The Future of Mobile Banking: Market Shift or Market Growth?

Despite a slow, steady growth of mobile banking and mobile payments users, there is still a large percentage of consumers who do not see the benefits of accepting digital banking. Can the banking industry encourage non-users to embrace mobile technology?

By Jim Marous, Co-Publisher of The Financial Brand and Publisher of the Digital Banking Report

For the fifth consecutive year, the Federal Reserve has conducted a survey examining trends in the adoption and use of mobile banking, payments, and how mobile financial services impact how consumers engage with their financial institution. According to the Federal Reserve Board report, “Consumers and Mobile Financial Services 2016,” 43% of adults with mobile phones and bank accounts reported using mobile banking – an increase of 4% from last year’s survey and 10% from the 2013 study.

As would be expected, mobile banking use is significantly higher for those consumers with smartphones (53%). Among smartphone owners with a bank account, the increase in users increased only 1% during the past year, the same amount as in the previous 3 years. This almost stagnant growth continues to raise the question as to whether the growth in mobile banking use is caused by the increase in consumers upgrading their mobile devices as opposed to being the result of marketing efforts by banks and credit unions.

Use of mobile payments continues to run at about 50% of the overall mobile banking user base, with 28% of the smartphone users with bank accounts having made a mobile payment in the past 12 months and 24% of all mobile users indicating the same. Despite significant hype of mobile payments by the banking industry, there was no growth in use by the key target of smartphone owners.

Of particular concern to banks and credit unions should be that there is still a significant proportion of consumers who have no desire to use mobile banking or make mobile payments in the near future. The reasons for non-use vary from being satisfied with current ways of conducting banking to not feeling that mobile channels are secure. It remains to be seen whether continued improvement in functionality and security features will result in new mobile banking users or simply a shift in market share of current users from one organization to another.

Mobile Banking Demographics

Reflecting the rates of mobile and smartphone usage among different demographic segments, younger consumers are more likely to use mobile banking than older consumers. For those with a mobile phone and a bank account, 67% of those in the 18 – 29 age range used mobile banking in 2015 compared to only 34% for those in the 45 – 59 age group. Usage has generally increased from year to year for all age groups, and is greater for smartphone owners. The rate of growth has been higher for the older segments, who were slower to adopt mobile banking initially.

Also consistent with the data from previous surveys, minorities continue to be more likely to use mobile banking than non-Hispanic whites. In particular,
Hispanic mobile phone users with bank accounts showed a higher rate of use of mobile banking (56%) compared to mobile phone users with bank accounts overall (43%). As with most segment delineation, the difference in use by minorities correlates with mobile and smartphone usage variances.

Finally, the Federal Reserve study found that mobile banking usage continues to be more common for those with higher levels of education and those with higher incomes. Usage for those with a college degree or some college (47%) is greater than for those with a high school degree or less (35%), while mobile banking usage by households with incomes of $40,000 or more exceeded use by those with incomes below $40,000 (45% vs. 38% respectively).

Mobile Banking Activity

Consistent with previous studies, the most common mobile banking activity was checking financial account balances or transaction inquiries, with 94% of mobile banking users having performed this function in the 12 months prior to the survey.

To read the rest of the article regarding Millennial acceptance and use of mobile wallets, go to the complete article here ...

Follow me on Twitter
Read more of my articles on The Financial Brand 
Download '2016 Retail Banking Trends and Predictions' Report