As Online Banking Acceptance Grows Is Mobile Banking Reaching the Tipping Point With Millenials?

A new survey by the American Bankers Association (ABA) found that for the fourth year in a row, consumers named the Internet as their favorite way of conducting banking business, with 39 percent of respondents saying it is the method they 'use most often to manage (their) bank account(s).'  The second most popular way to bank – visiting a branch – continued its downward trend to 18 percent from 30 percent in 2008.

In addition, this year’s survey showed a sharp increase in the popularity of mobile banking, driven mainly by customers in the 18 to 34-year-old age group. Use of the mobile channel by millennials escalated from 4 percent in 2010 to 15 percent this year. Conversely, the use of branches by this age group during the four-year period dropped from 20 percent to 11 percent, with ATM use also dropping from 32 percent to 14 percent. Overall, mobile banking is now preferred by six percent of customers, a 100 percent increase from 2010.

The distribution of primary channel use this year was as follows:

• Internet Banking (laptop or PC) – 39% (36% in 2010)
• Branches – 18% (25% in 2010)
• ATMs – 12% (15% in 2010)
• Mail – 8% (8% in 2010)
• Telephone - 9% (6% in 2010)
• Mobile (cell phone, Blackberry, PDA, I-Pad, etc.) – 6% (3% in 2010)

Online banking first became the most preferred banking method in 2009 with 25 percent of customers naming it as their favorite. Previously, visiting a branch was the most popular method, followed by ATMs. “The survey results show consumers have a clear preference for the speed and convenience that come with Internet and mobile banking,” said Nessa Feddis, ABA senior counsel and retail banking expert. “However, banks are committed to serving the needs of all customers regardless of which method they prefer,” she added.

Even the oldest demographic segment surveyed (55+) is moving away from branch visits and towards online and mobile channels. As shown below, the 61 percent of the oldest segment preferred branches and ATMs in 2008, while this preference dropped to 37 percent in this year's results. And, while mobile banking preference by this segment is still close to non-existent, internet banking has almost doubled over the past four years. 

Interestingly, this segment is the only group where bank-by-mail and telephone banking has increased consistently. In fact, telephone banking has increased during each period for all demographic segments, representing an opportunity to move many of these transactions to alternative (less expensive) channels.

“These results show customers are embracing new technologies that make managing a bank account simpler, easier and more convenient but that doesn’t mean that the traditional bank branch is going anywhere soon,” said Feddis.

“Branch design may evolve as a result of declining foot traffic. However, we know that nothing replaces human interaction and that’s why branches will never disappear,” she added.

The key going forward will be to encourage adoption the mobile channel by more than just the early adopters for more robust use beyond simple balance checking. According to the white paper developed by Fiserv a few months back entitled, "Breaking the Mobile Banking Glass Ceiling: Five Factors Will Drive Consumer Adoption," these early adopters may represent as much as 20% of eligible users.

To move beyond this 'tipping point', Fiserv recommends five factors to move mobile banking into the mainstream. These include:

• Establishing mobile banking as useful
• Providing access to mobile banking through all devices
• Helping consumers overcome security concerns
• Fostering familiarity for a natural transition across channels
• Making mobile banking easy to use

"Financial institutions have rushed to offer mobile banking during the last few years, and many now realize that driving adoption is not just a ‘build it and they will come' proposition," said Kelly Rodriguez, vice president, Strategy and Business Development, Digital Channels, Fiserv. "In order to maximize return on investment, financial institutions need to engage both their staff and customers. This requires a proactive strategy for delivering mobile financial services and educating potential users on the benefits."

With the continued growth in smartphone ownership and the accompanying comfort level with all things digital and mobile, it is clear that mobile banking acceptance will continue to grow. The key to success will be to introduce marketing initiatives that will stimulate mobile banking utilization beyond the level which naturally occurs in the marketplace. This will require enhanced mobile capabilities, improved customer communication and a focus on the excellent win-win opportunity for both banks and customers.

Additional Resources:

Preferred Banking Method for ages 18-34 for the years 2008-2012 (PDF)

Preferred Banking Method for ages 35-54 for the years 2008-2012 (PDF)

Preferred Banking Method for ages 55+ for the years 2008-2012 (PDF)

Breaking the Mobile Banking Glass Ceiling- Fiserv 2012

The annual survey of channel preferences was conducted for the ABA by Ipsos Public Affairs, (an independent market research firm) on August 2-6, 2012. For the survey, a nationally representative sample of 1,000 randomly selected adults aged 18 and over residing in the U.S. were interviewed by telephone. This ensured survey accuracy within ±3.1 percentage points and reflected the demographic composition of the U.S.