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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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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The mobile financial services sector continued to expand in 2014, boosted by the creation of more enabling regulatory frameworks in several markets. With 255 mobile money services in operation across 89 countries, mobile money services are now available in over 60% of developing markets.  Today, mobile financial services are firmly established in the financial sectors of the majority of the developing world, serving new business areas and enabling a wider range of digital payments.

2014 in particular saw the achievement of key milestones for the industry:

A growing & maturing industry

The industry is getting smarter about what it takes to prompt mobile money adoption: active mobile money accounts stand at 103 million as of December 2014 (up from 73 million in 2013), and an increasing number of services are reaching scale. 21 services now have more than one million active accounts.

With effective improvements to the quality of agent networks, the mobile money industry is continuing to extend access to financial services beyond the reach of traditional financial institutions. At the end of 2014, there were 2.3 million mobile money outlets globally, 60% of which are active. While this figure masks variance across regions, there has been particularly strong progress in West Africa in 2014.

Interoperability & ecosystem development

As competition heats up in markets where mobile money is already available, we’re seeing a growing number of mobile network operators (MNOs) showing interest in interoperability. In 2014, MNOs in Pakistan, Sri Lanka and Tanzania interconnected their services to allow their customers to send money directly to mobile wallets on other networks, following in the footsteps of MNOs in Indonesia, where interoperability was implemented in 2013.

In terms of transaction volumes, the fastest growth in 2014 occurred in bulk disbursements, bill payments and merchant payments – reflecting an expanding ecosystem of institutional and business users of mobile money.  These transactions represented nearly a quarter (23.1%) of all the value processed through mobile money systems globally in December 2014, demonstrating the growing importance of mobile money as a payments channel for goods and services.

Cross-industry partnerships are helping to drive remittances too, both domestically and internationally. The introduction of a new model involving direct wallet-to-wallet cross-border transfers has led to a surge in international remittances via mobile money, and is helping to reduce costs for users. The median cost reported by respondents for sending USD 100 via mobile money is USD 4, less than half the average cost to send money globally via traditional money transfer channels.

Investment continues in mobile money

For investors, industry partners and stakeholders in the financial services industry, this is good news: Mobile money providers are continuing to invest in improving and expanding their services, showing important commitment to the long-horizon investment required by this industry.

In particular, mobile money providers are investing to strengthen their internal capabilities, with the objective of addressing an increasing number of users and transactions. By June 2014, half of all respondents to the survey had either already migrated their platform or planned to do so within the next 12 months. In addition to USSD, STK and IVR, over 60% of mobile money providers have now made their services available through smartphone apps, providing customers with better customer interfaces and meeting demand from a growing market of smartphone users in the developing world.

Fostering financial inclusion

Mobile money continues to transform the way people access financial services: in three-quarters of the markets where mobile money is available, agent outlets outnumber bank branches.  Providers are also making efforts to increase the number of users at the bottom of the pyramid and in 2014, the percentage of rural users and of female users increased.

As all of these changes take place within the industry, regulators are increasingly recognising the major role that non-bank providers of mobile money services can play in fostering financial inclusion, and are establishing more enabling regulatory frameworks for the provision of these services. Reforms have been passed in Colombia, India, Kenya and Liberia this year and today, in 47 out of 89 markets where mobile money is available, regulation allows both banks and non-banks to provide mobile money services in a sustainable way.

As the sections in this report reveal, mobile money providers are working hard to increase the quality, reach and sustainability of their services.  Through industry-led initiatives, including partnerships with banks and other third parties, providers are enhancing the customer experience and reaching scale to evolve the sector to a new phase of maturity.

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