Clearing the Runway for Mobile Banking Adoption

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Clearing the Runway for Mobile Banking Adoption Consumer Insight Brief May 2011

Paul McAdam, SVP of Research and Thought Leadership, FIS Mandy Putnam, Director of Research and Thought Leadership, FIS

Clearing the Runway for Mobile Banking Adoption

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© 2011 Fidelity National Information Services, Inc. and its subsidiaries.

Convergence Drives Penetration Better technologies for mobile devices, proliferation of banking apps and increased consumer appetite for staying connected are converging to propel mobile banking penetration. On the technology device front, recent double-digit growth in smartphone adoption has enabled consumers to expand the activities they can perform via mobile phone connections — including banking online. One-half of smartphone owners have banked online with their mobile phones within the past 30 days vs. only 13 percent of those with conventional mobile phones with Internet access (Figure 1).

During this past year, penetration of the Android operating system soared past the more business-oriented BlackBerry and, along with its iPhone rival, fueled the proliferation of apps, including banking apps. The current number of mobile banking apps is estimated at between 1,400 and 1,600 1.

Large Banks Lead the Way with Apps Downloading a banking app is the number one predictor of whether someone engages in mobile banking. Seventy-one percent of mobile banking users have downloaded a banking app. Beating out sports, photography and shopping apps, banking apps are among the most popular types of apps (Figure 2).

50%*

13%

Smartphone Conventional mobile phone with Internet

access

Figure 1: Mobile Banking Penetration by Mobile Phone Ownership

70%*

57%

55%

49%

44%

41%

37%

28%

27%

23%

21%

20%

20%

20%

16%

15%

14%

14%

Games

Social Networking

Entertainment

News & Weather

Navigation

Communication

Banking

Sports

Photography

Shopping

Books & Reference

P2P Payment App

Personalization

Health & Fitness

Lifestyle

Travel

Business & Finance

Education

Figure 2: Types of Apps Downloaded by Mobile Phone Owners Who Download Apps

*Read as: 50% of smartphone owners banked online with their mobile phones in the past 30 days

*Read as: games are downloaded by 70% of mobile phone owners who download apps


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Two characteristics – 1) generation and 2) the type of financial institution where customers have their primary checking account – stand out from others in defining who uses mobile banking apps.

1) Gen Y members are avid app users in

general and account for more than one-half

(54 percent) of banking app users. They also

account for 43 percent of the smartphone

owners though they represent only 26

percent of the survey sample population.

Their banking app usage is double the norm

(Figure 3). The oldest Gen Y customers are

now 31 years old. On the precipice of nest-

building, Gen Y members are avid

consumers that demand quick access to

funds wherever they are and whenever

they need them. Access to mobile banking

is cost-of-entry in growing the Gen Y

customer base.

2) Large banks are leading the way in

providing apps to their customers.

Customers of the top-10 banks account for

58 percent of banking app users (Figure 4).

The top banks are doing a better job of

providing banking apps to their customers

and in making their customers aware of

their mobile offer. As a result, the top-10

banks capture more than their fair share of

mobile banking users – 52 percent of

mobile banking users vs. 37 percent of

consumers in the survey. Customers of the

top-10 banks also report greater

satisfaction with their mobile banking

experience and, thus, will be more likely to

stick with the institution providing them

with mobile banking services.

*Read as: 54% of mobile banking app users are members of Gen Y

*Read as: 58% of banking app users are Top 10 Bank customers

Figure 4: Mobile Bank App Usage by FI Type

Figure 3: Mobile Banking App Usage by Generation


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Satisfaction with mobile banking has risen significantly year-to-year. Customers who use mobile banking apps to access their financial institutions report the highest satisfaction level – at 88 percent. Satisfaction with alternative types of access – text messaging and through the Internet browser – also has improved significantly year-to-year (Figure 5). No doubt, better devices and the proliferation of apps are positively affecting customer satisfaction with financial institution connections via mobile devices.

