February 26, 2013

It was 1984 when Motorola launched the first cell phone, a two-pound device called the DynaTac 8000X. Customers flocked to stores to purchase the $3,995 portable device, which offered just over a half-hour of talk time for every recharging. Today, cellphones, or the evolved smartphone, are no longer a luxury accessory accessible only to North America’s wealthy. In fact, smartphones are playing a key role in helping over-financed and underbanked Americans dig out of the financial trenches.

Approximately 68 million Americans are underbanked, meaning they have limited access to mainstream financial services like checking accounts or online banking. However, with the Internet in the palm of their hand, they no longer need to rely on payday loans with punishing interest or inconvenient treks to the mobile or utility company office. Technology is servicing this long underserved demographic in ways banks have failed to.

In order for banks to capitalize on this revenue stream, they have to do a better job at anticipating the underbanked consumer’s need for a mobile experience. How the underbanked consumer or any consumer for that matter, interacts with an online banking service differs on a mobile platform. For instance, speed of delivery and a simplistic user experience are much more critical in meeting a mobile consumer’s needs.

It is essential that banks understand usability when developing a mobile solution for underbanked customers. This is both in terms of making information accessible, searchable and readable from a variety of mobile devices, while keeping the user engaged. For deeper functionality, banks may want to consider native apps for a more comprehensive and branded solution.

Though much of the underbanked population is low-to-moderate income, don’t confuse a lack of income with a lack of sophistication. The disposable income required for a home computer or in-home broadband connection may be temporarily out of reach, but the underbanked’s access to mobile and smartphones is 4% greater than the average American.

Smartphones are serving as both mobile phone and computer, but most importantly as a tool to help users keep track of balances, get bills paid on time, get out of debt and reestablish credit.

Figures from the Center for Financial Services Innovation suggest that banked and underbanked consumers alike are using mobile banking to stay on top of account balances and remedy low-balance accounts. For the underbanked, having balance information at the ready can alleviate stress by allowing them to avoid incurring fees.

With the intro of the smartphone, Americans are also turning to mobile apps to tackle their debt. Green Dot allows users to manage their prepaid debit cards, track their spending and locate no-fee ATMs for cash withdrawals. In the U.K., Wonga is a popular pay-day loan app that allows users more flexibility and a lower interest rate than a traditional over-the-counter payday loan. Mint continues to be a popular money management app for consumers in all financial situations.

While apps and mobile banking solutions can be a great add value for the underbanked consumer, banks must address security concerns for users when considering mobile transactions. Enhancing not only perceived, but real security with advanced technology can make a tremendous difference in the adoption of mobile services. There are many new technologies utilizing biometrics, retinal scanning, pattern recognition and location based services that can all contribute to a feeling of security in the mobile experience.

I bet when Rudy Krolopp and his design team launched Motorola’s extravagant communications device nearly 30 years ago, they never would’ve imagined it would help level the playing field for America’s financially challenged. In order for banks to attract this growing consumer base, innovation through mobile is essential.

Hamed Shahbazi is the CEO of cloud-based bill payment processor TIO Networks