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Study: 40M U.S. mobile banking customers by 2012

New research from TowerGroup shows that mobile banking is finally developing into a force that can't be discounted.

The market researcher estimates that mobile banking customers will top 1 million by year's end in the United States, jumping to more than 40 million by 2012. Also, by 2012, one-fourth of all mobile customers are expected to come from outside the online banking channel.

"We think this is pretty impressive considering that most banking did not launch a mobile offering until this year," said Charul Vyas, analyst at Tower Group. "Most of the top 10 banks have already deployed mobile banking or will shortly. And interest in mobile is now moving downstream as more mid-to-small banks and credit unions begin to evaluate and offer mobile banking to their own customer bases."

This growth is credited to the substantial improvements across wireless networks, handsets and applications. Also contributing are the significant marketing and technology investments from top banks to increase consumer awareness and trial.

Mobile banking initially suffered from a lack of consumer interest. Add to that cultural, business and technical challenges such as information security and consumer privacy.

In fact, Wells Fargo actually shut down its mobile banking offering in 2002 after only 2,500 customers had signed up over 18 months. But the bank has now re-launched a new mobile banking application.
However, security continues to remain a major concern for potential users.

An example of how this is being dealt with is Citibank's Mobile banking application, Citi Mobile.
Citi Mobile protects customers in three ways.

First, each time that customers access their account by mobile phone, they must enter a six-digit personal identification number (PIN). Second, no personal data, including account numbers, are ever stored on the phone. Finally, all information sent between the phone and the bank has 128-bit encryption.

The adoption of mobile banking will be fueled by two primary factors: consumers' increasing preference for real time, self-service transactions and their growing adoption of mobile data services and applications.

Currently the impact of mobile banking on commerce is limited.

"But we believe that mobile banking will help pave the road for mobile payments and commerce in the future," Ms. Vyas said. "As consumers become more familiar with accessing their financial data via mobile, we believe they will become more comfortable with the idea of using their mobile phone for other activities such as payments."

TowerGroup projects that up to 30 percent of online banking customers will use the mobile channel in the next five years. Mobile banking may also appeal to a segment of the banking population that uses ATMs, but is not willing to use or comfortable with online banking.

"Currently, the typical mobile banking customer is one that uses Internet banking, because most banks require customers to sign up for mobile banking via their online banking site," Ms. Vyas said. "So as you can imagine, users tend be the more tech savvy consumer. But we think this will change in the coming years."

Finally, so what's the opportunity for mobile banking?

Plenty. Studies show that consumers are more likely to return home for their mobile phone than for keys or wallet.

"We think there is real potential for mobile banking to reach the underbanked or unbanked, and by 2012 we expect 25 percent of all mobile banking customers to come from outside the Internet banking channel," said Ms. Vyas.