By John Joseph Parker and Samantha J. Henry
TECHNOLOGY IS CHANGING THE way money is exchanged, and the banking industry is adapting to this fast-growing trend. Banks are investing in new online banking solutions that offer improved user interfaces, easier access to information and richer features and functionality.
According to a report from Juniper Research, more than one billion mobile phone users will have made use of their mobile devices for banking purposes by the end of 2017. The most common mobile banking activities continue to be reviewing account balances, monitoring recent transactions or transferring money between accounts.
“Mobile banking is ubiquitous at large national banks, and smaller community banks and credit unions are rapidly adopting mobile technology,” explains Greg McBride, CFA, chief financial analyst at Bankrate.
Recent survey data from the American Bankers Association confirms that customer banking preferences are changing rapidly and mobile banking use is taking off, especially among 18-year-olds to 34-year-olds.
“Mobile banking is now preferred by 6 percent of recent survey respondents as their favorite way of conducting their banking business—representing a 100 percent increase in just two years,” says John E. McWeeney, Jr., president and CEO of the New Jersey Bankers Association (NJBankers). “For 18-yearolds to 34-year-olds, the number jumps to 15 percent of respondents who cite it as their favorite way of banking. As functionality and speed improve and concerns over security decline, mobile banking usage is expected to increase.” Small business customers need help with electronic invoicing, more robust payment capabilities, more global functionality, new financial management tools, and integration across products and capabilities.
“In five to 10 years, mobile devices, especially tablets, will become the dominant devices used for banking,” explains Aite Group Research Director Christine
Barry. “Tablets have created new expectations for user experiences, and banks are now being forced to create a tablet-like experience through the online channel. Sliding bars and rotating carousel menus are becoming more common; text is being minimized and the use of graphics is on the rise. Responsive design is on the minds of most banks to enable a single experience regardless of the device being used.”
Most banks have at least one mobile banking offering, either via messaging, mobile browser or an app-based service. The larger banks are deploying two or more mobile technologies together, particularly where there is significant smartphone and tablet usage. Mobile technology is constantly evolving.
“Banks and their technology vendors will work to broaden mobile functionality to include more payment options, tighter integration of data, and more collaboration capabilities for the multiple individuals often involved in business/corporate payments and approvals,” explains Aite Group’s Barry.
According to the Urban Financial Services Coalition, seven percent of U.S. households do not have a bank account cash into banks and act as a virtual branch network without the costs of an actual brick-and-mortar facility.”
To learn more about cashless transactions, COMMERCE discussed this opportunity with Michael Moeser, director of the Payments Practice, at the consulting firm Javelin. Here are his thoughts and observations.
Payment Trends. “Currently cash makes up approximately 20 percent of retail purchases, or about $847 billion. This does not include people earning cash salaries, making bill payments, etc. It’s just you and I using cash to buy things at Walmart and Costco. Javelin predicts that cash will fall to 16 percent of retail purchases in 2020, or about $738 billion. While a straight-line view would say cash effectively could disappear by 2035, at least from retail shops, I think it will be faster, reaching that near zero level by 2030.”
Cash is Disappearing. “Just look at how cash and paper checks have disappeared in the case of bill payments. Online banking and formal e-bills, like your utility or credit card bill, have replaced cash and checks with ACH. Informal payments to the piano teacher or babysitter are now sent through Venmo, and even the handyman carries a Square reader to accept your debit card.”
Retail Transactions. “As retailers flock to mobile apps, they are building in payment functions to be used at the register. CVS and Walmart are two good examples. Consumers are being conditioned to eschew cash and checks in favor of electronic payments. In-app payments for mobile apps are now standard, as is seen with Game Time and Starbucks only accepting electronic funds. You can order a pizza with the Papa John’s mobile for pickup and delivery, pay for it with a credit card that is in the profile, and then use Payshare by Venmo to ask your friends for their share of the pizza, all within the mobile app. Within the next two years, I see every single pizza app with some form of electronic money collection.”
Industries Adapt. “Certain industries have completely or almost completely eliminated cash. A good example is the airline industry. It started with booking tickets, then moved to in-flight entertainment options, and now to the food and drink you purchase on the plane. What other industries are learning is that there is an inherent cost and risk to handling cash. There is also an opportunity to get customers to go plastic. The main reason McDonald’s moved to accept payment cards was the opportunity to increase order size. That is, their customers were no longer restricted to making purchases by how much cash they had in their wallets or purses.”
Mobile P2P Banking. “Javelin reports that there were 69 million mobile P2P users in 2015 and forecasts that this number will grow to 126 million in 2020, almost double. The recent announcements of Early Warning/clearXchange, Visa, MasterCard, and Fiserv all banding together to make real-time payments a reality in 2016 means that mobile P2P will soon be real-time. No longer will it take days for you to load a Venmo account or to redeem the money either. Cash is just no longer needed.”