Mobile banking has revolutionized how people manage their finances in real-time, driven by innovative advancements in app development, open-banking APIs, and high-speed Wi-Fi connections. Agile fintechs are at the forefront of the mobile banking revolution as they accelerate technological advancements in the sector and introduce cutting-edge features that retail banks are increasingly integrating into their platforms to remain competitive. These innovations, including peer-to-peer (P2P) payments, biometric authentication, and artificial intelligence (AI), have significantly enhanced security and created seamless user experiences. “Mobile is now the gateway to everyday banking for a growing majority of consumers in various markets,” McKinsey and Company says in its State of Retail Banking report. “Banks, therefore, need to design their distribution so it leads with mobile.”
Changing consumer behavior
Mobile banking first emerged in 1999 with basic services, such as balance inquiries, offered through SMS channels. However, the behavior of consumers was transformed during the COVID-19 pandemic, as millions of people worldwide worked from home during lockdowns.
Today, consumers are demanding real-time access to financial services and their bank accounts, as well as hyper-personalized experiences that allow them to automate bill payments, set savings goals, invest, and budget, among other features.
A 2024 survey by Q2 Holdings found that 74% of consumers across all generations seek more personalized experiences from their banks, while 48% log into their mobile banking apps or websites daily, highlighting the integral role that mobile banking now plays in the daily management of their finances. The study also found that 48% of consumers demand higher levels of security, and 66% are comfortable with their bank or financial institution using their data to personalize their experiences.
“The digital landscape is continuing to shift and evolve for banks and credit unions,” says Anthony Ianniciello, Q2’s vice president of product management. Consumers across all generations are asking for the same things: personalized experiences, increased security, and an increased use of AI.
Increased smartphone penetration
The global penetration of smartphones has also been a significant driver of the expansion of mobile banking in the financial ecosystem. Since 2023, smartphone usage has surged, enabling banks to reach a broader customer base, including unbanked or underbanked populations.
GSMA statistics show that the number of people using their smartphones to access the internet increased to almost 4.3 billion people by the end of 2023, or 53% of the global population. Almost 80% of mobile internet subscribers globally are now accessing the internet on a 4G or 5G smartphone, an increase of 330 million people between 2022 and 2023, GSMA says.
Meanwhile, McKinsey notes that the share of consumers actively using mobile for their banking needs jumped by 18 percentage points between 2020 and 2023 to reach 57%. It adds that mobile banking service touchpoints have also surged by 72% over the same period, reaching 150 annual touchpoints per customer and surpassing some leading e-commerce players. As more people embrace mobile banking, the industry is poised for significant growth, ensuring that financial opportunities are within reach for everyone.
Transformative impact on personal finances
The convenience of 24/7 access, intuitive interfaces, and customized services have reshaped customers’ expectations. Features such as instant transfers, mobile deposits, and easy bill payments are now the norm, allowing customers to manage their finances seamlessly.
However, hyper-personalization, which leverages AI and machine learning data analytics to tailor services to individual preferences, has significantly enhanced the overall customer experience. It has set a new standard in the industry through personalized products, tailored financial advice, and real-time financial solutions.
“As consumers increase their use of digital banking services, they grow to expect more, particularly when compared to the standards they are accustomed to from leading consumer-internet companies,” McKinsey says.
Operational efficiency for banks
Financial institutions that embrace mobile banking have reduced operational costs associated with maintaining physical branches. AI has also enabled them to automate routine tasks, allowing employees to focus on more important strategic responsibilities.
According to McKinsey, banks adopting a mobile-first integrated distribution strategy have also increased deposit balances by 10% to 15% by optimizing their distribution channels. This efficiency lowers costs and enables banks to allocate resources to enhance digital platforms and customer service.
Consumer preferences
Understanding and meeting consumer expectations is paramount in the mobile banking revolution. While personalization is a key factor driving user adoption, others include:
- Trust in technology: A survey by MX Technologies found that more than half (59%) of US consumers trust AI to deliver proactive reminders to pay bills, save money, and provide a comprehensive breakdown of their spending.
- Seamless integration: 57% of consumers would link all their finances into a single mobile app if given the option, according to MX Technologies. This is despite many financial institutions offering this feature on their mobile banking apps.
- Financial education and insights: Almost half (42%) of US consumers want educational programs to help them become financially stronger, and 33% are seeking predictive insights and personalized recommendations to manage their finances better, the MX Technologies study found.
Innovations shaping mobile banking
Numerous innovations are transforming mobile banking. These include:
- Mobile wallets and contactless payments: The rise of mobile wallets such as Apple Pay and Google Pay has transformed consumer spending habits by enabling contactless payments. Digital wallets offer a secure and convenient way to conduct transactions, further embedding mobile banking into consumers’ daily lives.
According to Juniper Research, the total value of digital wallet transactions is expected to jump by 77% from US$9 trillion in 2023 to over US$16 trillion by 2028. The trend is being driven by growth across developed and developing markets thanks to services such as Buy Now, Pay Later, microloans, and personal finance management tools, Juniper adds.
- Integration of AI and chatbots: Forrester’s 2024 European Digital Experience Review highlights that banks are evolving from basic chatbots to sophisticated virtual assistants that anticipate customers’ needs.
“As AI evolves, we expect digital banking experiences to become increasingly seamless and immersive, transforming the app from a transactional tool into a trusted advisor—revolutionizing how customers interact with their banks,” Forrester says in the report.
- Open banking and API integration: Open-banking APIs facilitate the connection of various financial tools and services through third-party fintechs. This enables banks to offer their customers a more comprehensive and integrated solution on a single platform by allowing fintechs to access their financial data.
The future of mobile banking
Emerging technologies such as 5G, the Internet of Things (IoT), and augmented reality (AR) will shape the future of mobile banking, making interactions immersive and even more seamless than they are today. AI will continue to play a pivotal role in the future of mobile banking by transforming apps into comprehensive financial advisors that offer customers personalized financial guidance.
However, the financial “super app” has emerged as one of the most promising innovations in mobile banking. Super apps integrate various services into a single platform, including banking, payments, investing, insurance, shopping, and personal finance management. The holistic approach enhances user convenience and fosters deeper customer engagement by catering to diverse financial and lifestyle needs. By transforming their platforms into super apps, banks can position themselves as indispensable tools in customers’ daily lives, driving loyalty and expanding their service offerings.
Examples of super apps include Paytm in India, Alipay and WeChat in China, GCash in the Philippines, and Gojek in Indonesia. The UK’s Revolut also aims to become a super app and has already added features such as phone plans, instant chats, and travel bookings to its app.
Mobile banking has revolutionized the financial industry by improving accessibility, efficiency, and customer personalization. The adoption of advanced technologies and strategies such as mobile-first distribution and hyper-personalization has allowed banks to strengthen customer relationships and broaden their scope. As mobile banking progresses, financial institutions that prioritize innovation and invest in technology and analytics will be well-positioned to shape the future of finance.
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