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What We’re Reading: The Paper Check, Mobile & Online Banking and Mobile Payments

May 10, 2012 By Banking.com Staff 2 Comments

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

The Paper Check Prevails but the Future of ePayments Is Optimistic

Barlow Research Newsletter

At Barlow Research’s 2012 Annual Client Conference held in April 2012, a group of thought leaders gathered to discuss the state of the paper check and the electronic payments (ePayments) movement. Specifically, the group addressed questions around the drivers of electronic payments, barriers to adoption, the future of checks and electronic payments. The paper check is an instrument that is universal. It is still the common denominator amongst companies doing business.

Mobile RDC Is Game Changer – NACHA Expert: Onsite Coverage

Credit Union Times

Waving an iPhone, Fiserv executive Gary Brand told the NACHA audience: “This changes everything.” Then Brand explained why: the ease of use of mobile deposit apps on smartphones coupled with the ubiquity of those devices suddenly means that the ability to make remote mobile capture deposits is in just about every hand. And consumers want it: 43% of people will switch financial institutions to get mobile RDC, Brand said at his presentation on Wednesday at NACHA’s PAYMENTS 2012 conference. As mobile RDC proliferates, “this will change everything in your relationship to customers,” Brand said, because many members come into a branch only to make a deposit.

More Than 50% Saw Member Increase in 2011: Credit Union 24 Survey

Credit Union Times

A survey of credit unions conducted by Credit Union 24 has found that more than half of credit unions surveyed (53%) reported seeing their numbers increase last year and that almost half (46%) attributed the increase to Bank Transfer Day. The nationwide ATM and POS network collected the data as part of its fourth annual CU Industry Survey. “The industry took a very aggressive approach to member recruitment during 2011 and it was successful,” said Jim Park, president/CEO of Credit Union 24. “Bank Transfer Day, robust marketing strategies and an overall increased awareness of credit unions in the consumer marketplace all helped advanced the credit union movement; however, credit unions are rightly concerned with how to keep this momentum going in 2012.”

Checks Die While Online Thrives, But Gen-Y Still Use Branches

The Financial Brand

Despite Gen-Y’s love for all things digital, they don’t just bank online or on their phones. While Gen-Y certainly prefers the digital channel, it’s not like they’ve declared a boycott against physical channels (as many in the financial industry widely believe). Indeed, it’s exactly the opposite. According to the 2011 Consumer Trends Survey from Fiserv, Gen-Y consumers are more likely to visit a branch, drive up to an ATM, or call a call center than any other age segment.

Who’s Ready For Mobile Payments? The U.S., Canada…And Kenya

Forbes.com

We are on the verge of one of the biggest changes in decades in how we pay for goods and services. For the first time since the 1980s, what we call the “form factor” – the physical device that initiates a financial transaction – will shift to new technology. Smartphones and tablets are becoming an integral part of people’s daily lives around the world and soon will replace the familiar plastic cards we all carry. In fact, your smart phone will become your “wallet” – replacing a host of cards, coins and cash.

Many Competing Paths on the Road to the Phone Wallet

New York Times

The idea of using a smartphone as a wallet has been slow to catch on in the United States. A big part of the problem has been that most stores do not have the proper physical equipment to allow customers to pay by tapping their phone. These stores also do not have the right equipment to allow the use of smart cards, credit cards embedded with computer chips that are much less susceptible to fraud. But a change is coming that will push both innovations at the same time.

Pew study: Overdraft fees still take account-holders by surprise

Philadelphia Inquirer

Nearly two years after the Federal Reserve began requiring banks to get customers’ permission before subjecting them to controversial overdraft practices, many account-holders are still surprised when they are charged overdraft fees for debit-card purchases or ATM withdrawals that could simply have been declined, says a new study financed by the Pew Charitable Trusts. The Pew study found that more than half of those hit with overdraft fees did not believe they had opted in to the policies, which enable banks to approve purchases or withdrawals for customers short of funds and then charge them fees for the transactions. Pew says the median bank overdraft fee is about $35. Pew has focused on unexpected overdraft fees as part of its Safe Checking in the Electronic Age Project, which says the fees pose financial risk, particularly to younger and less-affluent customers.

