Mobile Banking: Boom Or Fizzle?

As reported in Finextra, TowerGroup expects the number of mobile banking users in the US to increase four-fold in just one year, from 1.1 million in 2007 to 4.6 million users in 2008, and then up to nearly 29 million in 2011. The growth, according to the analyst firm “will be driven by major improvements in technology across wireless networks, handsets and applications.”

Contrast that with Forrester’s view that “today’s consumers still aren’t very interested in mobile banking.” According to Forrester, even among the most likely adopters of mobile banking — Gen Yers who bank online, pay bills online, and use text messaging — only 16% are interested in mobile banking.

I was chatting recently with someone from a third analyst firm who confirmed that his company’s numbers are in line with the Forrester numbers.

My take: Tower’s forecasts are way out of line. And not simply because there’s an apparent lack of interest today. Instead, it’s because technology improvements, in and of themselves, aren’t enough to generate demand.

For Tower’s estimates to come true, banks will need to make significant investments — not just in the technology, but — in marketing the service to drive adoption. I don’t see it happening. There are too many better places for FIs to put their money than in mobile banking technology and marketing.

Last point: I’m anticipating that those who read this will vehemently disagree with me, because of their interest in mobile banking.

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17 thoughts on “Mobile Banking: Boom Or Fizzle?

  1. To me, mobile banking is a cool “emergency” tool. If I’m on the road, or in a sudden bind, it’s neat to know I have access to my credit union account. As for day-to-day use…forget it! This isn’t day trading, it’s personal checking/savings.

    I see mobile banking like I see jumper cables…I’m wise to take it with me, but I’m not going to spend any part of my day using it.

  2. I’m with the Warrior, that today it would be seen as an emergency device. I already “mobile bank” on my iPhone but only when I’m in an airport, in a hurry or just bored because I like to play with my phone.

    I bought a book on Amazon.com two days ago on my iPhone cuz Amazon already has an iPhone beta site. They get it.

    But here’s why you’re wrong Ron. (god that’s fun to say, isn’t it?)

    “We” asked members years ago if they owned a computer. Overwhelmingly they said, “No.” Which led many to think members wouldn’t be interested in home banking products.

    We asked them the wrong question.

    What we should have asked was, “Do you have access to the internet.” Home banking should be called “Office Banking” cuz that’s where people access it.

    Mobile banking on the current crappy phones (iPhone excluded) would make anyone say, “Are you kidding?” But iPhone has raised the bar – things are changing and fast.

    I’m putting my money on the Tower’s stats.

  3. Ah what the hell — why don’t we just say it’ll be somewhere in the middle. People will adopt, it won’t be as fast as some of the analysts think and in the end banks who are early out the gate will grab some early adopters while others who lag behind will take a ‘wait-and-see’ attitude. If I remember correctly this is what we all said about this whole internet thing, internet banking, blogging, etc.

  4. I don’t think change in technology will have any (much?) impact in the adoption of mobile banking. I think if there is to be any increase, it’ll have to come from changes in phone plans. When you’re looking at adding $30-50 to your monthly bill, that’s a pretty significant factor, especially when cell phone internet access is often the pits for speed compared to home or office broadband. (In comparison, texting is hella cheap; I think I could add unlimited texts to my plan for $5/mo.)

    And when most people get whatever phone is free when they sign up, and “whatever” usually doesn’t include much in the way of browsing capability….

    Like everything else about cell phones, the carriers have us hostage.

    Maybe the iPhone changes things, but only as much as that moves the monopolistic carriers to lower prices. Yeah, not seeing that happening real soon.

    But benry’s probably right; that’s a safe bet with most technology predictions: it won’t be as amazing as the hypesters say it will be, and it won’t be as lame as the naysayers predict.

  5. On the one hand, our members were slow to adopt “online banking” services (although now @ half of our members use it almost exclusively). On the other hand, I live in a college town – when I drive through campus every other student is doing something on the phone (talking, texting, who knows what!). The crystal ball Is foggy!

  6. @Ginny: That’s the part that I find surprising, and counterintuitive. With so many younger adults so reliant on their cell phones, why did two credible, independent research firms find such low interest in mobile banking? I got it! It was a paper-based survey, and the sample was biased. (Just kidding).

  7. Just to throw out another data point, at Online Banking Report our forecast (published Feb. 23, 2007) predicts 16 million U.S. households using mobile banking by the end of 2011 (about 14% of all households in 2011). We also realize how “unscientific” it is projecting usage of a brand new service, so a footnote to this projection is that it could vary by plus or minus 25%. So, we are saying it will be about 12 to 20 million households.

