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U.S. Federal Reserve/Matt Higgins, MEDILL

Consumer use of mobile banking to check bank accounts increased by one-third, but use of mobile payments grew only by only 14 percent, an indication that while consumers are using their phones more, some consumers have security concerns.

Mobile banking growing

by Matt Higgins
May 16, 2013


U.S. Federal Reserve/

Matt Higgins, MEDILL


Current usage suggests that future increases in mobile banking will most likely occur in younger age groups.

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U.S. Federal Reserve/

Matt Higgins, MEDILL

In 2012 most consumers still used in-person banking, but industry experts see the biggest growth ahead in mobile banking, which was only a distant fourth last year.

More and more people are using their smartphones for everything from checking their bank statements to paying bills. 

The Federal Reserve Board announced in March 27, “as of November 2012, 28 percent of all mobile phone users and 48 percent of smartphone users had used mobile banking in the past 12 months.” This was an increase of 7 percentage points from December 2011. During the same period, consumers using phones to purchase items tripled to 6 percent. 

“Technology rules the day,” declared Karen McIntyre, managing director and senior financial advisor, Wescott Financial Advisory LLC.

Consumers like Martin Lynch, 23, a paralegal in New York City, like the convenience of carrying something about the size of a wallet, but with the ability to access the same information as a computer.

“I like my banking app because of alerts,” Lynch said, referring to the time he purchased an item on a computer but was alerted immediately on his mobile banking app that his credit card had been used.

“There’s nothing I can’t do from my phone that I can’t do from my computer,” he said.

According to the Federal Reserve report, mobile banking is “prevalent” among 10 percent of the “underbanked”--people who have checking accounts but who use payroll lenders, debit cards attached to electronic payroll deposits, and check cashers. In addition, the Federal Reserve states that up to an additional 10 percent of the ”unbanked”--those without a bank account--may have access to financial services because of their cell phones; 59 percent of those without bank accounts own cell phones.

“It is bringing finance to the masses,” McIntyre said.

According to an April 2013 survey by Harris Interactive and Jumio, a computer company specializing in electronic security for retailers, 42 percent of the survey’s respondents in the Midwest used tablets or smart phones to check bank account balances, 36 percent made a retail purchase, and 31 percent paid bills. The Midwest respondents were no more or less than five percentage points different in any category compared to the national average.

Consumers can deposit checks similarly to depositing them at the ATM. They log into their accounts using the mobile app. They choose a check deposit option, enter the check figure, snap pictures of the front of the check and the back with the endorsement, submit on screen; an email confirmation follows. 

“I can see a day where people will not have wallets and will use their phones to do all of their banking except to get cash,” John S. Oxford, director of external affairs of Renasant Corp., a Mississippi-based bank with 87 locations in the Southeast, said in an interview.
Companies like Rushcard, a prepaid Visa debit card founded in 2003 by hip-hop mogul and entrepreneur Russell Simmons, are moving with the mobile banking trend.

“We expect to be accessible in a mobile wallet in the next couple of months,” Rushcard Chief Executive Officer Rob Rosenblatt said in an interview.

Fiserv Inc., a Wisconsin based financial technology services company, works with military financial institutions like Navy Federal Credit Union to transfer payments between service personnel and their families. A spouse in Chicago can use the app to transfer money instantly to a soldier in Afghanistan.

The 561 consumers who rated Fiserv’s app on gave it an average of 3.5 stars out of 5.

The biggest obstacle in the way of growth in this industry is fear among some consumers that the technology is not secure. Experts, however, say that mobile banking is secure.

The mobile banking industry has not had many major cyber attacks, partly due to the fact that the industry is a new one. In 2010 Citibank publicly acknowledged its banking app stored sensitive information including account numbers and passwords. However, Citibank said, it upgraded its app to delete files with stored sensitive information.

Chandler Givens of Edelson LLC, a Chicago based law firm specializing in consumer litigation in the electronic financial industry, said in an interview that "generally speaking, mobile apps are secure, but there are significant opportunities for malicious actors to exploit that technology."

Among the technology used by financial institutions to prevent cyber-theft is “sandboxing.” Hackers may try to obtain information from your mobile account by using other apps already installed to infiltrate the app with your banking information. The sandboxing technology puts a virtual wall or sandbox around the app with the sensitive information.

Another typical security feature of banking apps is two-factor authentication. For example, when you log into an online account, you have to enter a code, or a picture appears that you recognize. That same extra layer of security exists on mobile banking apps.

Bank mobile apps also use secure web servers. A consumer can tell the difference because any website that is secure has a prefix of https, instead of only http.

“I use apps and feel secure,” attorney Givens said.

Clay Calvert, director of cyber-security for MetroStar Systems, whose clients include the FBI, the State Department, and the U.S. military, believes mobile banking apps are better protected from malware than PCs or laptops.

“In 2012, only 3 percent of malware attacks were from Windows, but 28 percent were from Adobe, and 50 percent from Java,” Calvert said in an interview, citing a 2012 report from Kaspersky Lab Inc., a software security company.

Other features in mobile banking include apps such as the one from Wallaby Financial Inc. that allows credit card users to figure out which of their cards would provide the best reward for a specific item they want to consume. For example, if a consumer wants to go out to dinner at a restaurant on the first Friday of the month, the app might recommend using a Chase Sapphire Preferred credit card because it provides an additional point on a restaurant purchase on the first Friday of each month. 

The app has been in existence since 2012, and 34 consumers reviewed the app on, giving the app an average rating of 3.6 stars out of 5.

Sankar Krishnan of bank consultant Sutherland Global Services sees a day in the near future when paying by smart phone will be common.

“I think people are learning from the Starbucks experience”, he said, referring to the process by which consumers can pay for items using an app.

“In the next five years, 80 percent of retail stores and coffee shops will be sales done with mobile banking apps,” he said.

The company works with banks to more efficiently run their business, including the use of mobile banking.

Some consumers like Kelly Craig, a twenty-something law school student in Chicago, are treading the waters lightly. Craig says she uses her smart phone at Starbucks, but isn’t comfortable using it for banking or any other types of transactions.

“I’m concerned about what would happen if I lost my phone,” she said.

Experts like the Federal Reserve, and consumers like Craig agree that the trend will likely grow and it will grow the most among younger people, the Millennials and Gen X’s.

Even Craig admits, “definitely a younger generation technology.”

“My parents don’t even trust Amazon,” she said.