Filed Under Financial Management Insights Tagged With banking news, mobile banking, what we're reading

Infographic: The Mobile Employee

May 2, 2012 By Banking.com Staff Leave a Comment

It’s no secret that mobile use amongst consumers is on the rise, but a recent infographic published by [x]cube labs shows an astounding jump in mobile usage among employees in the last year alone. Statistics cited in the infographic state that smartphone usage for work jumped from 69% in 2010 to 91% in 2011. One of the top types of mobile employees noted is the mobile information worker: workers who travel frequently but needs to stay in touch with the office through email and collaboration tools (e.g. financial services professionals, banking executives, consultants, etc.). Within the mobile information worker sector, the percentage of the total workforce is predicted to jump from 24% in 2010 to 30% in 2012. See below for the full infographic.

Are you and your employees using mobile phones more frequently for work? Do you think employees should use company sanctioned mobile devices to do work on-the-go? Let us know in the comments section below or Tweet @bankingdotcom.

Browse more infographics.

Filed Under Financial Management Insights Tagged With infographic, mobile apps, mobile banking

2020 Hindsight: A Look at Cash, Credit and Smartphones in 2020

April 23, 2012 By Banking.com Staff Leave a Comment

Who needs cash? Who needs credit cards? They’re so old-school—and frankly so vulnerable to being misplaced or stolen –that they’re an inducement to danger. Fortunately, this is about to change…maybe.

A new report from the Pew Research Center’s Internet & American Life Project and Elon University’s Imagining the Internet Center brings news that mobile payments could all but eliminate the need to carry money or credit cards around. In advanced nations, at least, a majority of consumers will trust their phones and mobile devices to conduct end-to-end transactions.

And when will this happen? In the year 2020. Yes, 2020.

For the record, even that date carries multiple caveats. A strong majority, 65 percent, of the technology experts surveyed for the report signed on to that timeframe. The rest of the respondents disagreed with the premise (there was no middle ground allowed), and contend that this discipline will not gain sufficient traction in the timeframe discussed.

To be sure, the Internet terrain is pockmarked by failures, radical technologies that were designed to fundamentally transform human behavioral patterns and, well, didn’t. There are also plenty of legitimate reasons to doubt the broad-scale adoption of mobile payments.

To start with, not everyone has a smartphone—according to the Federal Reserve, the number is still only 44 percent of the population—and not everyone will anytime soon. Security and privacy concerns have always loomed large, and they will continue to do so.

Besides, consumer fears are not the only impediment to success: Credit card providers, among other business entities involved in the mix, will need to redirect their resources, and that likely won’t happen overnight. Most of them have considerable investments in the existing infrastructures, and a top-to-bottom overhaul probably isn’t on the priority list yet. Even when it does happen, everything from standards and the resulting interoperability to competitive positioning could lead to market fragmentation.

Still, it’s also important to note that however futuristic the concept of mobile payments seems, in some ways it’s already here. Consumers aren’t only using their phones to talk: According to other recent Pew Internet studies, 10 percent of Americans have used their phones to donate to charity via text message, more than a third use them for online banking, and almost half, 46 percent, have used a mobile app to, well, buy another mobile app.

Other research backs this up too, and retail seems a particularly active area. Analyst firm comScore reports that not only have 38 percent of smartphone owners used their devices to make buy products, but half the U.S. smartphone user base has gone online to look up deals while they’re inside a brick-and-mortar outlet, and nearly one in five even scanned barcodes.

As for the ‘advanced nations only’ argument, here’s another nugget cited in the Pew report: Users of Kenya’s M-Pesa system now send money amounting to 20 percent of the country’s entire GDP via text message.

For all Internet prognosticators, the reality is that this might be yet another area where we don’t know what will happen, or more importantly when. There are statistics and anecdotes to back up virtually any hypothesis, just as many changes have blindsided even the most accurate analysts.

The groundwork for a radical transformation has been laid. While there are certainly standards issues to work through, particularly at the back end, many of the tools needed to change payment habits are already in place. There’s a new generation that can’t remember a world without iPhone and iPad apps for everything. And some emerging mobile technologies have allowed business and consumers alike in developing markets to leapfrog landline infrastructures.

