Mobile Banking Apps Becoming Financially Involved

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1 Research Paper Mobile Banking Apps Becoming Financially Involved By Joseph Majestic Mobile is one topic that continues to garner significant attention across the banking and payments industries. A quick review of the agendas at industry conferences clearly reveals significant bandwidth dedicated to the subject. While mobile payments continue to evolve rather slowly as various players enter and exit the market, the use of mobile banking apps has grown appreciably over the last several years. Some argue that this adoption is a function of the increasing penetration of smartphones, and therefore will continue to grow as smartphone ownership grows. Others believe that growth in banking app usage is slowing due to concerns over security and the perceived lack of benefits over existing distribution channels. Frequency of banking app usage Figure 1 Have the app but never used it 5 In our 2015 U.S. Consumer Payment Choice Study we asked respondents about their frequency of mobile banking app usage and what features they used most often. This research brief segments banking app users by frequency of use, and also profiles those segments behaviors to gain insight into how consumers are using this increasingly important distribution channel. Overall Mobile Banking App Usage Fifty percent of survey respondents indicated they have a mobile banking app on their phone. Figure 1 shows the distribution of how frequently respondents used their banking app. Used it once Use it less than once a month Use it a few times a month Use it a few times a week Use it daily 1

2 To make the segmentation more usable and to ensure the statistical integrity of the analysis, the usage categories were combined into four groups, as follows: Light user = Have but never used + Used it once = Used it less than once a month + Use it a few times a month Banking app usage by segment Figure 2 5 = Use it a few times a week + Use it daily Figure 2 shows the resulting segmentation distribution. Light user Card Usage Respondents were asked a series of questions relating to card ownership and card preferences. Card Ownership Table 1 shows the average number of cards owned by respondents in the various card categories. In general, Medium and s of banking apps tend to have more cards overall than the total of all respondents, with s having the most cards in almost all categories. Table 1 Total Do not use Light user A debit card tied to your checking account An FI-Issued, Association-branded credit card A limited line credit card for online shopping A retailer-branded credit card A retailer-branded debit card An Association-branded prepaid card A PayPal SM account or other online payment form

3 In terms of payment preferences shown in Table 2, there is nothing particularly remarkable when comparing banking app user segments to all respondents, with the exception of the category, where there is a higher preference for debit cards and a slightly higher preference for using Pay Pal or another alternative payment form. Table 2 Association-branded credit card 35% Store credit card Charge card (pay balance in full every month) Debit Card Prepaid/Gift Card Pay Pal or another Alternative payment form 5% Check Cash 1 1 I have no general preference 5% Credit Card Features We asked consumers to indicate which features they find most attractive on their preferred credit card. As Table 3 indicates, in every instance the of banking apps has a higher preference for all the credit card features tested in the survey when compared to respondents as a whole. This seems to indicate a wider knowledge of the credit card features available and a higher involvement in their use. Table 3 Type of rewards 55% Finance charge / Interest rate Card brand (Visa, MasterCard, AMEX, Discover ) Payment options/flexibility Alerts/mobile options Ability to select my card design Customer service provided my card issuer I only have one credit card 1 5% 1 Balance transfer options % 3

4 Bank-Sponsored Coupons & Offers Consumers were asked if they were open to receiving coupons and special offers from their financial institution based on their purchase behavior. As Figure 3 shows, Medium and s of banking apps have a much higher propensity to being open to receiving these benefits when compared to total respondents. Mobile Banking App & PC Banking Usage In terms of banking app usage, we compared Medium users to s, with s defined as using the app once or a few times a month, and Heavy users defined as using the app a few a times a week or daily. As Figure 4 indicates, more frequent users seem to be more comfortable using all the features of the app. It is particularly interesting that nearly 20 percent of s use the app to contact customer service. Desire to receive offers based on purchase behavior Figure 3 Banking app usage of medium and heavy users Figure 4 Total 2 6 Verify balance 7 95% 1 5 Verify recent transactions Make bill payments 3 4 Light user 5 Make deposits 3 45% 2 Transfer funds 3 55% 7 Verify investments 7 Contact customer service Other Yes No Not sure 4

