Mobile Banking Adds Value, But Does it Add Revenue?

In Africa, use of mobile phones as a substitute for branch banking has clear upside for banks. In developed markets, the business case is much softer.

In fact, it is possible that mobile banking actually will wind up costing banks money, in a direct sense. The problem is that mobile banking now is becoming one more channel a bank has to support, while incremental revenue opportunities do not exist.

The business model essentially hinges on the "soft" advantages, such as ability to help retain high-value customers, retain parity with other banks in terms of new customer acquisition, and possibly some incremental value in terms of avoided retail branch openings. 

A study by the Federal Reserve System shows that mobile phones are changing the way consumers access financial services. 

Today, 87 percent of the U.S. population has a mobile phone, and according to Nielsen, more than 50 percent of U.S. consumers already are using a smart phone.

Some 21 percent of mobile phone owners have used mobile banking in the past 12 months. 

Some 68 percent of those consumers with Internet access and a bank account have used online banking in the past 12 months, by way of contrast. So some would note that mobile banking already is a channel a third the size of online banking. 

You might argue that online banking has the advantage of allowing users to conduct transactions and get information without creating additional needs for tellers. Mobile banking, though, doesn't necessarily even provide that advantage, since the online channel already is widely used.