Remember when you regularly handled cash? Had it in your wallet, used it at coffee shops or restaurants? Mobile payment applications made cash obsolete even at craft fairs and farmer's markets. Then, the Coronavirus accelerated the dismissal of cash at even small shops. It's just another step in the digitization of our system of commerce.
In part, some of this shift was heralded by the entrance of mobile banking. The days of people handling financial transactions at the local bank branch are, these days, a relic of a bygone age. Do you recall the last time you were in a bank lobby? At the drive-through window?
While automated banking trends began with the proliferation of ATMs and online banking, it has truly taken off with the development of mobile banking applications. Millions of people now turn to their smartphones for many of their banking needs, and current mobile banking trends indicate these applications will continue to become even more widespread.
Mobile banking involves making financial transactions on a mobile device, your phone or a tablet, through an application provided by either a bank or other type of financial institution. Transactions can include notifications from the bank regarding account activity, bill payments, point-of-sale transactions, wire transfers, check deposits, and these days, pretty much any other function your bank can perform.
How Have Mobile Banking Applications Evolved?
Even before the existence of smartphones (yes, even back then), mobile banking existed, just not in the form we’d recognize it today. In 1999, individuals with mobile phones could receive SMS (text) messages reporting on banking/account information. That was it.
But, cell phone screens were too small and viewing more information was just too difficult. In fact, in the early 2000s Wells Fargo introduced a mobile banking service, but adoption rates were so low, they discontinued it. Then came the arrival of the iPhone, which begat applications, which begat more robust services. Applications were largely consumer driven. Simply put, with bigger screens, better computing power, and new features, users demanded more mobile services.
By 2016, nearly half of the world’s population was checking their account balances using a mobile banking app. Coincidentally, by 2016, Millennials were hitting their 30s and beginning to engage in more complex transactions than checking their balances. In fact, research by the Federal Reserve suggests that the Millennial generation is the primary driver behind the evolution of mobile banking with nearly 70% of them using mobile banking applications and many of them suggesting they’d leave a bank without a mobile application.
By 2019, 87% of banks with assets ranging from $50 million to $50 billion offered some kind of mobile application. When one considers that by 2021 there will be 7 billion mobile users, with 3 billion of them promising to utilize mobile banking, it’s easy to see the continued growth potential and the continued drive for evolution.
Why You Should Be Aware of Upcoming Mobile Banking Trends
Mobile banking apps are fast becoming an essential tool for consumers looking to manage their finances more effectively. According to a recent study by Citi, mobile banking apps rank third behind social media apps and weather apps when it comes to the most used smartphone applications. The same study showed that 46 percent of people increased their mobile banking app usage over the previous year and that nine out of ten of these users preferred using them to visiting a physical bank. For millennials, the results are even more stunning, with 68 percent of them claiming that banking apps could eventually allow their smartphones to replace their wallets altogether.
Given the rapid adoption of online banking applications, it’s critical for organizations and businesses to consider how these trends will shape financial services and transactions as well as money management in the near future. It should come as no surprise that other companies are looking to get in on the financial action. In fact, Facebook caused quite a bit of controversy when it announced plans to promote the Libra cryptocurrency. While Libra may not be getting off the ground anytime soon, there are plenty of other developments in the future of mobile banking that will continue to affect the way people manage their finances and spend money throughout 2021.
7 Mobile Banking Trends for 2021
1. Mobile App ATM Connectivity/Cardless ATM
While mobile apps have long made it possible for customers to manage their accounts, new innovations in near-field communications technology and QR code scanning will allow them to interact with banking ATMs more easily than ever. Rather than having to fumble with debit cards and enter passwords in a public setting, users will soon be able to access funds by simply scanning their phone screen or being within close proximity to the ATM.
Expect this trend to continue and expand to include applications like Apple Pay and Google Pay as well as QR code functionality.
2. More Biometrics
Multi-factor authentication is fast becoming the standard for security, especially when it comes to financial institutions. The ability of smartphones to capture biometric data like fingerprint scans and facial recognition will become even more sophisticated to provide better protection against fraud and make using mobile banking apps even more intuitive and simple.
Again, this trend may be lead by a generational shift as 62% of Gen Z is comfortable using biometrics for identification purposes. And, when considering that biometric data is more reliable in verifying ID than a human, it may just be what enables opening up a bank account to become a mobile feature in 2021 as well.
3. Voice Command and Voice Recognition
Just as voice requests are taking over mobile search and allowing people to access applications without even touching their devices, mobile banking apps are using voice commands to help users obtain the services they need with minimal obstruction. Rather than sifting through multiple menus or searching for the right option, voice commands will allow them to access services faster and more easily.
While noted as a growth point last year as well, 2021 will likely see the integration of voice recognition AI which will enable increased security for such transactions.
4. Machine Learning and Chatbots
As more and more people utilize mobile banking apps, financial institutions are able to gather more data about how those services are being used and use that information to improve the overall customer experience. Machine learning algorithms can be used to power bots that help direct people to the services that will address their current needs. Combined with voice technology, machine learning will make the future of mobile banking more responsive and user friendly.
However, in 2021, the use of chatbots will continue to grow, and when coupled with other technological changes will be able to provide users not just with improved customer service experiences, but also act as digital financial assistants and advisors.
5. Big Data Fraud Prevention
The ability to gather and analyze data about how people use financial products makes it easier than ever to identify inconsistencies that are commonly associated with fraud and identity theft. For instance, if multiple purchases are being made in one state, but the mobile banking app indicates that the device is located in another, the customer’s account can be locked down until the financial institution verifies the purchase. And since messages and notifications can be delivered directly to the app, these potential fraud issues can be resolved quickly and easily.
Big data and its application to security and customer experience will continue to be an important trend in 2021.
6. Automation and Personalization
People have been paying bills online for some time, and even using existing banking services to automate their payments. However, expect this automation trend to extend beyond bill payments and be utilized for other services, like helping customers save money.
Those savings automations can be informed largely by more robust, and personalized, reporting, tapping into a customer's savings or financial goals. A combination of AI, algorithms and machine learning can help users look at their spending saving trends, develop a plan, and stick to it.
7. Blockchain in Banking
Because of the way Blockchain stores data, it's an ideal method to facilitate faster payments and increase security. Further, because of the way blockchain handles data, less human intervention will be needed in processing allowing for lower processing fees as well.
While banks have been using some form of blockchain data storage for a few years now, the improvement in speed, efficiency, accuracy, and security (of both transaction and data) means that the financial sector as a whole is looking at this shift.
The Role of Data Centers in Mobile Banking Trends
As financial institutions push more online banking applications into the hands of their customers, it’s more important than ever for them to ensure that they’re building these services upon a reliable, rock-solid infrastructure. The stakes are particularly high, both in terms of customer service and security. A few moments of downtime that makes it impossible for a customer to access their funds could cause them to lose faith in their bank and turn to another provider. And it goes without saying that a data breach involving financial information could be a catastrophic event for any bank.
That’s why it’s more important than ever for financial services to partner with data centers that are engineered for perfection. While finding the right combination of space, power, and cooling is crucial when vetting a colocation provider, financial institutions can’t afford to settle for anything less than 100% uptime reliability and full transparency that allows them to monitor the status of their infrastructure. Just as banking customers take their financial data very seriously, their banks must be even more vigilant when it comes to delivering services over mobile banking applications.
About Ernest Sampera
Ernie Sampera is the Chief Marketing Officer at vXchnge. Ernie is responsible for product marketing, external & corporate communications and business development.