Mobile Banking

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Last Updated:January 18, 2024

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What is Mobile Banking?

A service that allows bank customers to make financial transactions through mobile phones or smartphones.

Mobile banking services can be used from available options through multiple applications that customers can download and install.

It offers convenience compared to SMS banking because customers do not need to remember the format of SMS messages sent to the bank and the destination number of SMS banking.

It allows mobile devices, such as phones, tablets, etc., to help you make your financial transactions. Using these banking apps is the same as using an ATM, but transactions are now made from your hand, which is much easier.

Understanding Mobile Banking

Making transactions from an ATM can often be a bit troublesome. First, you must wait in line, sometimes resulting in a long process or even the feeling rushed because someone is waiting for you.

The ATM still allows individuals to complete transactions much quicker than in person at a bank. Therefore, people still go to ATMs to assist with their financial needs. This is where the mobile app for banking gets handy to make things even easier.

This financial service app is provided by financial institutions (banks) to help customers complete financial transactions without going to an ATM or visiting a banker. Customers can use this app remotely; they only need wifi or a signal for the app to work.

Unlike SMS banking, this uses software to make a safer and quicker transaction. The purpose is to simplify every financial transaction. In addition, the app is usually a 24-hour service, so customers can use it when it comes to an emergency or when needed for a 2 am shopping trip.

Providing this feature also helps banks reduce the cost of expenses when the customer goes to a bank branch for non-cash withdrawals or deposits.

A Brief History of Mobile Banking

The earliest product of mobile banking services was SMS or SMS banking. The way it works is in its name, getting notifications through SMS or text messages.

SMS banking was the most used form of sending messages due to the introduction and popularity of mobile phones throughout the 1990s.

European banks were the first ones to offer these services. They use their mobile apps using the WAP (Wireless Application Protocol), which allows many new mobile phones to access the internet. Like Amazon, banks started to find opportunities by using WAP.

The first WAP banking services started in Norway in 1999 and began spreading worldwide. With the development of smartphones with iOS and Android operating systems, financial banking apps began to develop and evolve.

WAP was the most used banking service until 2010. Customers were able to download financial apps into their smartphones with increased security and a developed transaction function

Most banks and financial institutions now employ SMS, Web-banking/e-banking, and mobile applications to keep customers informed and make transactions easier. Sometimes banks use SMS and mobile applications to inform the activities in the account.

For instance, if Jack withdraws cash from an atm for $100, he will receive a notification that his account was withdrawn $100.

Internet banking and SMS Banking

SMS banking was one of the first types. When mobile phones became more popular in the late 1990s, SMS was the most widely used messaging type, and SMS banking used that format.

The introduction of WAP (Wireless Application Protocol) opened up new opportunities for banks and made it possible for many new mobile phones to access the internet. In 1999, Norway launched the first WAP banking services, quickly spreading to other businesses.

1. Internet banking

Also known as online banking, web banking, e-banking, or home banking, it is an electronic payment system from banks or financial institutions to customers that enables them to conduct various financial transactions through the bank's official website.

Internet banking offers an easier and similar transaction process to one found at an ATM. So every traditional transaction, such as deposits, transfers, and bill payments, is now available online.

Usually, every bank or financial institution has its online banking app, which can be used on any device, such as smartphones, tablets, desktops, and laptops; you need wifi or an internet connection to do your transactions.

After registering your account from the bank, the customer does not need to go to the bank. However, sometimes he needs to transfer or do other financial activities. Internet banking allows customers to complete transactions anywhere and is secured because it uses customers' IDs and passwords.

The types of online banking transactions available differ by institution. The majority of banks provide basic services like transfers and bill payments. In addition, customers can use online banking platforms to open new accounts and apply for credit cards at some institutions.

Ordering checks, setting stop payments on checks, and reporting a change of address are examples of other functions.

2. SMS Banking

SMS banking is a facility some banks or financial institutions use for sending messages that are also considered notifications to a customer's mobile phone.

SMS banking service uses a system called push and pull messages. Push messages are messages a bank sends to the customer's mobile phone without the user initiating any information request.

Usually, a push message is a form of marketing that has been offered to customers or acts as an alert about whatever happens to the customer's account activity, such as withdrawals from an ATM or credit card transaction. The alert also notifies customers of a due payment.

On the contrary, the pull message in SMS banking is a one-time password (OTPs). OTPs are the latest tool that banks and financial institutions use to combat cybercrimes and fraud. Using OTPs is safer than memorizing passwords. OTPs are sent to the customer's mobile phone using SMS.

The OTP sent out by the banks is only valid once, meaning if a customer wants to do a transaction, they will have to send a message and receive an OTP to complete it. Therefore, OTP usage is limited and expires once used for a customer's transaction.

"Pull messages" are initiated by the customer, using their mobile phone to gather information or use it for transactions in their bank account. For example, checking their account balance, currency exchange rate, interest rates, or a transfer from person to person.

