More consumers now spend, manage, & invest money via finance apps; are you getting your share?

Money has officially gone mobile. Using your smartphone to pick up a tab is no longer taboo.

The suits on the metro with their faces buried in their mobile devices aren’t  just texting, emailing or web surfing; they’re using finance apps to spend and send money, invest and manage their finances. And they’re not alone, either. The Millennials sitting next to them are doing the same.

This is partially (and quite simply) because they can; mobile money-management capabilities and security have improved vastly over the past few years. But the upswing in making financial transactions and financial moves via mobile is also because consumers now feel generally more at ease with the security of mobile money-management, having seen it working better and for longer now. More consumers are finally willing to put their money where their mobile is.

More Consumers “Banking” on Mobile Finance Apps

Accenture reports that 40 percent of overall consumers have used their smartphones to pay a merchant, up 24% from two years ago. And at least 52% of Millennials reported paying with their mobile device—not surprising since they are one of the leading forces pushing more brands to go mobile and more financial institutions and banks to provide mobile offerings for consumers.

Here’s a glimpse at NFC World’s overall stats on the use of mobile finance apps:

  • One in six US consumers (15%) have used a mobile wallet in the past six months
  • An additional 22% are likely to adopt mobile wallet functionality in the next six months
  • 61% of mobile wallet users have used PayPal  (88% satisfaction rate)
  • 31% of mobile wallet users have used Apple Pay (89% satisfaction rate)
  • 31% of mobile wallet users have used Google Wallet (82% satisfaction rate)

There are still 60% of consumers who have never used their smartphone to make a payment, with the majority citing security and privacy as their main reason for not doing so. However, the growth seen in the above stats over the past few years indicate that it doesn’t take long for such concerns to dissipate as adoption of mobile spending and money-management spreads.

Millennials Are Currently the Biggest Mobile Spenders and Change Drivers

As previously mentioned, Millennials are most likely (compared to other consumers) to use their smartphone to make a payment. They are therefore the most forceful drivers of the adoption of mobile payment options and systems.

But while Millennials are more likely to use their smartphones to send rather than spend money, they aren’t using finance apps to manage money. Of the amount of Millennials who do keep a budget and contribute to their retirement, only 35% of them use an online or mobile budgeting system. However, this likely isn’t due to mobile adoption factors; on average—Millennials simply save less than 10% of their salary through their employee-sponsored retirement plan, and only 66% keep a monthly spending budget.

And while they are largely uncompelled to manage their finances on mobile, a March 2015 survey of Millennials by Principal Financial Group also revealed that 41% refrained from working with a professional to manage their finances because they didn’t have enough money saved to do so. From all of these findings, we can conclude that a key barrier to Millennials using mobile finance apps to manage money is due to a perceived or actual cost of doing so, combined with lack of sufficient funds to justify it and a bit of an investing learning curve.

While it’s easy and free for Millennials to spend small amounts of money via mobile on a frequent basis, they simply may not (or may not feel) they have the assets to warrant more in-depth money-management and investing via mobile or otherwise.

What Spending and Financial Trends Mean for Financial Brand and Institutions

While the main way the Millennials are moving money on mobile is person-to-person (via PayPal, Venmo, etc) and to brands (online shopping and purchasing), there is a large group of consumers who use their mobile device more for banking and finance.

In fact, 53 percent of Americans overall say they use online banking and investment applications regularly, and 70 percent of those users say such tools make them more diligent about finance tracking. So while a majority of consumers, especially Millennials, are using their mobile devices for spending, 57 percent of consumers are also utilizing the mobile finance apps that help them track that spending in order to manage it more responsibly on their own.

So, what does this mean for financial institutions?

“As payments technologies continue to evolve, financial institutions will need to upgrade their middle- and back-office legacy systems in order to support customer demand for faster, more real-time digital payments,” said Dave Edmondson, senior managing director and head of Accenture’s Banking practice in North America.

If they don’t already have capabilities in place, brands will need to make mobile payments possible (and user-friendly) via finance apps to keep sales up.

