Accourt Payments Specialists » Digital Transactions

US mobile banking and mobile financial services

Alex Rolfe — Tue, 31 Mar 2015 10:04:43 +0000

According to research from the Federal Reserve Board, nearly 40% of banked Americans now use their mobile phone to access their accounts.

A survey of 2,900 people on behalf of the Fed shows that mobile phones have become ubiquitous; 87% of respondents have handsets, and 71% of these are smartphones, up from 61% a year earlier.

Mobile phones have increasingly become tools that consumers use for banking, payments, budgeting, and shopping. Given the rapid pace of developments in the area of mobile finance, the Federal Reserve Board began conducting annual surveys of consumers’ use of mobile financial services in 2011.

The survey examines trends in the adoption and use of mobile banking, payments, and shopping behaviour and how the emergence of mobile financial services affects consumers’ interaction with financial institutions.

This report presents findings from the 2014 survey, fielded in December, which focused on consumers’ use of mobile technology to access financial services and make financial decisions. Where applicable, the findings from the current survey are also compared with the findings from the 2011, 2012, and 2013 surveys.

Topics include consumer access to bank services using mobile phones (“mobile banking”), consumer payment for goods and services using mobile phones (“mobile payments”), and consumer shopping decisions facilitated by use of mobile phones. Details about the survey, its methodology, and limitations can be found in the body of the report and in a methodological appendix.

Key findings of the 2014 survey include:

Mobile phones are in widespread use

87 percent of the US adult population has a mobile phone, consistent with 2013.
71 percent of mobile phones are smartphones (Internet-enabled), up from 61 percent a year earlier.

The ubiquity of mobile phones is changing the way consumers access financial services.

39 percent of all mobile phone owners with a bank account have used mobile banking in the 12 months prior to the survey, up from 33 percent in 2013 and 29 percent in 2012.
52 percent of smartphone owners with a bank account have used mobile banking in the 12 months prior to the survey, up from 51 percent a year earlier.
Among those mobile phone users with bank accounts who do not currently use mobile banking, 11 percent think that they will probably or definitely use it within the next 12 months, down from 12 percent a year earlier.
The most common use of mobile banking is to check account balances or recent transactions (94 percent of mobile banking users).
Among mobile banking users, transferring money between an individual’s own accounts (61 percent) and receiving an alert (e.g., a text message, push notification, or e-mail) from their bank (57 percent) are the second- and third-most common uses of mobile banking.
51 percent of mobile banking users have deposited a check using their mobile phone in the 12 months prior to the survey, up from 38 percent in 2013.
Among mobile banking users, the frequency of use has increased slightly, from a median of four times per month in 2013 to five times per month in 2014. This frequency was five times per month in 2012.
Residents of more rural areas have a lower incidence of mobile banking use than residents of more urban areas.

Usage of mobile banking and mobile payments by mobile phone type, 2011–14

Mobile phones are also changing the way consumers make payments.

22 percent of all mobile phone owners reported having made a mobile payment in the 12 months prior to the survey, up from 17 percent in 2013 and 15 percent in 2012.
The share of smartphone users who reported having made a mobile payment in the 12 months prior to the survey has increased to 28 percent, up from 24 percent in both 2013 and 2012.
Among mobile payment users with smartphones, the most common type of mobile payment was bill payment through an online system or mobile app (68 percent, up from 66 percent in 2013).
39 percent of all mobile payment users with smartphones have made a point-of-sale payment using their mobile phone in the 12 months prior to the survey, in line with the 39 percent reporting such payments in 2013.
Of mobile payment users with smartphones who made point-of-sale mobile payments, 31 percent did so by scanning a barcode or QR code displayed on their phone’s screen at check out (down from 39 percent in 2013), while 22 percent used an app that did not require tapping their mobile phone or scanning a barcode (up from 17 percent in 2013).
Residents of more rural areas have a lower incidence of mobile payments use than residents of more urban areas.

