The evolution of internet based services has transformed the banking industry. The combination of online banking services and the proliferation of smart phones now makes is possible to conduct just about any banking transaction without ever having to physically step into a brick and mortar bank branch.
In a report released by the Federal Reserve, the use of mobile phones to conduct financial transactions continues to rapidly expand. According to the Fed report, as of November 2012, 48% of smartphone users and 28% of mobile phone users had used mobile banking over the past year. The use of mobile banking increased by 14% for smart phone users and by 33% for mobile phone users in the period studied.
Mobile devices have become a common tool used by consumers for paying bills, banking and shopping. The Federal Reserve wants to understand how the rapidly expanding use of mobile banking affects consumer decisionmaking and the overall economy. The Fed’s report, Survey of Consumers’ Use of Mobile Financial Services, is the second annual survey conducted by the Fed on mobile banking. Highlights of the survey include surprising information on who actually uses mobile banking the most and reasons why many consumers don’t like mobile banking.
The use of mobile banking is “particularly prevalent” among the underbanked who represent 10% of the population. The “underbanked” population is defined by the Fed as consumers who have bank accounts but who use payday lenders and check cashing companies that charge exorbitant fees for cash loans. Almost half of all underbanked people with mobile phones utilized mobile banking.
Despite the rapid growth rate of mobile banking transactions, half of all people with mobile phones do not use mobile banking and have no interest in doing so. Reasons for refusing to use mobile banking centered on concerns over security, skepticism about the benefits and a preference for other easy payment methods.
The most common use of mobile banking by consumers is to check account balances, review recent transactions and to transfer money to other accounts. The biggest growth in mobile phone use has been to deposit checks. Over the previous 12 months, 21% of consumers used mobile phones to deposit checks. Besides being able to deposit a check immediately, consumers save on gas by eliminating a trip to their bank and waiting in line at the counter or an ATM machine.
American consumers have become obsessed with the pricing power put into their hands through the use of price comparison apps on their smart phones. Price comparison shopping was done by 42% of all smart phone users and an amazingly high 66% of smart phone price comparison shoppers wound up making their purchase at another store with a lower price.
Consumers are using their phones to complete banking transactions in a timely, convenient and cost effective manner. Despite security concerns, the trend towards mobile banking should continue to grow as more and more people acquire smart phones.