As more banking activities become available outside of physical branches, consumers are increasingly reaching for their smartphones to conduct financial transactions. According to Plaid’s fintech impact survey from 2020, 80% of Americans believe they can manage their money without going into a bank. It also found that 56% who bank digitally say they could ‘never go back’ to the world of bank branches and paper statements.
With more people banking digitally, consumer expectations are starting to shift. Consumers expect mobile banking to be convenient, secure, and provide added features that promote financial health. Financial institutions that fail to meet those expectations risk getting left behind.
This article will define mobile banking, explore how consumer expectations are shifting, and take a look at the trends that will shape mobile banking’s future.
What is mobile banking?
Mobile banking enables customers of financial institutions to execute transactions and other banking activities using mobile applications on their smartphone or tablet. Available always, banking via a mobile app increases access to activities like viewing account balances, making payments, and depositing checks.
Mobile banking has grown rapidly over the last decade. As of 2021, there are an estimated 169.3 million mobile banking users in the United States, of whom nearly 80% said that mobile banking was their preferred way to access their accounts.
Many financial institutions have been slow to craft compelling mobile banking experiences. That represents an opportunity for new entrants and established players alike to build a competitive advantage and gain market share.
With consumer expectations rising, a great mobile app is table stakes for any bank. By providing a high-quality in-app user experience, banks can get customers more engaged with their finances, leading to a higher lifetime value (LTV).
Mobile Banking in the US
mobile banking users in the US
of US population uses mobile banking
of US mobile banking users prefer mobile banking for accessing accounts
Types of mobile banking
Viewing accounts and transacting via a financial institution's mobile app is the most common form of mobile banking. Banks like Wells Fargo and Bank of America provide their customers with mobile apps they can use to access their accounts and perform transactions at any hour, providing access to funds long after branches have closed.
Before mobile apps, there were other ways to engage in mobile banking; for example, you can still bank via SMS. SMS banking works by sending push and pull text messages to customers’ mobile phones.
Push messages notify customers about potentially fraudulent activity such as large ATM withdrawals—or regarding more common occurrences, as when a bank statement is available. SMS banking users can also send pull messages to their banks to check account balances, exchange rates, and interest rates.
Unstructured Supplementary Service Data
Another form of mobile banking that preceded mobile apps is Unstructured Supplementary Service Data (USSD), which provides mobile banking services to the people who don’t have a smartphone or mobile internet connection.
USSD banking customers can dial *99# on their cell phones to transfer funds, check their balances, or get a bank statement. USSD banking is primarily used as a way to deliver banking capabilities to the underbanked: for example, farmers in developing countries who lack internet- or mobile-data access.
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Mobile banking vs online banking
Is online banking the same as mobile banking? Not quite. In truth, it’s a fine distinction that’s not always easy to grasp.
Online banking means executing bank transactions via the internet, regardless of whether it’s done on a computer or mobile device. Financial institutions generally offer online banking through their websites. First a customer logs in with their username and password; then they can perform almost any transaction that would be possible in person.
Mobile banking is a subset of online banking; it refers to online banking transactions performed using a mobile device, not on a laptop or desktop computer. Mobile banking users can navigate to their bank’s website on a phone or tablet. However, most mobile banking is performed via apps.
As of 2021, 76% of American adults said they’d used their bank’s mobile app in the past year.
What consumers want from mobile banking
Not only are consumers expecting more from mobile banking apps; they also consider the quality of a bank’s app more important than the in-person banking experience.
In a 2020 survey of over 2,000 US consumers by payment card platform Marqueta, 21% of respondents said an easy-to-use mobile app is the most important feature a bank can provide. Only 15% rated a quality in-person experience as their top benefit of using a financial institution.
Here’s what customers are increasingly coming to expect:
Convenience: The clearest benefit that mobile banking provides is round-the-clock access to your bank account, regardless of location. Thanks to digital solutions like mobile banking, 73% of Americans see managing the majority of their finances digitally as the ‘new normal’ following COVID-19.
Security: Financial account information is among the most sensitive personal data that exists; as such, preventing identity theft and financial fraud are foundational for banks. Methods such as two-factor authentication and biometric identification via face, fingerprint, or voice can meet security needs at login and/or when conducting transactions.
Consumers know their financial data is powerful and don’t want anyone to access it without their permission. The ability to lock access to accounts or turn off linked payment cards via mobile banking apps is important to consumers’ sense of security. In a 2021 survey, 47% of consumers ranked the ability to turn off a payment card in a mobile app as ‘extremely valuable’.
A holistic view of personal finances: Given that consumers share their credit card and financial account information with numerous services, it’s hard to keep track of which companies have access to their financial data. As a result, financial institutions are increasingly connecting to one another in order to show consumers all of their accounts in one place. This gives consumers the big picture of their finances—helping them move money between accounts and offering personalized recommendations for how to achieve their financial goals.
For example, Wells Fargo’s Control Tower shows customers all recurring payments and digital wallets connected to credit cards they’ve added to the Wells Fargo mobile app. Varo, an online mobile banking company, shows customers all of their outside bank account balances and transfers in the Varo app, helping them achieve a view of their wider financial life.
Added features and functionalities: Consumers appreciate that mobile banking gives them more options for how to use their funds. For example, consumers can now use mobile-banking apps to deposit paper checks or split the bill at a restaurant. The digital-only bank, Chime, goes a step further by giving customers the option to receive their paycheck two days earlier than traditional banks. They do this by depositing funds on their customers’ behalf as soon as they detect that the direct deposit process has been initiated by their customer’s employer.