Measuring the Use of Mobile Payments and Mobile Banking

A preference for other methods of banking and making payments, as well as concerns about security, continue to be the main impediments to the adoption of mobile financial services cited by some consumers.

Of those not using mobile banking, the primary reason respondents cited was a belief that their banking needs were being met without the use of mobile banking (86 percent).
The primary reason non-mobile payment users gave for not using mobile payments was that they believe it is easier to pay with cash or credit/debit cards (75 percent).
Concern about the security of the technology was a common reason given for not using mobile banking or mobile payments (62 percent and 59 percent, respectively, of non-users).

Smartphones are changing the way people shop and make financial decisions.

47 percent of smartphone users have comparison shopped with their phone while at a retail store, and 33 percent have used their phone to scan a product’s barcode to find the best price for the item.
Of those consumers who used their phones to comparison shop in a retail store, 69 percent have changed where they purchased a product as a result of the information they found.
42 percent of smartphone users have used their phone to browse product reviews or get product information while shopping at a retail store, and 79 percent of them changed the item they purchased based on this information.
63 percent of mobile banking users have checked their account balance on their phone before making a large purchase in the previous 12 months leading up to the survey, and over half (53 percent) of them decided not to purchase an item as a result of their account balance or credit limit.
29 percent of all mobile phone users and 38 percent of smartphone users have used their phone to track purchases and expenses.

Mobile phones are prevalent among unbanked and underbanked consumers.

The share of consumers who are unbanked is 13 percent, and the share who are underbanked is 14 percent.
67 percent of the unbanked have access to a mobile phone, 65 percent of which are smartphones.
90 percent of the underbanked have access to a mobile phone, 73 percent of which are smartphones.

48 percent of underbanked consumers had used mobile banking in the 12 months prior to the survey.

Download the report here

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Payment Systems Regulator begins £75 trillion UK payment industry oversight

Alex Rolfe — Thu, 26 Mar 2015 11:40:32 +0000

On April 1^st,, in what will be a landmark date for UK financial regulation, The Payment Systems Regulator (PSR), the new economic regulator for payment systems, has confirmed how it will regulate the industry. It has also published a policy work programme setting out priorities for the year ahead.

The PSR’s aim is to make payment systems work well for the people and organisations

that use them, and deliver greater choice, innovation and competition – according to Leaprate.com.

Payment systems let people pay a deposit on a house, withdraw money from a cash machine, transfer money via smartphone, receive salaries into bank accounts, and much more. They are vital to the UK’s financial system and process in the region of 21 billion transactions worth around £75 trillion a year.

“Today marks a new start for payment systems. Our approach will bring change to the industry, injecting competition and innovation where it is needed most, and will put the interests of the people and businesses that use payment systems front and centre,” comments Hannah Nixon, managing director of the Payment Systems Regulator.

“True, long lasting change will be difficult, but we have the powers and the people to make it happen. Our challenge now – the challenge we share with industry – is to work together to deliver it.”

Today’s publication confirms the three ‘pillars’ of the new PSR’s work:

A new and inclusive strategy setting process that really involves users of these systems for the first time. This will be done by setting up a Payments Strategy Forum to develop a long term vision for how payment systems should develop and identify priority areas for the industry to work together where appropriate to deliver this vision;
Increasing transparency around how decisions are made, and who is making them. We will shine a light on the control and governance of payment systems, challenge payment system operators to explain how they have listened to people and organisations that use payment systems, and check that operators are really taking payment systems in a direction that meets people’s needs; and
Improving the way people and businesses gain access to a payment system – whether directly or indirectly – to be clearer and fairer and in a way that fosters innovative and competitive solutions for customers using payment systems.

As well as confirming its final policy, the PSR has published draft terms of reference for two market reviews and announced a card payment systems programme of work. The two market reviews will look at ownership and competitiveness of infrastructure provision; and the supply of indirect access to payment systems. This work will help the PSR gather important evidence to help it make robust decisions that make a real difference to those who use payment systems.

