Fed director cautious of ‘not fully known’ impacts of mobile banking

Sandra Braunstein, director of the division of consumer and community affairs at the US Federal Reserve today spoke of the uncertainties that still surround the potential uses of mobile devices in financial services.

Testifying about mobile payments before the Committee on Banking, Housing, and Urban Affairs at the US Senate in Washington, DC, Braunstein said: "The evolution of new technologies that enable consumers to conduct financial transactions using mobile devices has the potential to affect their financial lives in important – but as of yet, not fully known ways".

For this reason, Braunstein said the Fed had been "monitoring trends and developments in mobile financial services".

A survey commissioned by the Fed in 2011 saw 2,300 respondents answer questions relating to using mobile devices for banking and payments. One in five mobile phone users said they had used their device to conduct "some banking activity", Braunstein said.

The full results of the questionnaire were published on March 14 and demonstrated some notable trends. "Younger consumers, those below age 29, have readily adopted mobile banking, and make up almost 44% of all consumers surveyed who use such services," said Braunstein. "Adoption rates of mobile banking also differ by racial and ethnic background, with Hispanics and non-Hispanic blacks making up a disproportionate share of those who use mobile banking services".

The majority of consumers who had steered clear of mobile banking said they felt their banking needs were being met through more traditional means. Meanwhile, "security concerns" were the second most-cited reason for not using mobile banking, Braunstein said. "Specifically, consumers expressed concerns about hackers gaining access to their phones and exposing their personal financial information."

Mobile banking is gathering pace worldwide. In countries where access to in situ banking services can be difficult in particular, making payments via mobile phones is becoming increasingly common.

Access to financial institutions is not a problem in the US, but Braunstein noted the impact on the so-called "underbanked" population in the US. "The underbanked are more likely than the general population to use mobile payments, with one out of six using payment services on their mobile devices," she said.

For the minority who are unbanked, Braunstein said these consumers also reported using mobile financial services, "generally in conjunction with a general purpose prepaid card or payroll card".