Appetite for Connectivity Fuels Adoption The number two predictor of mobile banking adoption is frequent usage of the Internet via one’s mobile phone. Eighty-eight percent of mobile banking users describe their mobile phones’ Internet capabilities and usage as: I have Internet access on my mobile phone, and I use it frequently. In contrast, only about one-quarter of mobile phone owners in general describe their mobile phone usage this way. Another 29 percent of mobile phone owners have Internet access on their phone but either do not use it very often or do not use it at all. The distribution of consumers who describe themselves as using the Internet on their mobile phones frequently skews heavily toward younger generations. One-half (51 percent) of frequent mobile Internet users are members of Gen Y and one-third (34 percent) are members of Gen X (Figure 6). Though Gen Y members are the most voracious consumers of the Internet while on-the-go, both Gen Y and Gen X have large appetites for connectivity.

*Read as: in 2011, 88% of mobile banking users accessing their FI through an app were satisfied with mobile banking

Figure 6: Have and Use Internet on Mobile Phone Frequently

*Read as: 51% of consumers who have Internet access on their mobile phones and use it frequently are members of Gen Y

Figure 5: Satisfaction with Mobile Banking (top-4 box on 11-point scale)


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Mobile Banking Users Are More Active Mobile banking users’ financial habits differ markedly from non-users. Mobility increases exposure to places where financial transactions can be conducted. For mobile banking users, mobile banking is not a substitute for a point of contact, but instead, an additional point of contact with their financial institution. Usage of other channels is not diminished, but rather, is greater among mobile banking users. Compared with non-users, they make significantly more visits to ATMs owned by their banks and branch lobbies (Figure 7).

Mobile banking users are trading paper for plastic. They make more debit card purchases and debit card cash back transactions than non-users (Figure 8). Mobile banking users write fewer paper checks, because they typically pay their bills online. Most are paying their bills through their computers (86 percent) and mobile phones (42 percent), but small percentages are paying bills through tablet computers (e.g., iPad) (8 percent) and even Internet gaming systems (7 percent).

Figure 7: Points of Contact in Past 30 Days

*Read as: mobile banking users made 4.1 visits to their banks’ ATMs in the past 30 days, on average

Figure 8: Average Number of Transactions in Past 30 Days

*Read as: mobile banking users purchased 15.3 times in the past 30 days, on average


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Mobile banking users are more likely oriented toward accessing online financial services outside of conventional financial institutions, which should be cause for concern among traditional banks – especially ones not offering a person-to-person (P2P) payment product. Six out of 10 mobile banking users make P2P payments and nearly one in five uses an online personal savings service such as SmartyPig. Sixteen percent use an online personal financial management service such as Mint.com, Geezeo or Yodlee. In total, three-quarters of mobile banking users access at least one of the listed online financial services (Figure 9).

Mobile Banking Users Are Worth It Indexed against non-users of each respective generation, mobile banking users show higher asset balances. Gen X and Baby Boomer mobile banking users’ assets are especially high compared with their non-user counterparts. Both Gen X and Boomer mobile banking segments have about double the assets of non-users except for retirement/college savings, which still are above average. Even Gen Y mobile banking users compare favorably with non-users in their generation. Mobile banking users’ savings balances are especially robust compared with their non-user counterparts (Figure 10).

Figure 9: Online Financial Services Used

*Read as: 60% of mobile banking users have used P2P

Figure 10: Mobile Banking Users’ Asset Balance Indices

*Read as: Gen Y mobile banking users have 28% higher balances in checking on average than non-users in Gen Y


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Indices on credit and loan balances paint a somewhat different picture, though mobile banking users typically index above their non-user counterparts for most types of credit and loan balances (Figure 11). Reflective of their greater resources to acquire things during lifestages when acquisition is most common, Gen Y and Gen X mobile banking users have higher balances than their non-user counterparts in every credit and loan category.

Indices for store-branded credit cards are very high for both Gen Y and Gen X relative to major credit card indices. Retailers seem to be doing a better job than the major credit card issuers and the financial institutions with which they co-brand their cards at capturing younger generations’ loyalty. In contrast to Gen Y and Gen X, mobile banking users who are Baby Boomers have indices above their non-user counterparts only in automobile and educational loan categories. With nearly three times the amount in their checking accounts, mobile banking Baby Boomers are likely more financially solvent than their non-user counterparts especially regarding short-term or revolving credit.