It may be that 2020 is the year of mass mobile payments. It may, as some analysts claim, take more time than that. But let’s not be surprised if it takes less.

Filed Under Financial Management Insights Tagged With mobile banking, mobile payments, mobile wallet

The Next Banking Generation: The Mobile Teen

April 11, 2012 By Banking.com Staff 1 Comment

April is Financial Literacy Month, and many organizations and financial institutions are providing information and tips to help consumers take the right steps on money management. One demographic driving numerous campaigns for Financial Literacy Month is the pre-teen and teen demographic, the next banking generation.

A recent infographic developed by Safely shines light on how frequently pre-teens and teens are using mobile devices; 75 percent of 12 – 17 year olds own a cell phone. These teens don’t just have phones to call home in case of emergency — they are heavy mobile users who talk about 835 minutes a month on their phones and receive/send an average of 1,200 texts a month. They are also heavy app users, with an average user downloading 11 apps a month.

As financial institutions and organizations help educate consumers for Financial Literacy Month, it is important to keep in mind the new financial generation is a generation that will approach finances with a mobile perspective. See below for the full information from Safely and more stats on the mobile teen:

Browse more Technology infographics.

How are you helping your financial institution’s youth? Tweet at @Bankingdotcom or let us know in the comments below.

Filed Under For Financial Institutions Tagged With #FLM12, financial literacy, Financial Literacy Month, mobile banking, mobile teens

Behavioral Change: Is There An App for That?

March 29, 2012 By Banking.com Staff 1 Comment

To some of us, it might seem that people who don’t know about mobile banking must be living in a cave somewhere. But here’s the reality: Only 10 percent of mobile banking users were prompted to use their bank’s mobile channel by their actual bank.

This is not some revelation from years ago, when mobile features and capabilities were still mostly a novelty, and understandably accompanied by some trepidation. It’s actually a key finding from a survey of 1,527 mobile banking users, encompassing more than 240 banks and credit unions. It was commissioned by ath Power Consulting, a provider of customer experience solutions for the financial services industry.

That’s not the only bad news in the report. It turns out that only one in five users were offered any option to customize their user interface, and fully 40 percent failed to find links for technical support.

It’s relatively easy for those of us essentially embedded in these disciplines and practices to look down on these findings—after all, companies have spent millions developing these technologies, and millions more promoting them. Besides, many of those consumers are surely using their mobile devices for many other functions that would have seemed futuristic just a couple of years ago. So what’s the problem?

Just this past week, acerbic comedian Bill Maher got big laughs on his HBO show by expressing bewilderment at the construction of new retail banks. He noted that he hasn’t walked into a bank for many years, since there’s so much available at the click of a button.

But we should get real too. When it comes to banking, just saying “There’s an app for that” isn’t enough.

It’s impossible to bottle the science behind behavioral change. If we could, everybody would launch something like Facebook out of a dorm room, or create viral videos on a regular basis. What we do know is that some behavioral shifts (such as social networking) occur at an incredible pace, while others (such as specific aspects of e-commerce) are adopted in fits and starts. For the most part, we don’t know why, except that the availability of a new technological capability alone doesn’t guarantee a change in habit.

Money complicates the issue even more. The relationship we have with our banks is fundamentally different than with our favorite retailer or clothing brand; it requires a level of trust, comfort and familiarity that extends far beyond other B2C interactions. It takes a leap of faith to go from using the cell phone to Tweet something personal (which we know others can see) to conducting a sensitive financial transaction.

For the record, the ath Power study does show some promise. While security will always be a prime concern, the mobile channel can play a major role in fraud prevention as mobile adoption improves and consumers become more familiar with alerts. On another front, mobile customers are more loyal: about one in eight say they’ll change banks within two years, compared with one in five in the general customer base. Finally, despite the relative lack of awareness of this category, the quality of a mobile offering is a major factor in choice of bank among the mass affluent and small business owner segments.

