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Mobile banking usage nearly doubles year-over-year: study

Mobile banking has seen a huge increase in usage and in institutions offering the service in the last year, according to IDC Financial Insights’ 2009 Consumer Mobile Banking Preferences Survey Results.

Reported mobile banking usage has almost doubled since last year’s survey. However, while mobile banking may have finally turned the corner with customer acceptance, it is not a mainstream channel and in order to be successful, financial institutions need to be strategic about their mobile offerings, according to the survey.

“Mobile banking is making progress, yet it still has not become an integral bank offering nor is it challenging other channels for preference,” said Marc DeCastro, research manager of consumer banking and credit at IDC Financial Insights, Framingham, MA. “Over time, the trend will be more favorable to mobile adoption, but for the near term banks will continue to use it as a defensive strategy.

“The most surprising thing to me was that some of the features that banks may have thought were attractive with mobile like check images and fund transfers are not being utilized as much as anticipated,” he said.

“One reason check image is not important is that the demographic using mobile probably are not writing many checks, so this is where banks need to listen to their customers about what features of mobile are important to them and delivering easy-to-use applications.”

International Data Corp.’s IDC Financial Insights, a subsidiary of IDG, provides independent research, custom consulting and multiclient studies on the technology issues and challenges facing the financial services industry.

Its clients include retail banks, insurance carriers and asset management, securities and brokerage firms.

Mobile banking on the rise
The report summarizes key findings from IDC Financial Insights’ 2009 United States Consumer Channel Preference Survey of 1,008 U.S. adults aged 18 and older regarding their channel usage and preferences.

Specific findings from IDC’s 2009 U.S. Consumer Channel Preference Survey specifically around mobile banking include:

• Usage was up across all channels, requiring bankers to manage more transactions across an ever-expanding portfolio of delivery options

• The financial services industry should leverage its branch network to compete against potential nontraditional entrants that lack the brick-and-mortar infrastructure

• SMS is the most popular form of mobile banking

• Customized alerts and payments outside of network are gaining in popularity, while check image view and getting rate information on the mobile device appear to be fading

• Demographics for mobile banking customers were skewed toward a younger male audience, but all demographics are showing usage

Mr. DeCastro said that realistic expectations, an understanding that there are few revenue opportunities around mobile banking currently, as well as the backing of senior management, are all key to mobile success.

The challenge with mobile banking continues to be that it introduces a new cost structure without providing opportunities for revenue, according to the report.

Consumers have become accustomed to having more for free, and the convenience of mobile banking so far does not appear to be something that people are willing to pay for.

However, enhancements to mobile platforms—including the addition of adding deposit capture and payment solutions—will provide more opportunities for financial institutions to potentially gain some revenue opportunities.

IDC Financial Insights recommends that financial institutions begin expanding what they offer, marketing these offerings as easier to use, and providing more opportunities around payments and fund movement.

Financial institutions that can capitalize on this will be better positioned to both obtain and retain customers.

“A factor driving the growth of mobile banking is the quick growth of smartphones and the anticipated growth in the Android market once applications are developed for the Android,” Mr. DeCastro said. “Demographics are also driving momentum behind mobile as younger demographics are more likely to conduct business over the mobile device than they are using a traditional PC or laptop.

“The main thing holding it back is the fact that there has not until recently been much of a marketing push,” he said. “Most banks and credit unions are treating mobile as a defensive product offering and subsequently not giving much marketing umph behind it.

“This is probably a double-edged sword, as there are little to any direct revenue opportunities with mobile banking – however there are with mobile payments.”

What advice can Mr. DeCastro give to banks and financial institutions based on his findings?

“To be strategic and to not be as defensive with their offerings,” Mr. DeCastro said. “If you are going to roll something out, put a full plan behind it and set realistic goals.

“Rolling out any new technology and keeping it on the shelf is usually a mistake and often times institutions over pay for technology when they rush in,” he said.

Final take
Dan Butcher, Mobile Commerce Daily