Clear the Runway There is abundant runway ahead for mobile banking usage beyond early adopters. Key tailwinds include continued smartphone and tablet adoption as well as mobile payment options on the horizon. Today’s mobile banking users will become the early adopters of mobile payment. (Consumers’ attitudes about adoption of NFC mobile payments will be detailed in a future report). Smartphone adoption is projected by Nielsen and others to continue its recent pattern of double-digit growth near term. Also, tablet users are projected by Forrester Research to equal the number of current smartphone subscribers within the next two years2. With larger screens, tablets hold a key advantage over smartphones for online banking. The small screen on smartphones is an impediment for one out of five (19 percent) mobile phone owners who have phones that connect to the Internet but do not bank via their mobile phones.

Figure 11: Mobile Banking Users’ Credit and Loan Balance Indices

*Read as: Gen Y mobile banking users have 22% higher major credit card balances on average than non-users in Gen Y


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Headwinds to mobile phone adoption indicate the need to increase: 1) awareness, 2) banking app penetration and 3) appetites for mobile banking among customers.

1) Currently, 44 percent of mobile phone

owners do not know if their FI offers

mobile banking. Lack of awareness can be

reversed through improved

communication.

2) The number one predictor of mobile

banking usage is downloading a banking

app. Increasing app availability will

increase penetration.

3) Preferences for online banking via

computers and concerns about security

also represent impediments to the

diffusion process (Figure 12). One in five

(19 percent) non-users report the reason

why they don’t do mobile banking is

because they just have not bothered to try

mobile banking yet. Their indifference

could be reversed through communication

of a clear value proposition and “sampling

incentives.” Those with security concerns

(28 percent) will require different

messages to assuage their worries.

Conclusion Offering mobile banking is the price of entry for attracting the emerging customer who is connected to the Internet 24/7. This customer is “worth it” and will seek financial services from non-traditional

financial institutions if traditional banks and credit unions fail to deliver on expectations. Top-tier banks and alternative financial institutions are doing a better job of providing apps that boost customer satisfaction with mobile banking. Second-tier banks have more work to do – especially in the area of customer satisfaction – in order to earn their fair share of the growing market of connected consumers. All financial institutions need to work to increase awareness of their mobile banking offers among current customers and prospects.

*Read as: 38% of non-users prefer to bank online with their computers

Figure 12: Reasons for Not Doing Mobile Banking


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Citations: 1 Interview with Jim Breune, netbanker.com., April 8, 2011. 2 Forrester Research eReader Forecast, 2010 to 2015 (U.S.), Jan. 4, 2011.

About the Research Clearing the Runway for Mobile Banking Adoption is part of a series of Consumer Insight Briefs based on primary research conducted by FIS Enterprise Strategy. The research findings herein are based on a 60-question, online survey completed by about 4,000 U.S. mobile phone owners in February 2011. The survey was fielded by FIS Enterprise Strategy to a consumer panel maintained by Survey Sampling International. The definitions of age generations used in our analysis are the standard U.S. Census Bureau definitions: Gen Y, born in 1980 or later; Gen X, born from 1965 – 1979; Baby Boomer, born from 1946 – 1964; Mature, born in 1945 or earlier. The study’s primary objective was to determine the impact of mobile devices on behaviors related to financial transactions, including accessing accounts, paying bills, depositing checks and making purchases.

About FIS FIS (NYSE: FIS) is the world’s largest global provider dedicated to banking and payments technologies. With a long history deeply rooted in the financial services sector, FIS serves more than 14,000 institutions in over 100 countries. Headquartered in Jacksonville, Fla., FIS employs more than 32,000 people worldwide and holds leadership positions in payment processing and banking solutions, providing software, services and outsourcing of the technology that drives financial institutions. FIS is ranked 426 on the Fortune 500, is a member of Standard & Poor’s 500® Index and consistently holds a leading ranking in the annual FinTech 100 list. For more information about FIS, visit www.fisglobal.com.

Clearing the Runway for Mobile Banking was authored by Paul McAdam, SVP of Research and Thought Leadership at FIS and Mandy Putnam, Director of Research and Thought Leadership at FIS. Please contact the authors if you have questions about the research or how the results apply to your financial institution. Paul McAdam Ph: 708.449.7743 [email protected] Mandy Putnam Ph: 614.414.4207 [email protected]

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