That’s all for the good, but this is a behavioral change that needs broader consumer adoption. And for that to happen, maybe the word needs to get out a lot more than it has so far.

Filed Under For Financial Institutions, Surveys Tagged With mobile banking, survey

Mobile Maturity

March 22, 2012 By Banking.com Staff Leave a Comment

Here’s a conundrum: Is the rising concern over security as it relates mobile banking a sign that mobile banking is gaining legitimacy?

Sadly, yes.

There’s been a lot of talk here and in plenty of other places how mobile banking is being adopted more broadly by providers and consumers alike. With a little push on the innovation front, it’s likely to gain even more traction as the social media generation comes of age. Walking into financial institutions, or even sitting down in front of the PC, is too much work; let your phone or tablet do the banking. We’re surely about to see a plethora of mobile apps that enable us to deal with our finances in ways we never have before. As with every other shift in technology, this is turn will affect our behavior—perhaps even our attitude toward our personal finances.

The flip side to all this, of course, is the downside— a new breed of criminal that poaches on looser protection standards. The goal: to secure access to insecure data.

But again, as with the emergence of every new platform, form factor or application, security takes on a new urgency. The very point of mobile adoption is convenience—everything absolutely must get easier. Now, if something is easier, does that mean it’s automatically less secure?

Let’s hope not, but there’s more work involved to make that happen. Every financial institution is currently rushing products to market, knowing that there’s a huge potential audience for something customizable, unique and useful (so much easier said than done). But given the need for speed, is security getting the attention it should?

In an interview with BankInfoSecurity, Joe Rogalski, information security officer at New York-based First Niagara Bank, warns of the perils of this trade-off. He stresses that every product offering related to mobile banking—be it remote check deposit or just bill pay—needs to be evaluated from a fraud perspective before it goes to market.

But we all know that in the real world, getting there first can be more important than being the best. Is the threat of a serious data breach somewhere down the road worth losing critical market share now?

Just to be clear, even the PCI Security Standards Council is continually playing catch-up with regards to protocols and best practices—the whole field is still too new, and in perpetual motion, to set comprehensive standards. For their part, the bad guys have no trouble finding weaknesses and loopholes. For example, we’re only just starting to learn about a new breed of attack that fools consumers out of their SIM cards. (This mode should concern telecoms as much as FIs.) This is particularly troubling because SIM cards are the favored tool for securing mobile payments at many mobile payment schemes around the world, ironically because it gives the telecom provider more control.

The problem is that too much of this discussion remains in the theoretical realm, and belongs in the real world. So let’s take it as an article of faith that consumer adoption will continue to grow, that FIs will continue to push products out to market that makes diverse banking processes easier, and that criminal elements will use any tactic they can to steal access, steal data and steal money. Because they will.

Moving forward, we need ironclad guidelines, rock-solid processes and innovative technologies to (try and) stay one step ahead of the downside. Mobile banking is natural, beneficial and inevitable. It’s up to us to minimize the threats that emanate from it.

Filed Under For Financial Institutions Tagged With mobile apps, mobile banking, mobile security, tablet banking

With Mobile Banking, the Future Gets Closer

March 20, 2012 By Banking.com Staff Leave a Comment

It’s always good to see a comprehensive study, especially one based on a survey, that offers more than just a snapshot in time. “Consumers and Mobile Financial Services,” the brand new report from no less an authority than the Federal Reserve Board, is perfect in that regard. It comes with a mountain of data on where we are in this perfect triangulation of money, technology and human behavior.

For the record, there’s clearly considerable movement in this market—consumers are using mobile devices to carry out personal banking functions more than ever before, and every specific function is clearly trending upward. However, there are also signs that adoption is not as fast, nor as widespread, as other mobile-enabled capabilities.

First, the good news, and there’s plenty of it. Fully 87% of the U.S. population now has a mobile phone, and nearly half of those qualify as ‘smartphones’—that is, offering Internet access. In turn, nearly a quarter of those consumers, or 21%, engaged in mobile banking activities during the past 12 months, and another 11% say it’s likely they’ll do the same during the next 12.

