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Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank

FDIC Consumer News

Summer 2015

Mobile Banking and Payments: New Uses for Phones...and Even Watches

En Español

woman looking at cell phoneMobile banking allows consumers to use their mobile phones to perform transactions they might otherwise conduct from their personal computers or at a bank. Similarly, mobile payments enable consumers to use a mobile device to transfer funds to another person (sometimes referred to as person-to-person, peer-to-peer or "P2P") or to pay for goods or services at retail locations. Here's a look at recent developments in mobile financial services for bank customers. Also see Simple Steps for Safe Mobile Banking.

Mobile banking is popular. A recent survey by the Federal Reserve Board concluded that, as of December 2014, about 81 percent of U.S. banks offered mobile banking services to their customers and that one-third of their customers used these services. The overwhelming percentage of banks offering mobile banking is driven, in part, by the 87 percent of U.S. adults who own a mobile phone, of which 71 percent are smartphones. Also according to the study, 15 percent of online banking customers accessed that service exclusively through their mobile phones.

The survey also showed that the most common use of mobile banking (by 94 percent of consumers who use mobile banking) is to check account balances and recent transactions. In addition, half of mobile banking users have deposited a check by taking a picture of it with their phone.

If you are interested in mobile banking, many financial institutions offer mobile banking applications (apps) that you can download to your phone or have websites that are specially designed to be viewed on a mobile device. Banks and other companies also may offer apps that help consumers more closely manage their finances by keeping track of their spending, purchases and savings.

Mobile payment services can offer convenience and security. "Paying by smartphone can be more secure than swiping your credit or debit card's magnetic stripe card in the terminal because the merchant never sees your actual card number and all the sensitive payment information is encrypted," said Jeff Kopchik, a Senior Policy Analyst with the FDIC.

Using your smartphone to make purchases at stores or restaurants is generally a two-part process. First, determine if your smartphone has a mobile wallet app you can use to link to one or more payment methods to make payments with your phone. If it does not, download one from your bank's website or other reputable app marketplace. Second, enroll in the service with your bank and specify which credit or debit card will be used to pay for purchases.

To use your mobile phone to pay at a store, place it next to a compatible terminal located on the checkout counter and either enter your personal identification number (PIN) or use the phone's fingerprint reader (if it has one).

For more about using your smartphone to make payments at retail locations, see our Winter 2015 issue.

As for person-to-person payments, as long as you and the other party are enrolled in the same P2P service, you can send the money by simply entering the recipient's mobile phone number and the amount you want to transfer.

"P2P can be much more convenient than trying to find an ATM in your bank's network that doesn't charge fees for withdrawing cash," said Elizabeth Khalil, a Senior Policy Analyst with the FDIC's Division of Depositor and Consumer Protection.

Before using any P2P service, also make sure you understand whether any fees will be charged.

High-tech wristwatches are becoming fashionable for some bank customers. A few large banks have created financial apps for smartwatches that allow their customers to read messages from the institution or access basic services by just glancing at their wrist. "For example, a smartwatch could send you an alert if you are nearing the credit limit on your credit card or you are close to overdrawing your checking account," said Khalil.

The watch's tiny screen size poses some challenges to creating financial apps for the device. But, to date, several banks have publicized that they allow customers to authorize a banking transaction using a smartwatch instead of the mobile phone itself.

The integration of mobile payments with other smartphone apps can add convenience in additional ways. "Let's say you make a dinner reservation at a restaurant using an app on your mobile phone," Kopchik explained. "If the reservation app is integrated with a mobile payment app, the final bill will be sent to your phone and you can authorize the payment while sitting at your table. There is no need to give the waiter a credit card and pay the old-fashioned way."

Some mobile payment apps also coordinate with customer loyalty programs, meaning that you may earn points or discounts for dining at certain restaurants or paying with a certain app (see From Coupons to Cash Back: Our Latest Tips on Choosing and Using Bank "Rewards").

Simple Steps for Safe Mobile Banking

While mobile banking and payments can be convenient, FDIC Senior Policy Analyst Jeff Kopchik said consumers should always take certain precautions. For example:


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