There's an App for That: The Potential and Pitfalls of Mobile Phone Banking

>Posted by Emily Leeding
Look around a speeding Metro train or a park in Washington DC and you will see someone tapping on a smart phone.  The District is a city of speed and constant contact so it should be no surprise that new mobile banking technology is instantly adopted–specifically I refer to the ability to deposit checks via smart phone. An excerpt from a recent conversation within my family:
Mom: Grandma sent you a card and check for your birthday. Make sure you don’t lose it.
Brother: How nice of her! Puts check down on coffee table and punches buttons on his phone. Watch this! Click.
Dad: What did you just do?
Brother:  I deposited the check into my account. Look, you can see my balance and I receive a verification email that my funds will be ready by 5:00pm.
Now, my father worked in banking for 35 years, so he’s no stranger to banking or technology, but the concept was amazing to both my parents. But smart phones and mobile banking are not just for the young 20 somethings of Washington DC. In fact, they are catching on across the U.S.
A recent blog post on the New York Times discusses the new trend of mobile deposits. To date in the U.S., Charles Schwab, US Bank, PNC Bank, Citi, USAA and State Farm Bank offer this service. Bank of America is beta testing.
What does this mean for financial inclusion?
Smart phone technology is very expensive, especially for low-income clients who would benefit most from using it for increased and improved access to financial services.  But at the same time, this technology is rather new. As this technology becomes increasingly advanced, simpler versions will become more affordable for medium and lower-income clients in developing countries. In a few years, smart phones may be as commonplace in the developing world as regular cell phones are today.
Most mobile money applications in the developing world today rely on SMS technology – text messaging – to send and receive money. The advent of smart phones will open even more possibilities for reviewing bank statements, paying bills, depositing checks, and selling electronically, all in simple steps that require limited literacy. Proximity to a physical bank branch will become even less necessary. Hopefully, clients will also have more freedom in choosing a bank to work with and will be able to select the banks with the most appropriate practices, best customer service, and optimal interest rates.
While smart phone technology holds great potential for financial inclusion, safety is key. Client data and identity information should be adequately protected against fraud, while clients should know what they need to do to keep their information safe and fully understand the risks associated with using smart phone technology.
Now Bank of America needs to finish their beta testing so I can start depositing checks myself!
What apps would you like to see for money, banking and your smart phone?
Image Credit: Mitek Systems

Have you read?
Confessions of a Long-Distance Banking Customer
Mexico, Indonesia and Haiti Advance Financial Inclusion with Bold Approaches to Account Opening

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