Why Digitization is the Future of Consumer Financial Services
The Federal Reserve recently studied 50,000 US residents and their Consumer and Mobile Financial Report found, somewhat unsurprisingly, that mobile banking is on the rise. The most common actions include checking account balances, transferring money to themselves or others, and receiving push notifications.
“There is no doubt that consumers are embracing mobile money, it’s a booming space,” says Rimma Perelmuter, CEO of Mobile Ecosystem Forum in a call.
The Federal Reserve report also revealed a huge opportunity for the unbanked population. Of the unbanked, 90% have a mobile phone (73% of those are smartphones), but only half currently use mobile banking and mobile payments.
Mobile is contributing to economic and social development across the globe, delivering financial inclusion to unbanked populations with 270 live services in 90 countries as of December 2015 according to GSMA Mobile Economy Report.
Here’s why the adoption of mobile banking will continue to grow:
An emerging focus for startups, established institutions, and policy makers is to facilitate access to new payments providers in a way that boosts competition while also creating greater choice and convenience for the end user. What better way to do that than tackle the mobile market?
“All users have to do to pay a bill, purchase a good or service, or transfer money is reach in their pocket,” says Rodrigo Teijeiro, CEO and Founder of RecargaPay, a mobile payments platform. “Mobile banking eliminates the need for consumers to visit an ATM, take out cash, and redistribute it. They are no longer required to bother with kiosks or cash point top ups.”
Reduction in fees.
When checking account balances and recent transactions, 94% of mobile bankers use mobile platforms. But many consumers don’t even need to take it upon themselves to check their balances; many services offer SMS alerts when your account is low or there is a suspicious charge.
This positions consumers to be proactive. Scammers are constantly trying to steal people’s personal banking information, and if not caught quickly, can do enormous damage. Mobile banking allows consumers to keep close tabs on any fraudulent charges.
They are also empowered to check their accounts frequently, in theory avoiding the nuisance of overdraft fees, fees to pay bills, etc.
Peer-to-Peer Payment Apps
The economy has already been greatly affected by the sharing economy. From rides to lodging, and now in consumer finance. Peer-to-Peer (P2P) commerce is upending the legacy bank system through crowdfunding, social commerce, P2P payments and P2P insurance.
According to McKinsey, 80 percent of customer interactions with banks are for buying a financial product, checking on a payment or paying a bill. When these capabilities are integrated into P2P platform offerings, big banking becomes irrelevant for everyday transactions.
P2P payment platforms are built for continuous innovation. “Nonbank challengers that provide mobile top-ups, mobile wallets and financial services are more agile in nature,” says Teijeiro. “We’re able to launch updates with incredible speed and therefore serve our customers more quickly and effectively than most banks.”
From when they’re getting married, to desired workplace structure, to political influences, millennials are constantly discussed and researched. As they join Baby Boomers as one of the largest cohorts of Americans, it’s only natural that they make an impact on the economy.
Living through the financial crisis a decade ago has created an innate distrust in financial institutions within this demographic. Millennials are not keen on financial gatekeepers, like banks or financial advisors, and instead, prefer to pursue knowledge via their own research.
The consumer desire for instant gratification and convenience, coupled with the steady increase of mobile devices and IoT, positions mobile banking platforms to grow exponentially in the coming years.