Fewer fees, better financial health: Traditional financial institutions have often charged their customers fees for things like overdrafts, international transactions, and out-of-network ATMs. Those fees can end up being paid by those who can least afford them: marginalized groups and people who are struggling financially.
Financial institutions should improve data access infrastructure
Learn to meet the scale of consumer demand and future proof data access
Mobile banking trends that will shape the future
With the growth of mobile banking, many financial institutions have decided to begin or accelerate their own digital transformation. Trends to watch include:
Enhanced biometric authentication. A 2019 survey asked respondents whether they would be in favor of replacing their credit and debit cards with biometrically driven payment methods, for example fingerprints or facial recognition. 46% said yes. Among them, 62% of Gen Z preferred biometrics as opposed to 31% of Baby Boomers.
As Gen Z grows its economic influence, biometric authentication through mobile devices may become more commonplace for many different types of financial activities. Biometrics are already common in digital wallets (e.g. Apple Pay, Venmo) and security authentication for activities like replacing passwords, facial recognition and Touch ID. They could replace government-issued IDs and pin codes for financial transactions in the future.
Cash-flow management. In order to help customers avoid overdraft fees and predatory loans, some banks are modeling their customers’ cash flow and alerting them if they’re in danger of failing to meet their financial obligations. What’s more, many offer interest-free loans to help customers bridge the gap. For example, Dave offers up to $200 advance payroll without charging interest. They support the service by charging a monthly membership fee.
Chatbots and virtual assistants. One advantage of the rise in mobile banking is that it has yielded so much data about how consumers interact with their money. Among other things, that wealth of data has given banks the ability to build chatbots that can instantly and accurately respond to customer questions in real time.
Increasingly, financial chatbots are going beyond customer-service capabilities. Erica, Bank of America’s chatbot, acts as a financial virtual assistant. Erica offers services that include bill reminders, spending- and rewards snapshots, and subscription management.
Much like Amazon’s Alexa, Erica can recognize voice commands for routine banking activities and tasks. Voice commands reduce the amount of effort required to perform simple activities like transferring money or checking account balances. Banks hope that will translate to increased engagement and lifetime value (LTV).
Rewards programs and points. Increasingly, consumers want to earn rewards on their everyday purchases—and not just from their credit cards, but from debit cards and mobile apps as well. Point is a banking app that offers the ability to earn rewards on debit card purchases without paying interest. Chase Offers is another example of this, enabling customers to activate exclusive deals directly in the Chase Mobile App.
Automated savings and investing. Rather than manually depositing their savings, consumers want to save and invest money on autopilot. Apps like Betterment allow customers to automatically invest spare change from transactions or portions of each paycheck. Betterment automatically rebalances customer portfolios according to goals and risk tolerance. It can also optimize for tax reporting (e.g. tax loss harvesting).
Enhanced fraud and identity theft protection. As digital finance increasingly becomes the norm, fraud and identity theft are becoming growing issues. While fraudsters are getting better at gaining access to information, big data and technology can be used by banks to create enhanced security solutions that better protect customers.
The wealth of available financial data gives banks next-level fraud detection capabilities that they can deploy via mobile banking. Using machine-learning algorithms based on big data from financial transactions, banks can monitor for any outlier transactions that indicate suspicious activity. Once an outlier transaction comes up (such as multiple purchases made abroad), banks can notify users via their mobile banking app to verify the transaction or immediately cut off their account from use. This enhanced detection ability also helps banks reverse fraudulent charges before they’re posted to their account or even deny them at the point of sale.
Personalized insights and recommendations. Along with giving customers a holistic view of their finances, mobile banking apps like Credit Karma and Chase recommend actions and products that can help them reach their financial goals. Through their personalized recommendations, these banks help customers do things like pay down debt, increase their credit scores, and build a sustainable budget. Some companies, like Truebill, go further by helping customers negotiate lower monthly utility bills and cancel old subscriptions.
Support for cryptocurrency. In the 4 years between March 2017 and March 2021, the market capitalization for all cryptocurrencies grew from around $20 billion to over $1.7 trillion. Due to this rapid growth, cryptocurrency has caught the attention of financial institutions. JPMorgan Chase, Goldman Sachs, and American Express are all currently building support for cryptocurrency wallets and payments. JPMorgan Chase has even created its own digital coin for payments, JPM coin.
Connectivity to other banks and apps. Consumers are coming to expect their money to be available instantly, on whatever app or service they happen to be using. In other words, they expect to be able to link their Chime account to their Chase account, their Chase account to their Acorns account, and their Acorns account to their TurboTax, ad infinitum.
This trend was already underway before COVID-19; the pandemic has only accelerated it. According to Plaid’s 2020 survey on the financial effects of COVID-19:
59% of Americans use digital financial tools more than before COVID-19
69% viewed digital finance as a financial lifeline during COVID-19
73% see financial technology as the ‘new normal'
Mobile-focused banks will be rewarded
As consumer expectations shift, a great mobile banking experience is increasingly table stakes for any financial institution that seeks to be competitive in the space. Established players find themselves squeezed by startups and mobile-first banks to give their customers more.
Financial institutions that can recognize these opportunities before others will be rewarded with increased acquisition, engagement, retention, and lifetime customer value (LTV). Those who fail to deliver a modern mobile banking experience risk getting left behind.