Banks Could Lose Entire Generation of Mobile Clients

NEW YORK (Mainstreet) -- Consumers view one potential mobile wallet provider in high regard -- eight of ten would use the service if available. However, it's not a bank with which consumers are ready to go mobile with spending and payments. It's eBay's PayPal, according to a study, and it signals a trend away from using banks for mobile financial services just as big banks are rushing to add services for a more mobile world.
 
Banks certainly won't take kindly to consumers preferring mobile personal financial products from non-bank competitors. There’s way too much money on the line.
 
According to the San Francisco-based mobile advertising firm JiWire, 37% of “on-the-go” U.S. consumers have used a mobile wallet service in the past 90 days, mostly from smart phones and tablet computers.
 
Yet the leading platforms being used aren't from the big banks. Here’s a list of the“go to” mobile wallet producers on the JiWire list:
  
PayPal: 46%
Amazon: 29%
Google Wallet: 18% 
 
JiWire’s study is hardly an outlier. Last December, comScore found that 38% of smart phone users had made purchases via their smart phone.
 
A study from the Pew Internet & American Life Project showed that 65% of U.S. consumers will employ some form of mobile wallets as their primary means of making payments by 2020.
 
Study upon study seems to be refinforcing the notion that the future of consumer finance won’t be dominated by banks. In fact, they may be lucky to get their foot in the door.
 
Now comes the study from Carlisle & Gallagher Consulting Group, a Charlotte, N.C.-based management and technology advisory group, which adds to the chorus of reports showing consumers turning to non-banks for mobile wallet services.
  
The study of 650 consumers shows that interest in mobile wallets is being driven by two demographic groups -- young consumers and affluent consumers. Besides the eight-in-10 consumers who would opt for PayPal, six-in-10 say they would consider Google Wallet, and the same number would consider a mobile wallet service from Apple if the iPhone and iPad maker launches one.
 
Could banks lose an entire generations of customers to alternative mobile wallet providers?
 
 “The competitive threat from new entrants is real,” said Peter Olynick, CG’s Card & Payments Practice Leader. “Consumers are open to considering alternatives to their primary banks to provide mobile wallets and even core banking services.”

Olynick says that consumers have already slowed the use of cash and to make payments.

“Within five years, half of today’s smart phone users will be using their phones and mobile wallets as their preferred method for payments,” he adds. “These customers will be using better tools to help them optimize transaction choices. Banks need to proactively consider how their products will stay ‘top of wallet’ in the new mobile wallet world.”

At least banks know what’s coming, and most already have solid mobile wallet technologies in place. But is it enough?

The data from Carlisle indicates banks have a lot of catching up to do, and the PayPal’s of the world have a head start.