Not so long ago, the FDIC National Survey of Unbanked and Underbanked Households reported that more than a quarter of U.S. households are underserved by mainstream financial services. 20 percent are underbanked, which meant that they had a checking or savings account, but also rely on alternative financial services for their other banking needs. A whopping eight percent do not use traditional banking methods at all.
The Growth of Mobile Banking
The industry, however, seems to have hit upon a solution, something that is already in virtually everyone’s hands: smartphones. Recent years have seen a plethora of mobile banking apps on the rise.
This problem has turned into an opportunity for mobile telecommunications operators: along with financial services, they are now offering auxiliary aid such as health care and education. It seems to be the logical solution since everything on the Internet has already migrated to mobile.
Emerging markets, especially, are fertile grounds: formal banking has only reached 37 percent of the population, in contrast to 50 percent penetration for mobile phones.
There was a time when mobile banking apps were a pain to even look at, but today, a lot of them function almost as well as their desktop versions.
When once you had to physically go to your bank to take money out, and then go to the bill-pay center to pay your bills, now you can wake up in the morning, roll over, and make your payments through your smartphone. You do not even have to get out of your pajamas.
Tech Crunch also cites the recent economic crash as a factor that has propelled a growth in mobile banking. Because of the rise of consumer distrust in banks, companies like T-Mobile have started offering prepaid Visa accounts that are the modern equivalent of cash in the sock drawer.
According to Tech Crunch, “it’s for the large swath of Americans who admit that traditional banking holds little value for them, because their lives are lived paycheck to paycheck, with things like savings or money market accounts, IRAs, and other investment plans and services as additional, unnecessary options that can only be aspired to.”
Benefits of Mobile Banking
There are many reasons that banks have chosen to go mobile. The first and most obvious is that they can reach many more clients they would not have been able to reach by any other method. More clients, of course, will mean more revenue.
Another reason is that this is another avenue for advertising. There is a certain immediacy to messages delivered straight to a handheld device as opposed to those you receive via traditional methods like television or radio.
On the other side of the coin, mobile banking has proven to also be very advantageous for clients.
Keeping track of finances is now as easy as swiping or tapping on a smartphone. Just go into your mobile app and you will see how much you have in your bank balance. Besides checking, you can also make money transfers or make online bill payments.
For a small fee, or even for none, sometimes, a credit card company will offer text alerts to remind you of your due date and amount due. Of course, you can even make your credit card payment as soon as you get the alert.
This is especially useful to busy professionals or those who, for some reason, simply cannot physically go to a bank. You do not even have to call a bank representative and risk getting put on hold for long periods, which would be another waste of time.
Public Relations Tool
Mobile banking not only makes processes more convenient for clients, it also makes sending feedback a cinch.
It is also a “green” alternative to the traditional paper statements that are sent (and often lost) through the mail.
Responsive apps that offer comprehensive services will also encourage frequent and repeated use, which keeps the bank’s brand at the forefront of the client’s mind. It fosters trust, which could result in positive word of mouth, which is far more effective than any advertising could ever be.
Mobile banking has also brought financial services to a new, younger demographic. Ease of use and proximity make it an attractive service to young professionals who may have just started looking at financial service options.
Building More Mobile Apps
Two of the largest nonprofits in the U.S., D2D and the Center for Financial Services Innovation (CFSI), ran the Financial Capability Development Competition, or FinCapDev for short.
FinCapDev was an initiative to build more mobile apps that will fully exploit the capabilities of mobile devices to facilitate behaviors regarding personal finance.
Huffington Post reported that competition partners included the Applied Innovation Institute, Braintree, Citi, Dell Social Innovation Challenge, EachScape, Facebook, H&R Block, ideas42, MasterCard and Yodlee. They provided software development kits, app development environment access, and expert consulting and networking to FinCapDev finalists.