The PSR’s agenda complements work by the Financial Conduct Authority and the Competition and Markets Authority to deliver a more competitive banking industry in the best interests of consumers and the economy.

The new watchdog, whose upcoming launch was first announced in the spring of 2014, has been putting the final touches to its organization before the official start of operations. In January 2015, the regulator added three senior executives – Carole Begent, Mark Falcon and Louise Buckley to its ranks.

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UK shuns cash as cards dominate payment market

Alex Rolfe — Thu, 12 Mar 2015 12:31:46 +0000

The way we pay for everything is changing, with more digital transactions than ever before. But how close are we to the tipping point?

This weekend saw the end of cash as Britain’s dominant method of payment, and you probably didn’t even notice.Supposedly March 8 was the date on which transactions made be via credit, debit and other cashless methods would finally outstrip those made by cash – according to an article in The Telegraph.

In fact, there’s no way to tell when this exact point happened: it could have been Sunday, or it could have been at the end of last year. But for years the Payments Council has been predicting it by the end of 2015 at the latest.

The number of cash transactions will drop to just under 13 billion by 2023, while the number of cashless transactions – including cheques, credit cards, debit cards, contactless cards, direct debits, and standing orders – will rise to over 27 billion.

If you strip out large companies and focus only on individual consumers, it will take a little longer – happening in 2017 rather than 2015 – but the winds of change are only blowing in one direction.

Of course, it’s important to understand that these figures are in terms of volume,i.e. the raw number of individual transactions carried out. The value of cashless payments was already far larger than that of cash, because they’re used for much bigger transactions.

One reason the difference is so huge is because these numbers include payments made via CHAPS – the system used by big companies and even the Bank of England to shift around their vast sums of money.

Yet even if you restrict the figures only to retail – high street shops, online merchants, and all of that – the tipping point in terms of value was passed long ago.

According to the UK Cards Association, credit cards and debit cards surpassed cash in terms of value more than a decade ago, in December 2003. They now account for more than 75% of the retail sales.

Still, measuring by value isn’t actually very useful. I might make fifty small purchases with cash – say, bottles of milk at £1 each – and one large purchase with a cheque. That wouldn’t mean I did most of my shopping with cheques or that cheques were my dominant method of payment.

Change – for two reasons

The first is the rise of alternate payment methods. Paypal’s users exchangedmore than £30bn in 2014, up from £18bn the previous year, and this week Barclays will start allowing people to send money to each other using only their Twitter handles.

The most significant rival for cash’s crown is contactless payment, which is starting to sweep up some of the low-value transactions which would previously have been done with cash.

These are a small part of the picture for now, but they’re growing fast; the UKCA thinks that in two years’ time they’ll make up 6% of all card transactions.

That red line on the chart is the average value of a cash transaction last year –but it’s falling, from £11.43 in 2009 to £9.47 in 2014. And as you can see on the chart, the average contactless transaction is creeping up to meet it. Cash is being relegated to smaller and smaller sums.

Not everybody is happy with that. A study in the USA suggests that contactless cards make people more likely to buy things in the first place, because beeping it on a pad is so much easier than reaching into your pocket and counting out the change.

Another study found that contactless card transactions can be intercepted using off-the-shelf technology from as much as 60 centimeters away.

But the other factor is that we’re also using our old-fashioned credit and debit cards to pay for smaller things.

Over the last few years, the average value of a card transaction has been slowly dropping, as these statistics from the UKCA make clear:

Why? According to Richard Koch, the UKCA’s policy director, it’s a mixture of card technology getting cheaper and shops’ technology getting better.

Firstly, there has been a general fall in the price of card readers and card transactions – meaning local corner shops which formerly only took cash are now more likely to offer chip and PIN services too.

