This week, we’re excited to share a guest blog from our friends at Nerd Wallet.
The financial services industry is changing right before our eyes—and smartphones.
The convenience of using our phones to complete everyday financial transactions, combined with rapid growth in the smartphone market and a desire for instantaneous results among younger consumers, is fueling the popularity of mobile banking.
Financial institutions will likely continue innovating and developing their mobile offerings to keep up with the rising demand, especially as Apple’s Apple Pay and other companies’ digital wallets take hold in the marketplace.
As consumers grow more comfortable using their phones for daily purchases at the coffee shop and grocery store, they will likely become more adept at connecting with their financial institution that way.
However, the anticipated growth won’t come worry-free. Increasing mobile banking safety concerns remain challenging for the industry.
Why is mobile banking growing?
Perhaps the biggest reason for soaring growth in mobile banking is the fact that people under the age of 30 have generally never experienced the world without the Internet or cellphones. For this reason, it may not come as a surprise that smartphone use is highest among those ages 18 to 29, with 79% owning a device, according to a Federal Reserve report.
Just over half of all smartphone users used mobile banking in 2013, compared with 48% in 2012 and 42% in 2011, according to the report. Meanwhile, of the 87% of Americans who own a mobile phone, 61% said they own a smart device. That’s up from 52% in 2012.
The most common uses of mobile banking are to check account balances or recent transactions (93%), transfer money between accounts (57%) and deposit checks (38%). In addition, 12% of mobile phone users who currently don’t use mobile banking said they would probably use it over the next year, the report says.
The young generation of smartphone users is likely already accustomed to the immediacy these devices provide, whether it’s by checking email, looking up directions on a map or posting photos to social media. Instead of making a trip to a branch, younger consumers seek the speed and convenience of using their smartphones to conduct financial transactions, like depositing a check straight from their device, transferring funds between accounts and paying bills.
Statistics show that consumers in general are making fewer trips to their financial institutions. Just 14% of respondents in a 2014 Capgemini Global Financial Services survey said they visited a branch at least once a week, down from 16% the previous year. Meanwhile, 10% report using social media at least once a week to interact with their financial institution.
Security remains a concern for consumers
Security concerns are a common reason consumers choose not to use mobile banking and payments. Among consumers who don’t use mobile banking, security concerns (69%), data interception (25%), phone hacking (12%) and lost or stolen phones (8%) are the biggest fears.
A 2014 report from Deloitte highlights a few ways financial institutions can ease consumers’ security concerns. In the report, 80% of those surveyed said they’d like the ability to remotely disable a lost or stolen device, 72% said they’d appreciate the use of biometric identification—such as fingerprints or eye scans—to enable a device for financial transactions, and two-thirds supported using a mobile device’s global positioning system for location-based fraud sensing.
Mobile banking will likely continue to rise in popularity and usage over the coming years as smartphones gain wider market share. While financial institutions may upgrade mobile apps and enhance security features, you’d best keep your guard up if you use these conveniences.
Steve Nicastro, NerdWallet