Consumer Attitudes on Mobile Banking Impact Mobile Commerce (January 2013)

By Bill Grabarek, Senior Editor

Financial institutions must combat persistent consumer indifference toward mobile banking in the United States if they want to see consumers move toward mobile commerce, according to a recent report by Javelin Strategy & Research. The research, which outlines financial services trends in 2013 as well as how financial institutions can compete with non-traditional financial services providers, suggests designing mobile banking features that maximize the functionality of smartphones.

Despite the high percentage of consumers who own a smartphone—more than 50 percent in 2012—many have not tried mobile banking, according to Javelin. Among those who do not use mobile banking, 44 percent cited security concerns, 40 percent don’t see the value and 20 percent balk at the cost of a wireless data plan required for mobile banking. What’s especially troubling about the data is that they have changed only slightly, if at all, since 2009, which implies that, so far, added mobile banking features and marketing have done little to change consumer take-up of mobile banking (see chart at bottom).

Apple Falls from the Tree Apple and Google pulled away from Microsoft and Research in Motion, maker of the BlackBerry, in 2012, in the battle for smartphone market share, according to a recent report by Javelin Strategy & Research that outlines financial services trends in 2013. And, Amazon joined Apple and Google to make it a three-horse race in sales of tablet devices. Amazon’s use of Google’s Android operating system in its tablets resulted in tablet market share of 46 percent last year for Android-powered devices, compared with 19 percent in 2011. Market share for Apple’s iPad tablet, which uses iOS, fell to 40 percent in 2012 from 51 percent two years earlier. As demand for Google devices grows and Apple’s demand levels off, competition between Google and Apple is expected to heat up further in 2013, according to the report. As a result, financial institutions must continue developing Google‐compatible apps so as not to alienate the increasing number of Android users. What’s more, FIs must continue to educate consumers about mobile malware threats because of Google’s open-source approach with hardware manufacturers and developers, Javelin suggests.

To attract consumers, FIs, technology vendors and app developers must promote banking functions that employ a smartphone’s capabilities, such as the camera, global positioning system, texting and instant messaging, according to Javelin. Mobile remote deposit capture (RDC) is an example of a service banks offer that makes use of a smartphone’s functionality.

When consumers don’t see the need or don’t trust mobile banking technology, the adverse effects go beyond mobile banking adoption, the researchers say. “People who do not see the value yet of mobile banking are likely to harbor similar opinions about mobile commerce,” says Mark Schwanhausser, director, multichannel financial services for Javelin Strategy & Research, adding that mobile payments and purchases will become mainstream only when consumers have embraced the idea of mobility, and have an expectation that they should be able to do more with their mobile devices.

“Much evidence suggests that mobile banking will introduce many consumers to the concept of mobile commerce,” Schwanhausser tells Paybefore. “Your desire for other mobile activities will be limited until you feel that mobile banking has practical advantages over waiting to get back to a laptop or desktop computer for traditional online banking.”

Building Bridges

FIs and mobile wallet vendors will encourage consumers to use mobile payments over the next few years through hybrid solutions intended to bridge the gap between the physical, online and mobile channels, the report predicts.

“Although the mobile wallet will become an ideal payment mechanism for the physical world, the full transformation is still a few years away,” Mary Monahan, Javelin’s executive vice president and research director, mobile, says in the report. “Just 10 percent of merchants have POS terminals that are ready to accept EMV/contactless payments . . . [And] in 2012, just 9 percent of mobile consumers used a mobile phone to make a payment in a store and 24 percent used a mobile browser, whereas 86 percent made purchases online.”

Mobile wallet providers will get consumers accustomed to making mobile payments at brick-and-mortar stores through further access to discounts, information and other payment card services via their mobile phones, Javelin says. Hybrid solutions helping to bridge the gap between the various retail channels include Bluebird by American Express and Walmart, and the agreement between PayPal and Discover enabling merchants to accept PayPal payments through their existing relationships with the card network. Later this year, PayPal will issue payment cards that can be swiped at any Discover-compatible payment terminal.

Despite the myriad players offering a mobile wallet, banked consumers trust their primary FI “far and away” more than they trust telcos, payment networks or companies such as Apple, Google, Amazon and Facebook, according to Monahan.

“Financial institutions have a big head start in this arena,” Monahan tells Paybefore. “But it will be up to them to capitalize on their head start. For now, this means bringing in bridging technologies. Eventually, the phone will be the place consumers go first to make a quick [funds] transfer or check a balance on the run. With time and bridging technologies, turning to the phone to make a payment instead of a physical card eventually just makes more sense.”