Data from a new survey by the Federal Reserve Bank of Boston suggests that credit unions that don’t offer mobile banking, blow off mobile payments and ignore the mobile needs of business customers could head the way of the dinosaur.
The report surveyed 706 financial institutions, including 186 credit unions, in the Atlanta, Boston, Cleveland, Dallas, Kansas City, Minneapolis, and Richmond Federal Reserve Districts. The FIs were in 34 states and the District of Columbia. The data was drawn primarily from banks and credit unions with less than $500 million in assets; 46% had less than $250 million in assets.
It’s everywhere
The survey found what many already see anecdotally: mobile banking is now mainstream. According to the data, 89% of banks and credit unions now offer mobile banking, and 97% will offer it by the end of this year.
“Of the 706 FIs that completed the 2016 MFS Survey, only 24 (15 banks and nine credit unions) responded that they had ‘no plans to offer’ mobile banking services within the next two years,” the survey said.
Adoption rates are rising
“Respondents monitoring this data have seen strong increases, primarily in the 21%-to-50% adoption range, which doubled in this period. And although the percentages of FIs with more than 50% of their consumers adopting their mobile banking services are much smaller, they have doubled from 4% to 8% for both enrollment and use,” the study said.
Services to underbanked consumers rose, the study also found. In 2014, 15% of respondents targeted mobile banking to the underbanked; by 2016, 24% did and another 22% said they plan to do so by the end of this year. More credit unions than banks market mobile banking to the underbanked, the study noted.
Pays still looking for traction
Mobile wallets and other payments options are rare compared to mobile banking apps — just 24% of FIs have them, though 40% plan to do so within two years. This year, 99% of financial institutions support or expect to support Apple Pay; 84% said the same for Android Pay; and 70% said the same for Samsung Pay.
There are still a substantial number of mobile payments holdouts: 36% don’t plan to offer mobile payments in 2018.
The pressure’s on, though. Competition with other FIs was a key driver in offering mobile payments for about two-thirds (67%) of the respondents, though 50% also pointed to competition with nonbanks such as Amazon, Apple, Google and PayPal. Fewer than half pointed to security, customer demand, customer engagement, revenue generation, or cost reductions.
Eye on business accounts
Financial institutions are looking beyond the consumer markets for mobile expansion. By this year, 77% of bank and 47% of credit union respondents anticipate providing mobile banking services to segments such as commercial and small business, government agencies, educational entities, and nonprofits, the study said.
“FIs are increasing the mobile banking services they offer to businesses, but this is a gradual progression from simply mirroring retail services to implementing new services tailored to business users,” the study said.
“Banks offer both services at higher rates than do credit unions, but nonetheless 82% of credit union respondents offer balance and account monitoring, and 90% offer internal A2A transfers,” it added.
Large FIs are more likely to charge fees, it said.
Size matters
“A key takeaway throughout the survey is the impact of scale on mobile services. The largest FI respondents (those with assets above $500 million) were earlier to market, offer more services to more market segments, provide greater mobile capabilities (e.g., alerts and mobile account opening), and have implemented more sophisticated security and risk mitigation tools. Larger FIs have also been faster out of the gate in offering mobile payment services,” the report said.
“While smaller FIs do not have commensurate resources, they still need to craft strategies that will allow them to differentiate their mobile banking and payment services and leverage their own value propositions,” it added.
Other findings:
- 73% of respondents offer mobile remote deposit capture, and another 18% plan to do so by the end of the year.
- Most respondents offer or plan to offer the ability to check balances (92%), transfer funds between accounts within the FI (90%), mobile enrollment (71%) and single sign-on capabilities (61%).
- 79% of respondents expect to offer mobile P2P by the end of 2018.
- More than 80% support inactivity timeouts and multi-factor authentication (MFA), as well as mobile alerts.
- About a third (34%) of financial institutions don’t offer mobile card controls.
- The vast majority of respondents (70%) said the biggest implementation challenge for NFC mobile wallets was waiting for certification from card networks or processors.
- The two most common mobile-use incentives were rewards redemption for mobile transactions at the POS and cash rewards or account credits for mobile wallet enrollment. Fewer than 10% offered location-based offers or rewards points and cash back for mobile transactions.
- Mobile banking is free to consumers for 92% of the respondents; 25% of currently charge or plan to charge fees for mobile banking services to business customers.
- 31% of credit union respondents use services from mobile solution providers instead of their core service providers (just 12% of banks do the same). Only 11 respondents (seven were banks with assets over $1 billion) developed in-house mobile banking systems.
