Report: Mobile Mobile banking and payment practices of US Financial Institutions

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The year 2016 marks the second time that multiple Federal Reserve Banks (FR Banks) have surveyed financial institutions (FIs) about their mobile banking and payment practices and plans.

After surveying institutions in the Atlanta, Boston, Dallas, Minneapolis, and Richmond Federal Reserve Districts (Districts) in 2014, the FR Banks, led by the Federal Reserve Bank of Boston, distributed an updated survey in September 2016. Two additional FR Banks, Cleveland and Kansas City, participated in the 2016 Mobile Financial Services Survey (MFS Survey).

This report presents the consolidated findings from these seven Districts. The FR Banks share a common objective to provide FIs and the broader industry with an understanding of the current landscape for mobile banking and payment services – both consumer and business – within each District and across several regions of the United States (US).

Additionally, FR Banks want to augment their own knowledge about the status of mobile banking and payments at institutions within their Districts. The information collected in this 2016 MFS Survey included:

  • Number/percentage of banks and credit unions offering mobile banking and mobile payment services
  • Markets to which FIs offer mobile banking services
  • Types of mobile banking services offered or planned
  • Mobile technology platforms supported
  • Business drivers associated with offering both mobile banking and mobile payment services
  • Consumer and business adoption of mobile banking and mobile payment services
  • FI strategies related to mobile payment services
  • Implementation issues and incentives associated with offering mobile payment services
  • Security, risks, and other barriers to providing mobile banking and payment services

The 2016 MFS Survey captures a point-in-time snapshot of mobile banking and payment activities at FIs in the participating Districts. Because five of the seven FR Banks participated in the MFS Survey in 2014, historical information is used, where relevant, to augment the 2016 findings.

This study is important to the understanding of mobile financial services in the US, as it encompasses data from 706 FIs. These survey respondents are geographically dispersed across 34 states and the District of Columbia, providing a broad view of the availability of mobile banking and payment services in the US.

The study is also noteworthy because it addresses mobile services from the FI perspective and because the data is drawn primarily from banks and credit unions with less than $500 million in assets – a group for which information is not readily available.

Status of FIs Offering Mobile Banking Services by District

Mobile Banking Key Findings:

  • The following are mobile banking findings common to institutions across most Districts:
  • Retail mobile banking is ubiquitous at US FIs: 89% of FI respondents currently offer mobile banking services to consumers; and 97% will offer these service by 2018.
  • By 2018, 77% of bank and 47% of credit union respondents anticipate providing mobile banking services to other customer segments including commercial and small business, government agencies, educational entities, and non-profits – commercial and small business are the most prevalent.
  • Nearly all FIs offer or plan to offer mobile apps that support the two dominant mobile operating systems: 98% to support Apple iOS and 97% to support Android OS.
  • Most respondents offer or plan to offer the following services to consumers: ability to check balances (92%); transfer funds between their accounts within the FI (90%); mobile enrollment (71%); and single sign-on capabilities (61%).
  • Of those FIs tracking customer adoption, 54% now have more than 20% of their retail customers enrolled in mobile banking; and 44% have more than 20% actively using these services.
  • Among FIs offering and tracking business mobile banking adoption, more than half (55%) still have adoption rates less than 5%.
  • Mobile banking is essentially a free service to retail customers; only 8% either charge or plan to charge an explicit mobile banking fee and only for some advanced services; however, 25% of respondents currently charge or are considering fees for mobile banking services to business customers.
  • The key mobile banking security concern cited by respondents is the consumer’s lack of protective behavior. In response, FIs have implemented a range of mitigation controls – more than 80% support inactivity timeouts and multi-factor authentication (MFA), as well as mobile alerts –to enhance security and help change consumer behavior.

Status of FIs Offering Mobile Payment Services by District

Mobile Payment Key Findings:

  • Implementation of mobile payment services is accelerating as FIs respond to competitive pressure and industry momentum for mobile payments: in addition to the 24% already offering mobile payments, 40% plan to do so within two years.
  • Over two-thirds of the respondents partner or plan to partner with third-party processors and more than half are considering partnerships with wallet providers that support near-field communication (NFC).
  • Mobile wallet implementations are increasing steadily, with Apple Pay as the current leader. Survey results indicate that by 2018, FI support for wallets will be: 99% for Apple Pay; 84% for Android Pay; and 70% for Samsung Pay.
  • Asset size affects results in several areas: larger FIs have greater resources to expend on new services, implementations, and security technologies/controls.
  • Banks and credit unions often differ in approaches and strategies for mobile payments.

Download the full report HERE