    Based on what I’ve seen in the 9 months since I made that forecast, I think we’ll probably be in the lower part of that range. However….
    the iphone is a wildcard. The response to the research question “are you interested in mobile banking” may be very different once someone starts using something that is both user-friendly and wifi enabled.

  8. Let me ask you this, Jim — does banking on the iPhone really count as “mobile banking”? If it does, then I could argue that banking from my laptop at Starbucks is mobile banking.

  9. Forget about what is mobile banking and what is online banking.

    One could say that using a cell phone to transfer funds or check your balance is mobile banking. But what if you use your cell phone to call your banks telephone banking number. Is that mobile banking or is it telephone banking?

    The real question is, “What will your bank pay to have mobile banking?” If it is cheap, you pay for it since Bank of America is spending millions of dollars advertising on TV and the web their mobile and online banking solutions together. They are paving the way for adoption of these two technologies.

    Are our hands tied? Must we adopt mobile banking or fear being left behind?

  10. @David: I think the questions a bank needs to ask is: Do we need to invest in mobile banking? What do we gain by offering it, and what do we lose if we don’t?

  11. Ron, at my bank (a community bank) we have a core processor that we use for our primary and ancillary services. If they have a mobile banking solution that it is cheap enough, we will buy the solution and will not have to worry about what we gain or what we lose. However, if the cost gets to the point of having to evaluate its merits, the marketplace my bank competes in will dictate spending the money. My marketplace dictates spending the money since the market is currently spending tens of millions of dollars advertising mobile banking and SMS alerts. My bank will not have to. The market learns from the big money center banks and we just turn it on and add it to our feature set say “yea, we have that too.”

    What I really want to know is, does this channel keep my customers retained or just add a new delivery channel cost?

    Time will tell if my attrition rates of early technology adopters/gen X/Y/Z’ers etc. increase as this technology unfolds and my bank does nothing or my bank never had this demographic and I lose little and only have a new segment to gain.

    On a side note: I just can not wait to try it all out. When I used X.com all those years ago (PayPal via the cell) it was kewl and then I never used it again.

  12. @David: “does this channel keep my customers retained or just add a new delivery channel cost?”

    Ultimately, it will probably be both. Once enough banks offer it, and enough customers use it, taking it away will be impossible. Something’s gotta give — it’s time for banks to make some tough choices on what to take away. How about the IVR?

  13. Pingback: We don’t need no stinking mobile banking! « EverythingCU.com World 2.0 Adventure

  14. We introduced MemberNote 30 months ago (not many if any had this product then) which is simple alert messaging to your cell phone when you use your card at an ATM or POS. Is there a demand for it? Yes for some no for others. And there are a myriad of reasons for both.
    Here is one fact after 30 months – close to 20% of our chequing account users have signed up and use it. Some of the stats of usage are not what we expected, at all. There are some interesting surprises.
    As for new delivery channel cost — it really depends on implementation and who and how you are going to do it.
    Mobile banking is in its infancy. It is a beginning. Will it fizzle out? As we see it right now maybe/maybe not. But the more important aspect is that it will evolve, it will move forward with each change. It will re-invent itself with new software, new hardware and our own changes in culture and society. Products and services evolve over time. The speed of that evolvement is something we all enjoy discussing – right Ron, Jim, Denise et al.

  15. Thanks for sharing those stats, Gene. One thing we should keep in mind here — Tower’s estimates for the US, and, if I’m not mistaken, your CU’s membership base is Canadian. If the history of online banking is any indication, then adoption of mobile banking will happen faster in Canada than in the US.

  16. My feeling has been that there seems to be a lot of hype around mobile banking, and I think you are courageous to take a perhaps contrarian view on this topic. From a North American standpoint, one thing that keeps nagging at me about mobile banking is what is so overwhelmingly compelling about it that would make one change their banking behaviours? Perhaps it might be the convergence of mobile banking and mobile payments, where the mobile device is also a payment method/device at the point of sale. It seems though, that at least in North America mobile payments have a way to go. I like a lot of these comments: adoption may happen, but slower than the “experts” are forecasting. It may have a lot to do with the cell phone carriers and the cost of mobile usage to the consumer. It may depend on whether there is a business case for it from the bank’s standpoint. All very good points.

  17. @John: It seems to me that one of the key points mobile banking proponents make is that is DOESN’T require much change in behavior. People already have and know how to use a cell phone, so the behavioral changes are minimal. It’s a convenience thing. And that’s what surprises me about the Forrester numbers — I would have thought interest would have been a lot greater.

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