The message around mobile banking is usually centered on convenience, but for many in this country, it could mean much more than that.
Consider that about 28 percent of households in the United States either don't have a bank account or are "underbanked," which means they have an account but it's not fully connected and they may still rely on high-interest check cashing services.
In some states, that percentage is much higher.
Joe Valenti, director of asset building at the Center for American Progress, recently submitted testimony to the Consumer Financial Protection Bureau's New Orleans field hearing on "Mobile Financial Services", where he stated that 42 percent of households in Louisiana are either unbanked or underbanked, including more than 200,000 households in the state that don't have bank accounts at all.
Contrast that percentage of unbanked and underbanked in Louisiana to the percentage of those with a cell phone, and technology is poised to ease the void in financial services.
Valenti said that this makes Louisiana one of seven states, as well as the District of Columbia, in which cell phones are more prevalent than bank accounts, according to a report from the Center for American Progress released last year.
Mobile Banking as an Answer
Mobile banking could ease many of the pain points for those without financial services. For instance, remote mobile deposit alleviates the need for customers to find a branch office, which might be difficult for customers in underserved areas, where pricey check cashing services - many charge from 2 to 5 percent per check - are the only option.
But mobile banking isn't limited to smartphones with fancy cameras and apps. Valenti points out that on a traditional cell phone, text alerts can provide balance information and reminders to help consumers avoid overdraft fees when balances are low, which is key to avoiding costly overdraft fees. Additionally, he noted that a pilot in Philadelphia has taken text alerts one step further, giving consumers who are receiving credit counseling a new option to hold themselves accountable for paying down debt: If they miss a payment, their family or friends will receive text alerts, too.
Valenti says there are few challenges ahead to bringing mobile banking on par with legacy services. He notes that regulations like the Credit Card Act of 2009, which mandates that statements include the amount a customer would need to pay monthly to be debt-free in three years, haven't translated to the digital side of things. QR codes and emails, he says, are not going to cut it.
Just exactly how effective and pervasive mobile banking becomes will in large part depend on how financial institutions proceed. Javelin Research asserts that the quality and number of features offered by a financial institution will be a major point of competition going forward, which should serve to drive development and deployment of new services.
As it stands, mobile banking is seeing tremendous growth in this country. Javelin Research estimates that in 2013, 95 million U.S. adults used mobile banking, a gain of 27 million mobile bankers over 2012. The growth of mobile banking is also closely tied to device adoption of smartphones and tablets, which added 36 million and 42 million new owners, respectively.
Andrew Berg is Senior Editor for Wireless Week. He has been covering all aspects of the wireless industry for the past six years.