NEW YORK - Most Americans are still hesitant about banking with their cellphones and PDAs, but young people are coming around to the idea of mobile banking, according to a survey.
Meeting the needs of these tech-savvy customers is going to be key for banks to stay competitive - the income of "Generation Y" is expected to surge over the next 10 years and exceed that of baby boomers.
Though most major banks offer mobile banking services, 89 percent of the consumers surveyed do not use their cellphones to conduct transactions, according to a study by IBM's retail banking consulting practice.
The results are based on a phone survey of 1,424 adults, age 18 or older, conducted Jan. 24-28 by Opinion Research Corp. To qualify for the survey, respondents had to own a cellphone and have a bank account. The margin of error was plus or minus 2 percentage points.
The study found that 21 percent of consumers age 18-34 use their cellphone for mobile banking, compared to about 10 percent of the general population.
These numbers - particularly for younger consumers - are expected to grow significantly.
Aite Group predicts that the number of mobile banking users, having ballooned from a negligible number at the end of 2006 to 1.7 million by the end of last year, will rise to 8 million in the United States by the end of this year. And by 2010, Aite Group forecasts that 35 million Americans will be mobile banking users.
Bank of America Corp. has the most mobile banking customers - about half a million, according to Aite Group. But setting up the technology is just the first step. Going forward, banks will need to stay ahead of the curve in terms of both reputation and technology.
Reputation is important because the biggest reason for avoiding mobile banking, given by 65 percent of respondents, was that consumers are worried their personal information is not secure. And technology is important because, while online banking is becoming more common, the notion of mobile banking is only in the nascent stages.
Banks are "pretty much keeping up with the Joneses," said Wendy Feller, of the IBM Institute for Business Value. "My bigger fear is that they're not pushing the envelope."
If they don't, other companies could elbow their way in - which has happened in other countries, Feller said. One example is Smart Padala, an international remittance service in the Philippines that customers access with mobile phones.
And losing mobile-banking business to other companies could mean losing out on billions of dollars of potential deposits.