Drilling down one level deeper, the most frequent use of mobile banking capabilities is to check account balances or recent transactions—that’s the word from 90% of mobile banking users. The second most common activity is transferring money between accounts, attributed to 42%.

However, the numbers fall precipitously when it comes to more complex activities: 21% of mobile payment users use the ability to transfer money directly to another person’s bank, credit card or PayPal account, and only 12% made a mobile payment in the past year.

Security is clearly a major concern: 48% cite this as the primary obstacle to mobile banking, and 42% say it’s why they don’t make mobile payments. However, what the report also seems to indicate is that rather than using mobile devices and capabilities for a new kind of banking, they’re all basically doing the same thing.

In fact, more than a third of mobile phone users who don’t use mobile payments either don’t see any benefit to be derived from using mobile payments, or actually find it easier to pay with another method. Fully 58% specifically note that they haven’t yet adopted mobile banking because their needs are being met without it. That can’t be good news for the software developers working to create innovative applications for their banks’ customers.

Age is clearly a factor. Consumers between 18 and 29 account for only 22% of mobile phone users but exactly double that for mobile banking users. By contrast, only 6% of those 60 and over practice mobile banking (while they’re 24% of the mobile phone universe. In other words, there’s clearly an upward trend here. But is that enough?

The report has been hailed as a clear sign that mobile banking has a great future, and it clearly does. But it’s also possible to have a slightly contrarian view.

The practice of e-commerce surged only after consumer behavior changed with regard to shopping. Overcoming the same security concerns they have now (if anything, the fears were greater then, given that it was still a novelty), shoppers bought more, and bought differently, than they did otherwise. Mobile banking needs to make a similar leap.

The reality is that consumers have an ambivalent relationship with money; they don’t look at the bank the way they do the grocery store. The general availability of more applications and online services is vital, but it may not be enough. As professionals, we have some work to do in persuading our customers that mobile banking is not just safe, but that it also enables them to do many things they can’t do otherwise. Only then will the future get here faster.

Filed Under Financial Management Insights Tagged With Federal Reserve Board, mobile banking, mobile money

Untapped Opportunities…

February 29, 2012 By Banking.com Staff Leave a Comment

As businesses strive to remain afloat in this post-Great Recession era, every cost must be scrutinized in order to ensure profit maximization. The challenging economic climate has resulted in the identification of an increasingly important business sector known as the “small office/home office” (SOHO). A recent Barlow Research blog post shined a light on this elusive segment and the opportunities and challenges it holds for financial institutions (FIs).

Online banking and financial management is a natural fit for the SOHO market. It is convenient, cost-saving and real-time, and allows monitoring and control of a company’s finances from any location and even on-the-go, via mobile phone. There is no disputing the popularity of mobile banking for personal accounts, and there is reason to think it will translate to the SOHO market.

SOHOs are no doubt a diverse market segment. They encompass anything from house painting to event planning to accounting (and everything in between). Each business brings different needs to the table, and any solution offered by FIs that target this market must be versatile and fully customizable.

In these economically challenging times, the search for new customers and revenue streams will continue. The SOHO segment could prove to be a great new market for FIs. SOHOs may seem small at first because individually they employ few people. Collectively speaking, though, the market is estimated to be quite large and worth exploring. With rising gas prices, time lost stuck in traffic and the high cost of office space, there is overwhelming evidence to believe the SOHO market will continue to grow and FIs stand to reap the benefits.

Filed Under Financial Management Insights Tagged With mobile banking, small office/home office, SOHO

Versatility in the (Mobile) Bank

February 14, 2012 By Banking.com Staff Leave a Comment

No one can dispute the upward trend in mobile banking, not just in North America and Europe, but also in Africa — where adoption rates have soared. The success stories are remarkable. Mobile banking’s best feature has proved to be its versatility. It has managed to succeed in a wide-range of places all with differing needs.

In Africa, where branches and ATMs aren’t readily accessible, mobile banking enables people to easily manage their finances. It can take days for customers to reach the nearest branch, time that would usually be spent working. To remedy this loss of productivity, employers formed partnerships with financial institutions (FIs) to help facilitate financial transactions with mobile phones. Now workers only need to visit a nearby mobile money agent, usually an existing store or shop, to receive their paycheck.

