Although the use of mobile banking has grown from 5% of the U.S. online population in 2007 to 12% in the second quarter of 2010, according to a report released this week by Forrester senior analyst Emmett Higdon, such that 10 million Americans engage in mobile banking today, banks have yet to create the kind of "killer app" that will make mobile banking truly appealing to bank customers.
Despite the aggressive adoption of mobile banking -- Forrester predicts that by 2015, more than 50 million U.S. consumers will be banking via their mobile phone -- "the unfortunate reality we've seen is that consumer interest in mobile banking hasn't moved a lot in the last few years," says Higdon, who spoke to Bank Systems & Technology in an interview yesterday. "The value proposition is not clear."
In a Forrester survey of online U.S. adult consumers, 37% said they don't use mobile banking because they see no value in it. "That doesn't mean that there isn't value, it means that as we've marketed it so far, some people can't wrap their heads around it, they don't know what it means to bank any time, anywhere. Until they're on vacation and forgot to pay their mortgage or need to transfer money, perhaps to a son or daughter in college, some people don't see the need for mobile banking. "I encourage clients to think about how customers use other channels today and extrapolate," he says. "Not every customer is interested in having bank branch in their pocket. But if I'm a dyed-in-the-wool funds transfer user and I make eight transfers a month, I might be interested in using transfer functionality down the road on my mobile device."
Other reasons people cited for not using mobile banking in the Forrester survey were security concerns (35%), not wanting to pay texting or data use fees (32%), and a willingness to wait to access accounts through the telephone, ATM or web (24%).
The prize for banks that can get their customers more engaged in mobile banking, in addition to moving everyday transactions to a cheaper channel: an ability to reach the 40% of the population who do not bank online today. Cell phone ownership in the U.S. is above 82% in the U.S., more adults have a mobile phone than own computer or have internet access. Another piece of Forrester research found that 27% of mobile banking users say they use the online channel more often since they began using the mobile channel, which indicates that banks that can increase their mobile banking user base can grow their online banking base.
But to increase interest in mobile banking, banks need to go beyond the standard feature set most offer via cell phone or smart phone, such as the ability to check balances, transfer funds and pay bills. "Right now we have me-too functionality that's available in the other channels, and the folks adopting it are the same folks who are adopting everything mobile, not because it's better but simply because it's there," Higdon says. "We need to bring more functionality to the mobile channel that leverages the unique aspects of it."
Remote deposit capture is one example of an effective unique feature that some banks offer on mobile devices that's not available in the online channel. "That provides a lot of clear value to consumer," Higdon says. "Would you rather get in the car, drive to the bank and go through the drive-through, or snap a quick picture of your check at home and be done?"
Banks could take advantage of a unique aspect of the mobile channel -- location awareness, Higdon points out. One bank offers an ATM locator app that uses Google Earth and the phone's GPS and camera to direct customers, turn by turn, to the nearest ATM.
But despite these initiatives, "we still don't have the killer app for mobile banking; we're still waiting to see what that is," Higdon says. "It's very likely to be mobile payments, but we're at least a couple of years away from that."
As mobile payment solutions evolve, banks and merchants will start offering mobile rewards, mobile coupons, and location-aware services, Higdon believes. But what banks' involvement in mobile payments will be and how they could make money from it remains to be seen. "Up until now we've relied on merchants to carry the freight on our card-based transactions, swapping out Visa plastic for a mobile handset," Higdon points out. "Is that the model we're going to move forward with? Right now, I see few signs pointing to anything but that going forward. It's still the banks' and the card networks' game to lose."
A few banks are leading the mobile banking channel today, according to Higdon. "Chase is probably doing the best job understanding how consumers are using the mobile channel," he says. The bank offers a person-to-person payment service called QuickPay and mobile remote deposit capture. "They've been quick to roll out these enhancements to their mobile platform and get the functionality out there, while at the same time having it fit seamlessly with their online space," Higdon says.
USAA has also been innovative with its mobile apps. "They're very much in tune with their user base, they're not simply rolling out every piece of functionality they have for the online space," Higdon says.
Citi, Wells Fargo and Bank of America have done a great job at maintaining multiple modes of mobile banking, not abandoning their WAP users as they roll out BlackBerry, iPhone and Android apps, Higdon says. "Roughly half the user base of mobile banking today is accessing it through a mobile browser and a WAP interface," he says.
Tablets such as the iPad give banks a new canvas for interesting applications, and some financial services providers such as USAA have rolled out iPad apps, but Higdon doesn't view these devices as being in the same category as cell phones or smart phones. "We get the question a lot, is the iPad or are tablets a game changer? My response is yes, absolutely, for online banking," Higdon says. "Are they a game changer for mobile banking? I don't think so. I'm not walking around with an iPad in my shirt pocket 12 to 14 hours a day."