Apr12

US Money Has Gone Mobile… Or Has It?

Take a look at the trends and patterns emerging in banking and currency in the United States.

Of all the sectors that technology and and mobile capabilities have upturned, finance is one of the most significant. Though large banking institutions and banking structures can be slow to change and adapt to new technological development, the past five years have seen a major uptake in mobile banking, e-finance and other fin-tech, solutions. In some cases, tech solutions like peer to peer transfer allow users to circumvent banks entirely.

In the midst of this massive acceleration of fin-tech, there’s been one major market which has lagged behind. Indeed, it’s curious that despite being home to the epicentre of the tech economy—Silicon Valley—the US is incredibly far behind when it comes to banking and mobile payments This begs the question: why has mobile finance been so slow to catch on the United States?

To be fair, it’s not just in the mobile context in which the US banking is lagging. The nation has continued to be an outlier even when it comes to more basic forms of financial technology, as well. Where almost everyone in the rest of the developed world gets paid via direct electronic transfers—either interbank or from another account at the same bank—many people in the US still get paid via paper checks. In addition, when it comes to chip and pin technology, which has been widespread across Europe and elsewhere for the past half decade, major US card companies only recently switched to from the magnetic stripe to the chip format, but didn’t go so far as to add a pin. Their reasoning? They assumed consumers wouldn’t be comfortable entering a pin at the cash register like they do at an ATM.  

This same sense of lagging can be found in more modern modes of mobile finance too, such as Apple Pay. A survey carried out by website eCash found that “only about 1 in 5 people (20.7%) in the U.S. that have an iPhone that works with Apple Pay, (this would be the iPhone 6 and newer versions), have even tried Apple Pay.” Furthermore, TechInsider found that only just over half of Apple Pay users had only used the service once during a typical week for a purchase.

 

Why is it that the US falls behind?

One of the biggest reasons, perhaps, has to do with the massive banking and financial infrastructure that mobile tech is trying to replace. Like it or not, people trust banks and there is a tremendous amount of cultural inertia that has to be overcome in the process of getting consumers to give up trusting a brick and mortar institution in favor of a digital one. This is psychologically difficult because, when it comes to money, people like something they know and trust. Often an app maker isn’t seen as being as trustworthy as a finance institution.

Indeed when you look at the markets where mobile money has flourished—east Africa, for example, where the app M-PESA was launched—they tend to be less sophisticated when it comes to their conventional banking structures. In those “leapfrog” markets, mobile money gained popularity because there were no banks in the first place, and transferring money on a smartphone offered a better option than the existing way, which was often just exchanging cash or barter.
There are a few things that could improve the likelihood of mobile finance catching on in the US. Security concerns will always remain paramount, so the more that mobile finance solutions can show that they’re as sophisticated as banking institutions when it comes to keeping people’s money safe—or better yet, more so— the more likely it is people will use them. In addition, the more banks can scale back on their brick and mortar or counter services, the more consumers will stop associating a bank with something they can visit in person. This will likely help ease the US’s transition to mobile money and catch them up with the rest of the world.

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