FIs win as well, as their customer base is expanded without costly infrastructure investments such as brick-and-mortar locations or additional ATMs. FIs don’t have to spend money training new agents either since agents are reputable, local business owners, who are used to handling money.

In North America and Europe, where branches and ATMs are more abundant, mobile banking serves other needs. Checking one’s balance, online bill-pay and account transfers are more commonly utilized. Mobile check deposit is becoming more popular since it saves a trip to a branch or ATM, and lowers the cost of check processing for the FI. Even if visiting a branch doesn’t mean a multi-day trek, who wants to spend their free time visiting a bank, especially when the same transactions can be accomplished with a mobile phone.

Security remains a concern anywhere in the world when dealing with money. FIs have taken this to task by providing a wide array of security measures such as PIN numbers, SMS authentication codes and individualized security questions – all designed to thwart criminals without sacrificing customer convenience. Even if the unthinkable happens and a handset is stolen or lost, the multi-layered security measures in place at most FIs should provide protection.

The world will never be without hackers, malware and thieves waiting to prey on ambivalent consumers. As long as customers and FIs remain diligent, “stuffing the mattress” will remain a much riskier option than banking, anywhere in the world. Mobile banking provides access for many to FIs, who otherwise would be unbanked. As smart phone and tablet adoption sky-rockets globally, so too will the usage of mobile banking. That is a fact you can bank on.

Filed Under For Financial Institutions Tagged With ATM, mobile banking, underbanked

Consumer Trust: Still A Major Issue

February 13, 2012 By Banking.com Staff Leave a Comment

Consumers have been regularly engaging in online transactions that involve personal finances for many years now—shouldn’t we be able to trust in the process by now?

Apparently not, if the report “2011 State of Online and Mobile Banking,” just out from comScore, is any indication. The report has many positive signs that should cheer the industry, but there are also some negative indicators that deserve attention.

The area commonly categorized as Personal Financial Management (PFM) is clearly an important one for most financial institutions—it enables each company to engage with their customers on a more personal level and subsequently derive more revenue. That’s why most FIs across the board offer a range of tools to help consumers do business online with speed, convenience and safety.

However, even with awareness of these options, adoption is undeniably low. Half the customers of Bank of America and Wells Fargo know that these banks offer a range of online PFM tools, but that hasn’t translated into usage—adoption hovers at only 12 percent and 6 percent respectively. With greater education regarding functionality and usage, there’s tremendous potential here for growth.

Going one level deeper into online bill pay, there’s definitely good news: nearly 66 percent of the customers surveyed use this capability, and the number is still growing. However, there was 19 percent year-over-year growth in 2010, but an anemic 2 percent rise last year. Consumer habits are also far from settled, with most using a variety of institutions—banks, third-party providers, credit card issuers. Given the value of these services in better engaging customers, there’s definitely scope for major enhancements.

In addition to sufficient awareness and adoption, security remains a core concern—in fact, it’s the single most important reason why more consumers don’t pay their bills online. More worryingly, these concerns are growing—the comScore report shows that consumer fears actually jumped by 14 percent over 2010.

Given the considerable resource most institutions have dedicated to building their defenses, the natural reaction is to dismiss these concerns as unfounded. However, it’s important to remember that even for the tech-savvy generation, security is a visceral issue. Consumers don’t generally turn to analyst reports to see which institutions have implemented the best firewalls or the most effective data encryption technologies—they respond to word-of-mouth, advertising, and media coverage of high-profile data breaches.

The comScore report also indicates that good education can be effective—nearly a quarter of the survey respondents reacted positively to good, accessible information provided by their FI about security measures.

There’s no question that each institution can gain a significant competitive advantage by effectively using an array of personal financial management tools to engage and build a lasting relationship with every customer. Those customers can in turn benefit from the speed, convenience and safety afforded by the tools available.

However, there’s clearly a gap between what’s doable and what’s being done. The only way we can bridge it is by getting the message out more effectively.

Filed Under Financial Management Insights Tagged With comScore, consumer trust, mobile banking, online banking