Many within the financial industry have been focused on ways to make mobile banking more convenient and secure for their current customers, but now some experts say that it might be time to focus on those who do not currently have traditional accounts.
While mobile banking is now quite prevalent among consumers, in some cases, people who have accounts with various financial institutions may be reluctant to deal with these services because of concerns over the security they provide, it's likely that the underbanked — those who either can't afford or don't want a bank account — would be more receptive to such a service, according to a report from the Center for Financial Services and Innovation. Recent data from the Federal Reserve shows that 91 percent of those who are considered underbanked have a mobile phone, compared with 87 percent of all consumers, and 57 percent of underbanked Americans have smartphones, compared with just 44 percent of the general population.
In fact, 29 percent of currently underbanked consumers have used mobile banking in the past year, compared to just 21 percent of all consumers, and 17 percent used mobile payments during this period, and just 12 percent of all Americans did so, the report said. This shows that those consumers with low or moderate incomes who may not have access to traditional banking or online options will still rely on their phones to conduct financial transactions even as others are reluctant to do so.
Further, underbanked consumers typically use mobile banking in ways that are similar to all other Americans, such as checking balances, transferring money from one account to another, downloading mobile apps and receiving text alerts, the report said. And in addition, they're also far more likely to use their devices to pay bills than all mobile phone owners.
Where do financial institutions go from here?
With all these tendencies in mind, it may be time for financial institutions to start catering to those who do not have a standard bank account in the same way they do for their more traditional customers, the report said. Consumers without bank accounts now rely heavily upon prepaid cards to conduct their day-to-day transactions, and giving them greater control over these accounts via a mobile device will likely lead to greater use of these services and accounts in general. Currently, most are only able to load more money onto their existing accounts with direct deposit or cash.
"By using the mobile channel to better serve the underbanked population, financial institutions can tap into a large, and in many cases, a new customer base; develop loyalty and stronger relationships with customers who have a full range of financial services needs; and generate new revenue from thousands of new transactions by converting predominantly cash users to users of electronic transactions," the report said.
It is often said that security concerns are the largest hurdle to widespread adoption of many kinds of mobile financial services, including mobile wallets.