Banks will need to put systems in place for real-time mobile payments and money transfers.

Larger financial institutions and investment brands will need to do the same and—in addition—implement:

  • Simple, highly useful mobile finance apps to encourage more consumers to manage/invest money via mobile
  • Free mobile saving and investment app capabilities to compel Millennials to save and invest their money with institutions, regardless of how minimal their assets may be
  • Mobile systems that simplify and streamline saving and investing to remove the “learning curve” barrier for both first time investors and for experienced investors just now doing so via mobile

The ROI for Financial Institutions Investing in Mobile Capabilities

Is there a decent ROI for financial institutions that go mobile? Yes, but not an immediate one.

Banks and other financial institutions choosing to accept real-time mobile payments instead of the slower automated clearing house (ACH) payments, would need to invest in developing the completely new infrastructure to support it. While the initial investment on the front-end would seem hefty at first, real-time payment advocates argue that consumers would be willing to pay for the convenience of faster and easier settlements. The bank’s profit from consumers’ willingness to pay would be just one ROI of many in this effort, which would increase over time.

For those brands or institutions with the back-end already in place, the key investment would be in the consumer-facing platform and/or mobile finance apps that make the system function well from a user perspective, which would likely:

  • Boost the number of consumers saving and investing
  • Increase the amount of money being moved via these systems and mobile finance apps
  • Provide useful (and secure) consumer spending and investment data to financial brands to aid in service optimization and tailoring competitive offerings.

Cashless by 2020?

We will not be cashless by 2020, as many people still prefer cash due to convenience and perceived security of doing so, along with the fact that there are still a significant amount of companies and vendor types who aren’t equipped to accept payment electronically.

However, we will use cash less as consumers continue to spend and manage money more via mobile than with cash or in person, a trend that is already in place—and growing.

As more brands and companies expand their digital/mobile payment capabilities to meet consumers’ demands for it, those that have not yet begun developing these types of capabilities will most certainly need to do so, not only to keep up with consumer demand and competitive offerings, but also to stay ahead of them.

What’s In It for Financial Brands?

Some brands have already invested in developing finance apps for making financial responsibility simpler and more efficient for their consumers.

One such brand is TransUnion. TransUnion’s latest app puts all of their consumers’ financial data at their fingertips, including capabilities for:

  • Budgeting
  • Links to bank, credit card and utility company accounts
  • Home budgeting for multiple individuals in one household
  • Bills monitoring
  • Calendar for payment history and bill dates
  • Checkbook replacement
  • Credit score monitoring and alerts

And TransUnion is just one financial brand of many who are beginning to cater to the on-the-go financial management demands of their increasingly mobile consumer demographics.

Providing finance apps that help consumers make mobile payments and manage money allows financial brands to:

  • Provide the type of excellent, informative and customized service to all clients that was previously only available to their top-tier clients
  • Expand their client base
  • Increase profit, business volume and service utilization
  • Maximize brand engagement and brand-consumer relationship
  • Boost the amount of money being spent, saved, invested and moved via their mobile finance apps/systems
  • Gather valuable information on these money-management habits to develop insights, product/service offerings, and to better cater services to current and potential consumers

Cashing In On the Demand for Financial Service Mobility

Well-executed finance apps enable large financial brands to offer more in-depth insight and deeper opportunities to all consumers, in a variety of unique spending/investing situations.

“The financial institutions who are providing the most innovative, convenient and valuable digital services to facilitate mobile finance apps are building a massive foothold for future growth and/or market share retention,” said Brett Zika, account manager for Hathway.

Ease of use, convenience and benefits reaped at minimal effort will not only help financial brands to reach their consumers, but it will also cause consumers to rely on a brand’s service offerings and technology tools for managing important aspects of their financial lives—a relationship both consumers and brands can cash in on.

Hathway Announces New Chief Creative Officer
Hathway Austin opens alongside new CRM / Loyalty practice

Interested in working together? Let's chat.