Clicking Forward: Why Embracing Mobile Banking May Be the Best Financial Advice for Every Bank in America

We are, in every sense of the word, technologically linked to the goods and the services that we need to survive in a round-the-clock society.  In today’s world, banks never close.  They operate 24-7, day in and day out, fully prepared to meet the spontaneous needs of a customer who decides when, where and how to perform the online transactions that sustain his life. Through the convenience of mobile phones and other hand-held devices you can now check your bank balance, pay your bills, approve wire transfers and obtain other valuable information while on the go.

According to Internet World Stats, more than a billion people have access to the Internet today, and more than two million new users come online each month. Harris Interactive estimates that consumers in the U.S. and Canada represent approximately 36 percent of total users worldwide.  Many use this resource to find greater value and convenience in attending to their day-to-day needs in communicating, shopping, researching -- and managing their financial services. 

At the same time that more and more customers and small business owners are turning to their hand-held transportable computers to conduct their banking business, the number of U.S. banks offering mobile banking services is growing as well.  According to Aite Group, a Boston-based financial-services research firm, the number of U.S. banks that offer mobile banking is expected to rise this year to 614 – about 4 percent of all banks in the country – from 245 in 2008.

Why are banks investing in mobile services, when they themselves are experiencing great financial distress?  The answer is most likely rooted in a simple mathematical equation.  If banks want to enhance their relationships with today’s GenXers, and attract the 78 million Millennials who are the coming-of-age- banking customers of tomorrow, they have to change their ways to meet the needs and the expectations of this technologically driven and formative group.

No doubt. According to Carmen Effron, President of bank consulting firm, C.F. Effron & Co., “These consumers rarely enter a branch, even when making deposits…”  Given the younger generation’s penchant for all things high-tech, it’s only a matter of time before they come to think of their mobile devices as electronic checkbooks, safety deposit boxes, and wallets.  For this group in particular, managing money through mobile banking services will not be an option, it will be a necessity.

Small business owners are expressing a very keen interest in mobile banking services. Anthony Malakin’s recent article in Bank Technology News states that, “Of the more than 300 small businesses surveyed, 35 percent said they would use mobile banking to check business account balances over the next six months if offered by their bank; one-in-four would be willing to transfer funds and/or make bill payments under the same scenario.”  This information suggests that the small business demand for mobile banking products represents territory that is fertile and potentially lucrative.

Although it is little discussed, environmentally conscious consumers wishing to lessen their impact on the planet may represent another prime target market for the eco-friendly bank practices that go hand in hand with mobile banking.  Fewer trips to the local bank or ATM mean less time in the car and ultimately, less pollution.  The elimination of paper statements will reduce a customer’s carbon footprint.  The virtues of green banking are compelling.

Financial industry observers agree that Internet use, and the migration to online financial services, will continue to grow at an unprecedented rate.  According to TowerGroup, the world's leading research and consulting firm focused on the global financial industry, the volume of online bill payments will reach 3.87 billion transactions by 2012.  TowerGroup predicts that by 2010, payments posted within 24 hours of coming due will generate $40.7 million in revenue for financial services institutions, offsetting approximately four percent of that year’s online bill pay costs. A graphic illustrating the forecasted revenue and transactions of U.S. online bill payment expedited payments can be downloaded here.

The Wall Street Journal reports that the most popular mobile-banking services are: checking balances, making sure a payment has cleared, transferring funds between accounts, and paying bills.   As mobile phones and other mobile devices become more mainstream, new applications for expanded service offerings are becoming more available. 

Realizing that the way people communicate today is vastly different from what it ever was, banks are formulating their own Web 2.0 strategies for easing the lives of Baby Boomers, enhancing relationships with the Gen Xers, and attracting Millenials.  To prosper in a multi-generational financial landscape, banks must transform themselves into co-collaborators with their consumers by offering innovative and diverse money management channels and maintaining meaningful relationships with all of them.

Emerging technologies (including hand-held mobile devices) are enabling banks to reach customers and potential customers where they work, where they go to school, where they play and where they live.  Through blogs, social networks, podcasts, online forums and virtual worlds, banks are able to facilitate institution-to-customer and peer-to-peer conversations that speak to the distinct and authentic money concerns and solutions, as well as the financial challenges and needs of an ever-swelling sea of customer segments in ways that resonate with each of them.

As stated by Tony Wormington, President of Jack Henry & Associates, a Monett, Mo. -based provider of core information processing solutions for community banks, "Mobile banking is the next logical financial service, when you consider approximately 70 million Americans own cell phones, and the advancing functionality these phones provide has elevated them from communication tools to personal management devices.  Mobile banking is a natural extension."

Banks must embrace these changes if they are to continue to meet growing consumer demand for new and emerging products and methods of delivery. To remain at the top of their game, banks would be wise to embrace emerging technologies and use them to support the new business strategies that will strengthen retail and commercial relationships and provide a competitive edge.