Mobile Banking features

Transactions could vary depending on the features that the banks provide. What is certain is account balances, history of transactions, and transfers. As more customers embrace mobile technologies, mobile banking apps have reached new heights.

Mobile transactions have reached an all-time high in recent years and are still predicted to increase yearly. Most apps provide bill payments, remote check deposits, and provide no-card transactions (withdraw in an ATM without needing a card)

1. Account information

Banks provide recent and up-to-date account activity. For instance, checking the account balance. After checking your balance, you can check when and when money goes in.

Clients can examine their account balances and statements by requesting an account statement, reviewing transactional and account history, tracking their deposit accounts, checking loan or card statements, accessing investment statements, and managing their insurance policies through account information access.

Each transaction always includes a date, amount, description, and location to give more information and ensure no unknown transactions.

2. Transfer

Money transfer apps, commonly known as peer-to-peer (P2P) money transfer applications, allow you to send money from one person to another or from one entity to another in a rapid, simple, low-cost, and secure manner.

They work on payment and permit you to utilize a computerized wallet to connect your Mastercard or financial balance. As a result, you can make electronic exchanges and payments with only a couple of taps on a cell phone.

This is a handy feature if someone has multiple accounts active at one bank. However, it is essential to have easy access to transfer money from each account, which could be from checking or savings.

Clients can use transactional services to move funds between accounts at the same or different institutions, make self-account transfers, pay bills, and make purchases with other apps or prepaid service providers.

Not only could someone transfer from account to account, but they could also transfer from bank to bank, meaning they could transfer your funds to a different bank account. This also allows funds transfers from your account to another person's account for anyone with an active account or trying to have flexibility on their budgets.

Every mobile phone banking app should provide quick access to many digital payment alternatives, mobile wallets, UPI, and other services in this cashless era.

3. Mobile Deposit

Mobile check deposit is a banking feature that lets you deposit checks into your bank account using your smartphone or tablet.

Mobile deposit features allow the customer to scan their check and deposit that balance into their account as if they are going to the bank and depositing it in person. This helps if someone has a tight schedule and can't go to the bank and overall ease of use.

4. Online payments

The electronic exchange of currencies via the internet is called online payments. These payments generally involve transferring monetary amounts from a customer's bank or debit or credit card account to the seller's bank account in return for items or services.

Everyone has bills that they have to pay. Online payments help contain your bills in one place, so you don't have to go to different places or separate accounts every month.

There are some ways that mobile banking helps in making online payments, such as

First, add an account that is required to pay the bills.
Then, create a date that is a perfect fit to pay all the due date bills.
These features could also remind you to pay your bills every month.

Reminders to pay bills in your banking apps could be from text messages or email. Usually, reminders will directly send you to the page or app you should pay.

Online payments also mean paying your online shopping cart. So if you are checking out your online shopping cart and it shows the amount you need to pay, you could use this feature to help pay your shopping bills.

Using this app or feature is helpful for credit card bills, electricity bills, taxes, or just a personal loan; no need to go out; just by using your phone, everything is done.

5. Alerts

Alerts are useful when someone is very busy and needs more time to check their account activities consistently. For example, banking apps offer alerts or notifications for suspicious activity or a low balance.

Low balances, mortgage bills, house bills, and transactions are all events that banking apps offer to notify customers when any transaction has occurred.

Customers will likely find the alerts annoying if they are invasive or spammed frequently. Users should be able to configure or set up what information they want to get when they want it and how often they want it.

The easiest approach is to give access to the customer's smartphone notification bar via email or text message.

The most common alerts are

Unusual Activity Alert
Mobile Deposit Bank Alert
Cleared Check Alert
Low Balance Bank Alert
Big Purchase Alert
Password or Profile Change Alert
Large ATM Withdrawal Alerts
All Debit Card Purchases

6. Support

Services that help customers using the app report an error or even file a complaint. The finest banking applications offer excellent customer service and support via self-help, live chat, phone, and other channels.

Customers can contact institutions more easily if they have any problems or questions.

Support services allow the customers to check their status at their request for a loan or credit card, complaints, and card requests and locate the nearest ATMs to their location.

Check card status (request for loans, credit facilities, mortgage approval, insurance, student loans)
Cheque (check) books and card requests.
Write a complaint
Locate the nearest ATM location.
For a loan application, you could apply in your banking app.

7. Investments

Mobile banking has many effects on consumer engagement and returns on investment. The average institution may make millions in additional income and minimize attrition by up to 15% by raising mobile banking adoption rates.

Banks also offer investments to their customers. For example, investment management services offer management services to the customer for their portfolios or provide a real-time view of their portfolios. Some banks also offer real-time stock charts and also offer various mutual funds.

8. Content services

Another feature that could increase customer satisfaction is content services. Content services help organizations acquire value from data by providing insights from the content. In other words, a content service is a content provider.

