Cell Phones: The New Local Bank?
There’s no doubt that mobile banking is increasing in popularity, with numerous studies indicating more users are handling their finances via their cell phones. But is mobile banking getting so pervasive that we can think the once unthinkable — the end of the bank branch office?
Bank of America (Stock Quote: BAC) certainly thinks so. In July 2009, the bank announced plans to close about 600 of its 6,100 bank branches across the U.S. It’s no coincidence that Bank of America has been at the vanguard of banks adopting technologies that reach out to customers via cell phones. The bank was the first financial institution to offer free online bill payment services. It also opened its customer service phone lines to 24 hours a day — a move that increased volume among mobile phone users.
On the technology side, firms like Nokia (Stock Quote: NOK) are eager to meet consumer demand for more mobile banking applications.
Nokia recently released Nokia Money, a mobile financial service that allows consumers to transfer cash between bank accounts via their cell phones. Nokia Money also enables users to pay bills on their cell phones, or pick up their dinner check without using cash or even a credit card.
Bank of America and Nokia are representative of financial services and technology firms that view the ubiquitous bank branch as archaic and increasingly useless. According to Nokia, there are 4 billion cell phone users worldwide and just 1.6 billion bank accounts. It’s that 2.4 billion gap among cell phone users that technology companies are targeting with new apps and software that encourage mobile banking and discourage trips to the corner bank.
So, how many banks are following Bank of America’s lead? Aite Group LLC says that the number of U.S. banks offering mobile services rose to 614 in 2009 — that’s up from 245 in 2008.
That’s no accident. Studies show that, increasingly, consumers prefer mobile banking to visiting a bank branch. A 2008 Fiserv Electronic Banking Services study shows that 75% of survey respondents would use mobile banking services if offered. A similar 2006 study showed that 49% of Americans wanted to use mobile banking.
"This research shows that consumer adoption of mobile banking services is poised for potential rapid growth," explains Bob Homer, vice president of product management at Fiserv Electronic Banking Services. "Consumers perceive the value of accessing financial services on their mobile devices as a convenient way to interact with their financial institution."
As consumers demand more and more cell phone banking apps, expect financial institutions to climb aboard the mobile banking bandwagon. One more piece of data — this from the Gartner Group — points out that 59% of U.S. banks will be ramping up their mobile banking services within the next two years.
Consequently, we’re at a point where a trend turns into reality. Bank branches, once the cornerstone of the U.S. banking system, are on the way out and mobile banking is on the way in.
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