Mobile Banking Shifting Into High Gear, Fed Says

NEW YORK ( MainStreet) -- A study from the Federal Reserve says 20% of bank customers used mobile banking at least once in the past year, and 20% more say they will use it by the end of 2012.

The survey, Consumers and Mobile Financial Services, was released Wednesday. Inside, the report gauges the growth of mobile banking and concludes it's definitely shifting into higher gear.
Bank customers are going mobile, or at least trying it, a Federal Reserve survey shows.

The Fed pulled together all the survey numbers, did some calculations and now concludes that at least one in three American banking customers who own a smartphone will engage in mobile banking by 2013.

The good news for banks -- and for bank customers who want to conduct their financial business via mobile phones -- is that the mobile banking industry hasn't even hit the halfway point in terms of "critical mass." The Pew Research Center says 35% of U.S. adults owned a smartphone as of May, leaving plenty of room for growth in the market.

But it's the demographic data that really resonate. According to the Fed, Americans between the ages of 18 and 29 account for about 44% of all mobile banking users, while U.S. adults 60 and older account for only 6% of all users.

That in itself isn't a surprise -- younger consumers are usually first in line when using new technologies. But what may be an eye-opener for banks is the fact that the traditionally "under banked" are trending ahead of the rest of the population in terms of mobile banking usage. The Fed report says 29% of consumers who use check-cashing services and/or payday lenders used mobile banking in the past year.

By and large, consumers use their cellphones to check bank account balances or track recent transactions. Fewer consumers, the Fed reports, use mobile banking to actually pay bills or deposit a check via their phones.

What may be keeping a lid on growth is a general distrust among consumers about security effectiveness of mobile banking. The Fed report says that survey respondents were "more likely" to say that mobile banking was "unsecure" or "didn't know" how secure the technology may actually be.

Some other revealing data from the Federal Reserve study:
  • 87% of the U.S. population has a mobile phone.
  • 44% of mobile phones are smartphones (meaning Internet-enabled).
  • 84% of smartphone users have accessed the Internet on their phone in the past week.
  • 21% of mobile phone owners have used mobile banking in the past 12 months.
  • The most common use of mobile banking is to check account balances or recent transactions (90% of mobile banking users).
  • Transferring money between accounts is the second-most common use of mobile banking (42% of mobile banking users).
  • The primary reason mobile phone users had not adopted mobile banking was that they felt their banking needs were being met without the use of mobile banking (58%).
  • Concerns about the security of the technology were the primary reason given for not using mobile payments (42%) and the second most common reason given for not using mobile banking (48%).
  • 62% of the under banked who use mobile payments have used it to pay bills.

Clearly, mobile banking is making huge strides among consumers.

Once banking customers are convinced the technology is safe to use, and as more consumers buy smartphones, mobile banking may hit critical mass much sooner than banks might think.

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