Then there’s the advent of self-checkout terminals. “There’s a very high proportion of card usage at them,” says Mr Koch, “and some terminals are designed not to take cash at all.” Not taking cash makes them easier to maintain, and cheaper for their owners.

Obviously, the internet shopping revolution plays its part. The UKCA says e-commerce is rising by 13% every year because people are buying online what they might previously buy with cash.

Finally, people are now lumping what would once have been multiple cash payments together as one digital payment. Mr Koch gives the example of his children, who pay for their school lunches with a card that he tops up in batches of £20 or £30 every week.

Another example would be Netflix – which replaces rented videos with a single subscription charge – and, of course, Transport For London’s Oyster card, which replaces daily paper tickets with longer-term top-up fees. Mr Koch actuallly predicts two million fewer transactions in 2017 than there were in 2014 because of payments being amalgamated in this way.

All of this creates a kind of spiral effect, because once people become more used to using their cards, they’re less likely to carry cash. And once they stop carrying cash, retailers have to invest in card readers if they want to sell what they’ve got.

In twenty years’ time, cash could be a minority system, used regularly only by a small hardcore of people, and infrequently by everyone else. Some new technology will emerge to handle low-value transactions.

Until then, cherish the feeling of copper and zinc in your palm while you can.

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ECB: Digital currencies unstable

Alex Rolfe — Wed, 04 Mar 2015 15:18:17 +0000

The European Central Bank has published a new report on digital currencies, describing them as “inherently

ECB: Digital currencies unstable

unstable” whilst remaining upbeat about the potentially transformative benefits they may offer in payments.

The ECB study builds off an earlier study published in 2012, offering both a general overview of digital currencies as well as follow-up analysis on the potential benefits and risk of using so-called virtual currency schemes (VCS).

The central bank, which oversees national-level central banks in the eurozone, suggested in the report that digital currencies could impact the ECB’s ability to function. However, it stopped short of calling digital currencies a threat to its operations because of its lack of widespread adoption among consumers and businesses.

The report’s authors note:

“Although VCS units are not denominated in euro, they do have the potential to have an impact on monetary policy and price stability, financial stability and the smooth operation of payment systems in the euro area.”

The viewpoint echoes a report released last year by the Bank of England, which in September acknowledged that, if widely adopted, bitcoin could “severely impair” its ability to govern the UK monetary system. The Bank of England said in a study published last month that the technology could fundamentally change the way that central banks function.

Virtual Currency Schemes – A Further Analysis

Cross-border payments disruption

The ECB outlined a number of areas in which digital currency development could broadly impact the traditional payments space, noting that defects in the remittance ecosystem could provide an opportunity for the technology to flourish in the long term.

The report’s authors state that digital currencies like bitcoin, given their cost structures, make the technology a potentially attractive option for both domestic and international remittances. While acknowledging the technological resources required to build such a network, the ECB notes:

“…there is major room for improvement, especially in [the remittance] field, and hence a VCS could have the potential to offer a better service than traditional providers (banks, money remitters and informal remittance systems).”

The ECB goes on to say that a significant barrier to broader adoption for remittance is the lack of centralized protections for those who opt to use digital currencies.

ECB highlights risk of ‘scamcoins’

As well as including refrains of central bank warnings about digital currencies, such as a perceived lack of transparency and market volatility, the ECB also touched on the growth of altcoins.

The report suggested that altcoins may one day serve as future payment networks that, in the eyes of the ECB, could compete with bitcoin given the differences in design, distribution and implementation.

At the same time, the report highlighted how altcoins pose added risks for investors because of the nebulous nature of some projects, noting:

“It is too early to tell what the future of these altcoins will be. A great many of them could be nothing more than “scamcoins”, ie VCSs that are created with the main objective of swindling naive buyers, either as consumers and payers or as investors.”

Specific risks named in the report include a lack of specific information about an altcoin network’s management, premining and market illiquidity.

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