The Mobile Cash Crunch

Hand on mobile phoneWe love cash—literally. We love it so much that we’re willing to eschew the alternatives afforded by modern society. All these millennia into human evolution, and those crinkly, dirty pieces of paper that have passed through countless hands still have a place in our hearts and wallets, and bring a gleam to a mugger’s eye. By contrast, the credit card is so modern, an ultra-fast option that’s both convenient and safe, and helps build a financial history. But it’s not to new either. In fact, the idea goes back to at least 1887, when it gets 11 mentions in the Edward Bellamy novel “Looking Backward.” And today, 127 years later, it’s the only real alternative to the coin of the realm.

Let’s put it another way: Why haven’t mobile payments taken off?

It should be a no-brainer, since we use mobile apps for just about everything else. Apple passed the 1 million figure for the iPhone App store back in October 2013, and devices and apps exist to help us in every facet of our busy lives: shop, communicate, get healthy, get richer, get away on vacation, do our jobs, slack off, play games, and just plain kill time. Mobile banking in multiple forms has revolutionized our industry.

Yet the most fundamental form of human transaction—paying for goods and services in person—still relies on cash and credit cards. We can punch a button on the phone and get it done, more conveniently and a lot more safely. But we don’t.

It’s not as if there hasn’t been any progress. Consumers spent $235.4 billion through mobile payments in 2013. That, according to research from Gartner, represents a hefty jump over the $163.1 billion spent this way the year before. The numbers for 2014 will surely be higher still. However, the numbers are considerably lower for the United States: about $37 billion in 2013, up from $24 billion. And if even that seems big, consider this: The U.S. GDP for 2013 approached $17 trillion.

In other words, the potential for mobile payments is gigantic, and the reality is minuscule. Could it be that the technologies to support such a transformation aren’t here yet? No quite the contrary. In fact, we have a wealth of options available—and that might be the problem.

Remember, we first got to see Google Wallet exactly three years ago this month, and the expectation was that it would revolutionize basic transactions. It didn’t. More recently, we’ve had a steady stream of alternatives, from Square and Clinkle to Belly. Tech vendors and financial services have teamed up to offer joint options, such as Visa’s payWave on coming pre-loaded on Samsung Galaxy phones. Apple will presumably come up with a mobile wallet of its own at some point. Yet so far, the many ripples have not turned into a splash.

The chicken-or-the-egg question is particularly valid here. As recent reports have noted, merchants are wary of making the necessary deals and installing the technology in their stores until there’s enough of a critical mass in the public. But by the same token, most consumers can’t be bothered to download the relevant apps—even when they’re free—and go to the trouble of finding which store accepts which option.

Many other fields face similar compatibility issues, from games to stock trading, yet there’s typically more growth—a slow evolution followed by a spike. In mobile payments, despite the tremendous potential, widespread adoption has been stymied by competitive offerings.

So what’s the answer here? Should we still be waiting for a killer app from a particular vendor? Should the current technology entrants try to get together and create a common platform that enables compatibility but potentially hurts innovation? Should financial services vendors form an agreement of their own and force tech companies to go along? Should the government get involved?

We likely won’t have an answer for a while. But it’s worth noting that the time for the mobile wallet has come, and perhaps will soon be gone.


What We’re Reading: Malware, Fees and Tablets

Below are interesting stories the staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom.


  • Prepaid Cards Still Have Lots of Fees: Survey

American Banker

A survey by compares 24 prepaid cards based on the fees they charge consumers. For example, the 2012 survey found that 14 of 18 prepaid cards charged customers a balance inquiry fee on at least some automatic teller machines. This year, 18 of 24 cards charged such a fee on at least some ATMs. In last year’s survey six out of 18 prepaid cards charged fees for at least some declined transactions. This year, nine out of 24 cards did.

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  • FDIC on Social Media Risks

Bank Info Security

As the use of social media grows among banking institutions, federal banking regulators warn those institutions need to be mindful of phishing and spoofing schemes. Drafted guidance issued by the Federal Financial Institutions Examination Council now details how banks and credit unions can prepare to mitigate the new and emerging risks social media poses. The drafted guidance, issued in January, references applicable laws and regulations banking institutions should consider when planning and conducting their activities related to social media, says Elizabeth Khalil, of the Federal Deposit Insurance Corp., which is part of the FFIEC.

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  • Creating A Customized Banking Experience With Big Data

Bank Systems & Technology

Big data opens the door for banks to group their customers according to their banking preferences, which can make customers more satisfied and more profitable. Banks have been increasingly focused on customer experience in recent years, but they’ve been taking an approach that is too broad, says Dean Nicolackis, a partner at PwC’s banking and capital markets practice. While many banks are trying to configure a customer experience that is consistent for every customer across every channel, the key to a really great customer experience is providing a different personalized experience that fits different customer segments, Nicolackis contends. Different customers just want different things – and are willing to pay for different things – from their bank.

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  • Are Tablets Their Own Channel And Does It Matter?

Business 2 Community

The latest research from Javelin Strategy and Research indicates that the tablet users are older; between the ages of 35 to 54, have an average household income of $75,000, and half of them consider themselves to be early adopters. When compared with mobile banking, statistics show that users spend more time on tablets. The question though is not whether it should be considered a separate channel. However, whether separate or not, the bottom line, from a customer experience point of view, the service has to be consistent, and that is the key – it has to be fully integrated into all the other channels and the interchange between the channels has to be seamless.

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  • SaveUp Program, Other Tools Target Millenials

Credit Union Journal

Frankenmuth Credit Union CEO Vickie Schmitzer is continually focused on implementing industry innovations to attract members of all ages, but especially Millenials. That focus stems from the credit union’s work in the field. “We work as much as we possibly can with our local public and parochial schools at every grade level,” said Schmitzer. “We know they are our credit union’s future and that new technology is what attracts them to a financial institution or business of any kind, for that matter,” said Schmitzer.

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  • First Tech Also First CU to Launch Windows App

Credit Union Journal

First Tech FCU, the credit union for Microsoft Corp., said it has introduced a new Windows Phone mobile banking application, the first credit union in the U.S. to introduce a native Windows Phone mobile banking app complete with integrated mobile deposit and bill pay functionality. First Tech launched its new Windows phone app on-site at the main Microsoft campus in Redmond, Wash., giving employees of Microsoft an in-depth look at this new platform. Microsoft employees and First Tech members will be able to view the app on a giant Microtile phone display, chat with First Tech App experts and personalize their Windows Phone at a laser engraving station.

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  • Malware Attacks Growing, Getting Smarter, Targeting Android: Report


In 2012, 95 percent of malware threats targeted Android, says a new report. Malware attacks are increasing, getting smarter and targeting Google’s Android mobile operating system, according to a new report from NQ Mobile, a mobile security solutions provider that based the report on the findings of its Security Lab. Mobile malware threats increased by 163 percent in 2012, and 95 percent of all threats were targeted at Android, said the report. The firm estimates that 32.8 million Android devices were infected in 2012, an increase of 200 percent from the 10.8 million infected in 2011.

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  • Banks Are Designing Branches to Look Like Apple Stores In a Struggle to Remain Relevant

Go Banking Rates

There are a few regional banks, like Umpaqua, that fully embraced “smart banking” years ago. For major, national banks, it was Citi that sparked the trend. In 2008, beginning with its Singapore location, the bank began constructing futuristic branch prototypes that swapped tellers for touchscreens, size with efficiency, and gave locations the overall look and feel of Apple stores.. Rather than reinventing the wheel when it came to modern design, Citi actually hired the services of Eight, Inc., the architectural and strategic design firm behind Apple, according to The Financial Brand.

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