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Mobile banking could attract new, younger customers 4/23 CRMDaily Reputation is important, because the biggest reason given for avoiding mobile banking was that consumers are worried their personal information is not secure. Technology is important because, while online banking is becoming more common, the notion of banking outside a branch in the US is only in the nascent stages. Most Americans are still hesitant about banking with their cell phones & PDAs, but young people are increasingly coming around to the idea of mobile banking, according to a new survey. Meeting the needs of these tech-savvy customers is going to be key for banks to stay competitive - the income of Gen Y is expected to surge over the next 10 years & exceed that of Baby Boomers. So far, although most major banks offer mobile banking services, 89% of consumers do not use their cell phones to conduct mobile banking transactions, according to a study by IBM. The results are based on a telephone survey of 1,424 US adults, age 18 or older, conducted by Opinion Research. Respondents had to own a cell phone & have a bank account. The margin of error was plus or minus 2 % points. As one might expect, younger consumers appear to be jumping aboard the mobile banking trend more quickly than others. The study found that 21% of consumers age 18-34 use their cell phone for mobile banking transactions, compared to about 10% of the general population. These numbers - particularly for younger consumers - are expected to grow significantly. Aite predicts that mobile banking users in the US, having ballooned from a negligible number at the end of 2006 to 1.7m by the end of last year, will rise to 8m by the end of this year. By 2010, Aite forecasts that 35m Americans will be mobile banking users. Right now, 9 of the 10 top banks offer mobile banking to customers. BofA has the most mobile banking customers - about 0.5m, according to Aite’s Nick Holland. But setting up the technology is just the first step. Going forward, banks will need to stay ahead of the curve in terms of both reputation & technology. Reputation is important because the biggest reason for avoiding mobile banking, given by 65% of respondents, was that consumers are worried their personal information is not secure. & technology is important because, while online banking is becoming more common, the notion of banking outside a branch in the US is only in the nascent stages. Banks are ‘pretty much keeping up with the Joneses,’ said Wendy Feller, IBM. ‘My bigger fear is that they’re not pushing the envelope.’ If they don’t, other companies could elbow their way in - which has happened in other countries, Feller pointed out. One example is Smart Padala, a remittance service in the Philippines that customers access through their mobile phones. Losing mobile-banking business to other companies could mean losing out on billions of dollars of potential deposits. Deloitte reported last week that Gen Y, born in the 1980s & early 1990s, has more than 75m members & collective annual income of $1.89 trillion. Deloitte predicts their earnings will increase by 85% over the next 10 years to $3.5 trillion, exceeding Baby Boomers’ earnings by some $500b. At this point, the capabilities of mobile banking - essentially, doing transactions on-the-go using a cell phone or other mobile device - are practically the same as online banking. You can do simple functions like check your balance, move money from one account to another, or set up automatic bill pay. But technology allowing people to use their phones like credit or debit cards is developing. Meanwhile, marketing efforts aimed at luring customers to online banking has trailed off a bit since last year, Holland said. ‘It was maybe a little overheated last year, but is seeing some retrenchment as banks ask, what are we going to do to actually generate revenue?’ IBM’s survey showed that 84% of consumers would not be willing to pay a fee for mobile banking. But banks, still struggling with the US mortgage crisis, should see mobile banking as way to attract customers & their deposits, Holland said - & trim costs, too. Customers’ calls to call centers cost banks an average $14 each.