Fed: One-fifth of U.S. subscribers access mobile banking services


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The Federal Reserve Board is banking on mobile services to transform the American financial landscape. A new Fed survey issued Wednesday reports that one out of five U.S. subscribers used their mobile phone to access their bank account, credit card or other financial account in the 12-month period ending in January 2012, and an additional one out of five respondents said they would likely leverage mobile banking services at some point in the future. Even more impressive, the Fed speculates usage could increase to one out of three mobile phone owners by 2013. The survey reports consumers between 18 and 29 make up roughly 44 percent of mobile banking users, relative to 22 percent of all mobile phone users; at the other end of the spectrum, subscribers 60 and older--who represent 24 percent of the total U.S. mobile population--account for just 6 percent of all mobile banking users.

For now, most consumers are still limiting their mobile banking activities to checking account balances and monitoring recent transactions, although a few early adopters are expanding their horizons to make online bill payments, locate in-network automated teller machines and deposit checks. But the Fed expects big things to come, stating its belief that mobile banking technologies boast the potential to transform life for Americans not served by conventional financial channels. The survey reports that underbanked citizens--defined by the Fed as consumers with bank accounts who nevertheless use check cashers, payday lenders or payroll cards--are already capitalizing on the mobile opportunity, with 29 percent of this group access mobile banking services during the year ending in January.

This isn't necessarily news to companies in the mobile and finance verticals: Services targeting the underbanked are all the rage right now. Last week, Sprint Nextel (NYSE:S) partnered with payments and transaction processing firm PreCash to develop a mobile wallet application optimized for the operator's Boost Mobile and Virgin Mobile USA prepaid subsidiaries, enabling no-contract customers to make utility bill payments and related transactions via mobile device. Technological specifics are scarce, although Sprint Prepaid Group and PreCash said they plan to roll out the service later this month to all Boost Mobile handsets. The firms said the mobile wallet will support both Visa and MasterCard credit and debit cards, simplifying consumer adoption.

Fast-forward to the current week, and now mobile payments startup Wipit is teaming with H&R Block to introduce another virtual wallet service targeting the underbanked, a critical demographic for both companies. The Wipit service allows mobile consumers to use prepaid cash accounts to pay for purchases; moving forward, H&R Block Emerald Prepaid MasterCard clients can leverage their smartphones to complete transactions across mobile applications and websites that accept Wipit payments.

Look for more mobile banking services catering to the underbanked segment to follow, both in the U.S. and abroad. The question is who will ultimately capture this market--a mobile operator, a financial services firm, a digital payments startup or some combination of the above. It's going to be a slugfest: Just ask Nokia (NYSE:NOK). This week, the beleaguered device maker shut down its Mobile Financial Services unit, the latest move in its ongoing effort to move out of non-core business segments. The Nokia Money service launched in mid-2009, promising users in emerging markets access to basic transactions including person-to-person transfers, merchant and utility payments, and prepaid SIM card top-ups. Nokia introduced the service in association with m-commerce company Obopay, in which it invested $70 million in early 2009. Nokia later inked partnerships with India's Yes Bank and Union Bank but struggled to extend the initiative to other markets.

"While the rewards are potentially high for a well-timed mobile money initiative in developing markets, as witnessed by the phenomenal success of M-Pesa in Kenya, the time for new entrants may have passed and certainly some countries, such as India where Nokia chose to place their interests, are already well served by existing mobile money services," Yankee Group Senior Analyst Nick Holland said in a statement. "It may be that Nokia is simply cutting back to core interests that are more central to its position as a handset manufacturer, but its mobile money backpedaling goes to show that even a name as internationally recognized as Nokia cannot immediately guarantee success in the fiercely competitive mobile payment landscape." In short, even the biggest brands can leave the underbanked underwhelmed.--Jason