SMS (short message service, also known as "texting") banking as a supplementary way for clients access their current account balance information.
  • 83 percent of firms that offer banking through mobile applications also offer Bill Pay functionality via these apps.
  • U.S. Bank and Chase are the only two firms to offer rewards information through mobile banking.

Overall, the adoption of mobile banking is a great thing for customers. Having the ability to perform pretty much every important account maintenance function sitting in your pocket or purse is incredibly useful, especially in terms of avoiding overdrafts and other unpleasant outcomes.

It's easy to understand why banks are pushing mobile banking, too. Not only is it a way to appeal to a younger demographic than traditional branch banking, but mobile banking customers have higher average deposit balances ($64,303 vs. the market average of $48,384) and a higher average net worth ($341,017 vs. the market average of $281,263) than customers that rely on traditional banking methods, according to a Nielsen survey.

Plus, more mobile banking customers mean fewer people banking at physical branches, allowing banks to cut back on staff.

But I think this could turn out to be a dangerous road for big banks. Sure, having great mobile banking capabilities is a competitive advantage now, but one of the big advantages the larger banks have over small banks and credit unions is their huge network of physical branches and ATMs.

Having so many branches is expensive, which is why small banks can't do it. While it's hard to know how much it costs to build a top-flight mobile banking system, I can't imagine it's as expensive as building a thousand physical branches, which requires not only spending a fortune on real estate, but  also additional labor costs to staff and maintain them. If banking transitions to mobile, big banks won't have this advantage over small banks anymore, and banking services may become more about who offers the best rates and lowest fees, something which small banks and credit unions can more easily compete with big banks on.

That again benefits consumers, since any kind of price war is a good thing when you're the one receiving higher interest rates or paying lower fees due to increased competition. But it's not so good for big banks that have spent a lot of money building and maintaining a structural advantage over their competitors.

What do you think? Do you like mobile banking? Do you see yourself doing all your banking via smart phone someday?

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