How tech is changing the banking experience

Mobile banking is set to go big-time

It wasn't long ago that bank customers judged the quality of their local financial institutions by the sturdiness of their columns and vault doors. That idea is a throwback to an era when money was physical, and so was security.

Now, money is just data. And banks — especially small banks – are evolving rapidly to reflect that new reality.

No, I'm not talking about garden-variety mobile banking applications. Simple apps that let you check bank balances, transfer money and find branch locations already feel old and stale. I'm talking about trends that free you from ever having to visit bank branch offices again – and trends that make you want to visit.

Breaking the branch habit

The only remaining reason for many of us to visit bank branch offices, wait in line and interact with a teller is to deposit cheques. That is about to change.

The United Services Automobile Association, a financial services company for members of the US military and veterans, plans to launch a free iPhone app that lets you deposit cheques via your iPhone camera. The service will be called USAA Deposit@Mobile. To make a deposit, you use the app to log onto your account, enter the amount of the cheque, snap a picture of the front and back of it, then hit the "Send" button. The bank sends a confirmation. This is such a compelling service that I'm thinking about joining the Army to qualify.

Of course, you can always find an ATM and deposit your cheques in there. But that can give you a creepy feeling. How do you know the bank won't later tell you they never got your cheque?

Bank of America has installed about 12,800 new ATMs that print receipts that show scans of the cheques you deposit. This is nice, because it gives customers proof that cheques were in fact deposited.

Soon, you won't need cheques at all. You'll be able to use your cellphone as a debit card, and also to receive money from other people's cellphones. (It's best to get their permission first). A huge number of companies are working on technology and systems to offer this service. Even Nokia wants to get in on the mobile money racket. The company has registered the trademark " Nokia Money." The company intends to launch a service, apparently, that lets you transfer money from your cellphone to either another cellphone or to a store checkout counter. In March, Nokia invested $70 million in a company called Obopay, which enables secure mobile electronic money transfers.

It is likely that all cellphones in the future will enable this kind of functionality. When that happens, you can leave your entire wallet at home and use your phone instead of cash and credit cards.

The future of mobile money has barely begun and already it is changing how banks offer their services. Bank of America blames its closure of more than 600 branches on the use of the internet and mobile phones for banking.

Innovative bank branches. Oxymoron?

While BofA is shutting down branches because nobody wants to go there, other banks are making branch offices places you want to visit.

Oregon-based Umpqua Bank has 151 branches that double as offices for digital nomads, including internet cafes and conference rooms. It has installed a giant multi-screen interactive video display called the Discover Wall. PC stations let customers hold videoconferences with bank financial advisers.

The concept is vaguely similar to the ING Direct Cafe, which isn't a bank branch, but an internet cafe offering PC terminals where you can do online banking or just surf the internet for free. You can find an ING Direct Cafe in eight US locations.

These banks are doing something truly interesting. They are taking advantage of their locations and real estate to offer services people can use. Pushing money around is trivial and increasingly branch-independent. But we can always use some of these services (not to mention free coffee).

The future of mobile banking

The biggest hurdle to widespread adoption of mobile banking, of course, is consumer concern about security. Financial services firm KPMG says two-thirds of Americans are not comfortable with using cellphones for financial transactions. (Of course, everyone is comfortable with letting a restaurant waiter take physical possession of their credit card for 10 minutes.)

But that's mainly an age thing. Young people aren't so timid. The use of mobile banking has tripled in the past year among young adults in the US. Some 21 percent of Americans between the ages of 18 and 25 are doing banking via cellphones, according to a survey by Mercatus LLC.

Research firm TowerGroup says 10 million people now do mobile banking, but that the number will rise to 53 million over the next four years.

If you know where to look, there is incredible innovation happening in the banking space, especially in how customers interact with banks – and their money.

Now if only the economy would cooperate, there might actually be some money to move around and the whole experience of banking just might become something interesting and enjoyable.

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