Mobile banking is a major strategic shift for financial institutions with the capacity to displace other channels, according to a new report from Forrester Research.

The report, “The State of Mobile Banking in Europe 2012,” found that 21 percent of Europeans with a mobile phone used at least one form of mobile banking in 2011, compared with 18 percent in 2010. With growth expected to continue, the report says that financial institutions need to develop mobile banking services in order to stay relevant to customers, particularly the younger and wealthier ones who are most likely to use mobile banking.

“Some leading European banks have already seen the number of mobile interactions overtake the number of online interactions,” said Benjamin Ensor, London-based vice president and research director for ebusiness at Forrester Research, in the report.

“Although tablets complicate the picture, many digital banking executives have already spotted growing numbers of mobile-only customers who have stopped using online banking, while other mobile banking users have reduced the frequency with which they bank from a PC,” he said.

“A mobile-only relationship means these valuable customers mostly aren’t exposed to a bank’s marketing messages in its branches or on its Web site.”

Simple and immediate
Forrester expects the number of European consumers using mobile banking to continue to grow as smartphone adoption grows.

In 2011, 34 percent of European mobile users had a smartphone and Forrester expects that number to reach 67 percent by 2016.

Concurrent with this increase will be growth in mobile Internet use, which in turns means that more people will start using mobile banking.

Not only is mobile use growing, but the simplicity and the immediacy of mobile banking means that consumers are increasingly using their mobile devices for routine banking tasks instead of other channels.

The report found that 14 percent used SMS text alerts in 2011 and 9 percent mobile banking Web sites while only 5 percent used apps. However, app use is quickly growing.

There are some differences by country, with Spanish and Swedish consumers using mobile banking the most.

The most popular mobile content and services have common characteristics such as being timely, location-relevant, requiring little input and producing a clear output.

Specifically, Western Europeans who use mobile apps or mobile-optimized Web sites check their balances frequently, use their mobile devices to transfer money, receive alerts and use mobile to manage their investments.

Mobile disruption
Forrester surveyed 43 retail banks across Europe and found that most large banks and many smaller ones offer a range of basic mobile banking services, such as access to account balances and recent transactions. SMS alerts are commonly used as well as mobile apps and mobile-optimized Web sites.

Additionally,  most large European banks support multiple platforms, including iPhone, Android phones and BlackBerry.

While most European banks have introduced basic mobile banking services, there is a need for them to look beyond these basic services because mobile is both disruptive and far-reaching.

For example, mobile payments have the potential to disrupt established retail payment patterns and open up opportunities for banks, which is something that many European banks have just started to think about, according to Forrester.

The report found that mobile banking users are more than twice as interested as non-mobile bankers in mobile contactless payments. Interest in mobile payments is particularly high in Spain where banks BBVA and la Caixa have already introduced some form of mobile payments.

A few banks have expanded their mobile banking to including shopping, with la Caixa and Bankia enabling mobile app users to purchase movie tickets and bus tickets via their mobile banking apps.

European banks should also look into adding other functionalities such as access to credit card accounts, push alerts and full transaction histories.

Another area of interest for banks is mobile money management.

The hurdles banks face in expanding their mobile strategies include mobile fragmentation, rising development and maintenance costs, designing usable services on small screens that make sense to customers. This means looking for customer pain points and broken processes that mobile can help fix.

“With companies like Google, PayPal, and Telefónica competing to provide customers with a mobile digital wallet, digital banking executives need to work with their payments colleagues to develop mobile banking as a platform for mobile payments,” Mr. Ensor said in the report.

“European banks should take inspiration from Commonwealth Bank of Australia’s Kaching iPhone app, which lets customers make a wide variety of different payments — from PayPass contactless payments at an in-store point of sale to Facebook payments,” he said.

“In the process, the bank is teaching its customers that if they want to make a mobile payment, they should use the bank’s app.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York