A Tipping Point Approaches

September 23, 2009

Expect a shorter adoption cycle for mobile banking than for online banking.

An estimated 58% of adult Americans today use mobile devices to perform nonvoice data activities such as texting, e-mailing, taking a picture, looking for directions, or recording video.

That alone would have been unimaginable, even astounding, to people a decade ago, not to mention the myriad capabilities the average mobile device provides today. Indeed, consumers’ increasing use of mobile devices for nonvoice communications is one of the key drivers for mainstream adoption of mobile financial services.

But mobile banking still is in the early stages of adoption as more tech-savvy consumers learn how to access financial services on mobile devices. In the near term, mobile banking primarily provides strategic value for credit unions as a relationship-building and retention tool. It also enables credit unions to position themselves for long-term revenue opportunities from person-to-person and contactless mobile payments.

We’ll see mobile devices gradually morph into ubiquitous payment devices, both for remote and proximity-based point-of-sale payments. Not surprisingly, many of the early adopters of mobile banking and payments are (and will be) younger consumers—particularly generation Y (born between the early 1980s and 2000) and gen X (born between 1961 and 1982).

Older gen Y consumers have never known a world without personal computers and video games. The youngest of these “millennials” are still in their early teens, preferring to use their cell phones to text rather than talk and to count their “friends” on social networks. Millennials might not have the most money or be the most profitable—not yet, anyway. But one day, gen Y—the largest U.S. generation since the baby boomers—will outnumber their boomer parents and control the lion’s share of U.S. financial assets. By 2018, gen Y will represent 28% of the U.S. population and earn $3.4 trillion in income. Many of them will decide where to open accounts based on the availability of mobile services.

Mobile banking also seems to hold strong appeal for gen Xers. Unlike gen Yers, they’ll have higher incomes and higher account balances, and use more financial services, such as bill pay.
Ultimately, the primary driver for mobile banking adoption could be the sophistication of devices. Mobile users equipped with iPhones or other touch screen-enabled smart phones are far more likely to use them for financial services than those with ordinary cell phones, regardless of age.

Credit unions will underestimate the value of the mobile channel if they regard it as just another way to check account balances, transfer funds, and pay bills—akin to what ATMs represented to consumers in the 1970s. Unlike the ATM example, mobile banking isn’t just a new way for consumers to perform transactions “on the go” or during off hours when the branch isn’t open or an Internet-enabled computer isn’t available.

With mobile banking, credit unions can interact with members and deliver a range of services including support and alerts. And, the strategic value from mobile payments will be even more significant.

Credit unions that embrace a holistic multichannel financial services strategy will be better positioned to drive increased member acquisition, adoption, and retention across all channels and member segments. And an enterprise mobile financial services strategy will enable credit unions to support new applications, generate new revenue streams, and mobilize payments in novel and yet-unimagined ways. As a result, credit unions can achieve a compelling and quantifiable financial return from mobile channel investments.

It’s clear mobile banking is approaching the tipping point as consumers increasingly regard cell phones as multifunction communication and computing devices. Given the universality of these devices, expect shorter and swifter adoption cycles for mobile banking than for online banking.

Get ready to seize the moment.

MARK SIEVEWRIGHT is corporate senior vice president, strategic marketing, for Fiserv Inc., Brookfield, Wis. Contact him at 508-242-9477 or at