5 In addition to banking app usage, we asked respondents about their use of PC banking. As shown in Figure 5, PC Banking is used by the majority of respondents across all segments. Since consumers are comfortable with digitally interacting with their bank, it may be just a matter of time until more people migrate from PC banking to mobile banking apps. Card information loaded on mobile device by segment Figure 6 Total 1 PC banking usage by segment Figure 5 7 Light user Total % Light user Mobile Payments We asked survey respondents about the likelihood that they would load debit or credit card information on to their mobile device so they could use it to make payments. As seen in Figure 6, nearly one-fifth of all respondents indicated they had loaded debit or credit card data onto to their mobile device, while 44 percent of s of banking apps have. Yes No Not sure 5

6 Demographics The demographic profiles of the banking app usage segments provide additional insights into their behavior. Education The education distribution for the banking app segments is not significantly different from that of the respondents as a whole, as shown in Table 4. In general, Medium and s are more concentrated in the college and college graduate categories. Table 4 Grade School Some High School Graduated High School Some College - no degree Graduated College (2 or 4 year) % Postgraduate Degree Prefer not to answer Income Income distribution for the banking app segments is not significantly different from that of the respondents as a whole. In general, usage is highest among consumers with household incomes between $25,000 and $75,000. Table 5 Less than $25, $25,000 to less than $50, $50,000 to less than $75,000 25% $75,000 to less than $100, $100,000 to less than $150,000 $150,000 or more 5% Prefer not to answer 6

7 Age Table 6 presents the age distribution for the banking usage segments as well as the base of total respondents. As shown, Light, Medium and segments all tend to skew toward younger age cohorts, with one-third of s in the 25 to 34 age group. Table or older 2 1 Device Ownership Device ownership among the banking app user segments is shown below in Table 7. Smartphone and tablet usage are highest among Medium and Heavy app users. Note: The numbers reflect the ownership of multiple devices. Table 7 A basic voice and text messaging cell phone 3 1 A wearable (watch, etc.) An Apple iphone An Android SM -based smartphone A BlackBerry smartphone A Microsoft -based smartphone Another type of smartphone A tablet Do not own a mobile phone of any type 1 The impact of mobile technology across the commercial landscape remains uncertain. It is imperative that we in the financial services industry keep a watchful eye on this area to track trends and develop strategies. 7

8 About TSYS At TSYS (NYSE: TSS), we believe payments should revolve around people, not the other way around SM. We call this belief People-Centered Payments. By putting people at the center of every decision we make, TSYS supports financial institutions, businesses and governments in more than 80 countries. Through NetSpend, a TSYS company, we empower consumers with the convenience, security, and freedom to be self-banked. TSYS offers issuer services and merchant payment acceptance for credit, debit, prepaid, healthcare and business solutions. TSYS headquarters are located in Columbus, Ga., U.S.A., with local offices spread across the Americas, EMEA and Asia-Pacific. TSYS is a member of The Civic 50 and was named one of the 2013 World s Most Ethical Companies by Ethisphere magazine. TSYS routinely posts all important information on its website. For more, please visit us at. Apple, the Apple logo, and iphone are trademarks of Apple Inc., registered in the U.S. and other countries. Apple Pay and Touch ID are trademarks of Apple Inc. to learn more contact or sales@tsys.com. twitter.com/tsys_tss facebook.com/tsys1 linkedin.com/company/tsys 2016 Total System Services, Inc.. All rights reserved worldwide. Total System Services, Inc., and TSYS are federally registered service marks of Total System Services, Inc., in the United States. Total System Services, Inc., and its affiliates own a number of service marks that are registered in the United States and in other countries. All other products and company names are trademarks of their respective companies. (01/2016)