Mobile Banking Engagement: Data from Digital Insight

Digital Insight has been conducting a comprehensive and ongoing study of financial institution customers. From these studies, the company has been able to provide a deeper view of banking customer behavior across several categories, such as mobile and online banking. In this first post, we examine mobile banking statistics and how they both impact and benefit financial institutions. Below are key findings from the study, and you can view a more in-depth analysis here.

We will be publishing data on additional topics in the coming months, so stay tuned via *For information on the on the methodology used for the study you can download the PDF

Debit, Check or Cash?

The American Bankers Association recently published a whitepaper on the benefits of debit cards versus alternative methods of payment, titled “Debit Cards Cost Less, Provide More.” The paper discusses how debit cards are not only more time efficient in comparison to checks or cash, but save businesses money. While some may believe cash is a quicker method of payment than debit cards, businesses can process a debit card transaction faster than making change for a $20 bill.

According to the whitepaper, “Fast food restaurants such as McDonald’s see the benefits of debit cards: a customer can place an order, use their card and finish the transaction in less than five seconds. On the other hand, cash can take as long as 8 to 10 seconds.” When time is of the essence, each transaction affects the bottom line and a mere 8 to 10 seconds adds up for a business on a daily basis.

Other reasons merchants prefer debit cards? Consumers generally spend more money. Without the restriction of cash, a consumer can spend more money. The whitepaper goes onto cite, “In comparing debit sales to other payment methods, debit cards increase individual sales by as much as 20-30 percent at fast food restaurants and 10 percent at Big Box Discount stores.”

Are your members using debit cards more frequently than cash or checks? What do you think of the shift towards a cashless wallet? Let us know in the comments section below.

A Bouncing Debit Card?

While many consumers enjoy the benefits and convenience of debit cards, some banks across the country are beginning to consider allowing debit cards to “bounce” – similar to how a check would not clear.

According to the Wall Street Journal, with new rules and regulation in place, banks are now restricted on how much they can charge merchants for debit transactions, with the end result being a loss of billions in revenue.

Some are considering dividing debit services into components and charging for each separately, at the cost of the merchant. This turns the table on retailers, who according to the post, “won a significant victory with the enactment of debit-transaction fee limits.”

Is your institution considering allowing debit cards to “bounce?” Leave us a comment below.

Debit Card Fees: A Break For Small Banks?

Debit cards, while a seemingly easy source of payment for consumers, can be a costly add-on for merchants due to charges put in place by the debit-card issuers: banks and credit unions.

Although a hindrance for some merchants, banks and credit unions view these charges as an important part of their business model. Currently, there are heated debates among lawmakers and bankers alike about the pros and cons of debit card fee limits, especially for smaller banks and credit unions. A new provision recently proposed in the Dodd-Frank legislature suggested capping “swipe fees,” but that financial institutions with less than $10 billion in assets would be exempt. Call it the “small-bank exemption.”

In December, the Federal Reserve issued a draft rule capping fees that banks charge at 12 cents per transactions, which is much lower than the average 44 cents banks currently charge. Banks argue that the significant drop in transaction fee will not cover what debit cards cost them, which in turn will cause them to charge higher account fees to consumers.

The Wall Street Journal reported on the issue, quoting Federal Reserve Chairman Ben Bernanke, “there are two reasons why the small-bank exemption may not work. Merchants may choose to refuse to accept higher-fee cards from smaller banks. Or, payment networks such as those run by Visa Inc. and MasterCard Inc. may decide that it doesn’t make financial sense for them to have a two-tier system.”

So what are outside credit card companies and merchants saying? As noted by the Journal, “The National Retail Federation, which backs the provision, said the rules imposed by Visa and MasterCard bar them from picking and choosing which cards they accept based on issuer. Critics of the rule contend that there’s no way to police what each individual small-business owner does.”

What do you think about the small-bank exemption? Let us know in the comments section below.

IDC Poll: Financial Services Biggest Technology Breakthrough

IDC analyst Marc DeCastro recently asked readers, “Historically, what technological advancement in financial services do you feel is the industry’s biggest breakthrough?” The result: online banking and bill payment.
Here is the survey breakdown:
• 32 percent, Online Banking and Bill Payment
• 20 percent, ATM
• 20 percent, Debit Card
• 16 percent, Credit Card
• 10 percent, Mobile Banking

DeCastro’s poll also found that the older demographic was, the more they felt ATM’s were the biggest breakthrough, but the 25 – 34 age bracket chose mobile banking. This demographic breakdown demonstrates the ever-increasing challenge that financial institutions face to reach a broad range of customer preferences. Catering to customers’ needs is crucial during this era of rapidly-changing technology. To view the full survey results visit IDC.
What is your institution doing to reach different customer demographics? Leave us a comment below.