To provide increased satisfaction to their customers, banks provide finance-related news. The bank also offers content services; loyalty offers could be points or discounts in a certain merchant.

Is Mobile Banking safe?

Before having a banking app, whenever a person goes to an ATM to transfer a huge amount of funds to another account, often, they will check their surroundings, making sure that no one is watching the transaction.

People looking at your bank pin when you wish to withdraw money is another issue customers face with in-person transactions.

The use of mobile devices like smartphones and tablets is intense and continues to grow. According to a KPCB (Kleiner Perkins Caufield & Byers) report, mobile digital media is outpacing the use of the desktop.

The report says that people with access to mobile digital media use the feature 51 percent of the time, while desktop use is 42 percent and 7 percent for all other devices.

This financial app allows people to easily see the transfer fund feature and have peace of mind. Using your smartphone is easy to transfer the funds that you need. In addition, the data and account activities are secure if you use banking apps.

Because people use mobile devices everywhere and banking apps to help their financial activities, they are specifically created to be secure and safe.

The mobile companies' software and the banks that created the app calculates the safety measure. However, there are still some risks to using a banking app.

A banking app is safer and more secure than internet banking. Downloading a banking app and using its feature can only be used on one device with a SIM card in which the phone number is registered when making the bank account.

Internet banking is available on all sorts of devices, such as smartphones, tablets, desktops, and even laptops. However, in internet banking security, hackers must steal a person's username and password.

With today's technology, stealing those credentials can occur from someone installing logging software on the victim's device. In the case of a banking app, the criminal would have to know the SIM card number and the victim's identity to hack their banking account.

If the victim's realized that there was suspicious activity in their account because of the hacker, they probably would be too late to realize what had happened. Sometimes, someone would send a link via SMS that could trick some of its victims into clicking that link.

This happens to many people who don't understand this concept.

The link would send viruses that would steal the victim's account information. Every money transferred or stored in the victim's account would be gone with the information retrieved.

To increase security in their banking app, banks or financial institution could offer fingerprint scanners on smartphones that have fingerprint scanners, including inputting an alphanumeric password (containing letters and numbers or symbols like "!/./#") to verify the identity of a customer.

There are numerous ways that financial institutions can increase their security for the app ranging from alphanumeric passwords and fingerprints to facial recognition. Facial recognition usually has been conducted when applying to make an account.

Pros of Mobile Banking

Electronic banking has significantly altered every smartphone owner's experience with banking services. Due to advancements in technology, mobile banking has created a completely new method of handling financial transactions.

Mobile banking can be both a blessing and a curse in the internet era. Unfortunately, due to the risk involved, many customers still do not feel uncomfortable using it. Here is some safety advice that you might take into account.

Here are a few benefits and drawbacks for those who plan to use mobile banking:

The solutions are becoming increasingly popular across the world nowadays. Most analysts predict it will overtake cash as the dominant mode of payment in the next ten years.

However, using this system in your company might be rather costly. Most banks today provide mobile banking services, allowing you to carry out simple procedures that typically require standing in line at the bank.

The pros are:

1. Improved customer experience

Maintaining a relationship with a customer is crucial. Using this app could bring new experiences and ease of access for 24 hours.

2. Convenience

All the transactions and operations are automated, so the customer doesn't need to wait for a teller to process their financial activities. In addition, bank tellers don't have to manage every customer's transactions.

Using it also provides easy access; you don't have to go to an ATM. It could be a bit troublesome to go to a bank, but it's closing time.

3. Data Storage

Banks use an automated system that allows storing and processing more data faster. This is beneficial for the banks. Data storage could also help customers track their transaction history and account balance.

4. Cost Reduction

For banks could be from marketing, rent expenses, etc.

5. Security

No need to worry about other people peeping at your transaction or ATM pin. With today's technology, securities are kept developing to keep your transactions safe.

Although securities are an advantage, it has some downsides. Even though banks are constantly developing their service, criminals are always developing their skills.

Especially since the pandemic hit, everyone started to take drastic measures, such as stealing from banks. The loss of a smartphone could also be a potential threat to leaked information.

Cons of Mobile Banking

The cons are:

Customers would have to use smartphones to access their banking apps. This limits the availability of online banking to those who do not have a smartphone.

1. Extra charge for customers

Banks could charge customers for using the service. Usually, when people use a pull message, it charges their phone credit.

2. Security And Tech Issues

Although securities are an advantage, it has some downsides. Even though banks are constantly developing their service, criminals are always developing their skills.

Especially since the pandemic hit, everyone started to take drastic measures, such as stealing from banks. The loss of a smartphone could also be a potential threat to leaked information.

The launch of a banking app could be getting a risk of malfunctions. Bugs when developing, or a server that can't manage streams of customers. It's important to keep everything in shape to keep your customer satisfied.

Another area for improvement is a connection; a good connection improves the app's performance, the low signal could slow down the apps, and no signal means the app could not be used.