These days, you can do just about anything on your phone, including your banking. As online-only financial services providers such as Simple, Ally Bank and GoBank expand their products, more people are managing their money on the go or from the comfort of their homes.
More than half of American smartphone owners—51%—have used mobile banking services in the past year, up from 48% in the previous year, according to the Federal Reserve. In a survey this year by consulting firm Accenture, about a quarter of consumers who bank in the U.S. or Canada said they would consider signing up with a branchless online bank, while 94% of those 18 to 29 years old regularly do their banking online, and 72% have gone mobile.
Online encroachment
So where does this leave traditional banks and their bricks-and-mortar branches?
Because digital-only service providers don’t have to maintain and staff multiple locations, they cost less to run. This means that they can offer lower fees and interest rates. Simple customers, for instance, don’t pay any monthly or overdraft fees and aren’t required to maintain a minimum balance. Simple focuses on its mobile platform, so customers can do most transactions through their smartphones, including setting savings goals or writing and mailing a check.
Computer glitches affect online providers much as they do bricks-and-mortar banks. When Simple updated its system in August, about 10% of its 120,000 users lost access to their money, according to news reports at the time. Technology issues have blocked customers from even some of the biggest U.S. banks: In 2010, JPMorgan Chase’s online portal went out for three days. Although occasional technical issues can present a hurdle for online-only providers and their customers, the convenience they can offer, coupled with low costs, can still win over consumers.
In terms of basic services, digital-only providers aren’t all that different from bricks-and-mortar banks, especially as many of the larger institutions roll out their own online portals and mobile apps. In some cases, big banks have acquired or set up partnerships with the branchless upstarts. This year, for instance, Spain’s BBVA which also works with the Bancorp Bank to hold customers’ funds in Federal Deposit Insurance Corp.-backed accounts.
Making money
Like traditional banks, online-only providers make money through interchange fees paid by merchants for debit card swipes. Many, including Moven, offer customers fee-free access to tens of thousands of independently run cash machines, to counter big banks’ well-established ATM networks. If you need to send a paper check, though, doing it through digital-only banks may involve more time and effort than a traditional account would typically require.
As mobile banking becomes more popular, especially with younger adults, big banks as well as credit unions and community banks are beefing up their smartphone and online offerings and integrating more technology into their branches and ATMs. Some, including Wells Fargo and PNC Bank, are experimenting with smaller branches, while others have taken to putting teller windows in supermarkets, all to make in-person banking more streamlined and convenient.
If you don’t have a smartphone or tablet, or find it difficult to navigate pages and make transactions on a small screen, mobile banking might not be the right choice for you. But for those who love their smartphones, these mobile banking services are good news: As long as you can connect to the Internet, you’re good to go.
Tug-of-war image via Shutterstock.
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