NEW YORK, USA: Meeting the needs of these tech-savvy customers is going to be key for banks to stay competitive — the income of "Generation Y" is expected to surge over the next 10 years and exceed that of Baby Boomers.

So far, although most major banks offer mobile banking services, 89 per cent of consumers do not use their cell phones to conduct mobile banking transactions, according to a study by IBM's retail banking consulting practice.

The results are based on a telephone survey of 1,424 U.S. adults, age 18 or older, conducted Jan. 24-28 by Opinion Research Corp. To qualify for the survey, respondents had to own a cell phone and have a bank account. The margin of error was plus or minus 2 percentage points.

As one might expect, younger consumers appear to be jumping aboard the mobile banking trend more quickly than others. The study found that 21 per cent of consumers age 18-34 use their cell phone for mobile banking transactions, compared to about 10 per cent of the general population.

These numbers — particularly for younger consumers — are expected to grow significantly.

Research firm Aite Group predicts that mobile banking users in the United States, having ballooned from a negligible number at the end of 2006 to 1.7 million by the end of last year, will rise to 8 million by the end of this year. And by 2010, Aite Group forecasts that 35 million Americans will be mobile banking users.

Right now, nine of the 10 top banks offer mobile banking to customers. Bank of America Corp. has the most mobile banking customers — about half a million, according to Aite Group analyst Nick Holland. But setting up the technology is just the first step. Going forward, banks will need to stay ahead of the curve in terms of both reputation and technology.

Reputation is important because the biggest reason for avoiding mobile banking, given by 65 per cent of respondents, was that consumers are worried their personal information is not secure. And technology is important because, while online banking is becoming more common, the notion of banking outside a branch in the United States is only in the nascent stages.

Banks are "pretty much keeping up with the Joneses," said Wendy Feller, head of the financial services practice for the IBM Institute for Business Value. "My bigger fear is that they're not pushing the envelope."

If they don't, other companies could elbow their way in — which has happened in other countries, Feller pointed out. One example is Smart Padala, an international remittance service in the Philippines that customers access through their mobile phones.

Losing mobile-banking business to other companies could mean losing out on billions of dollars of potential deposits. The Deloitte Center for Banking Solutions reported last week that Generation Y, born in the 1980s and early 1990s, has more than 75 million members and collective annual income of $1.89 trillion. Deloitte predicts their earnings will increase by 85 per cent over the next 10 years to $3.5 trillion, exceeding Baby Boomers' earnings by some $500 billion.

At this point, the capabilities of mobile banking — essentially, doing transactions on-the-go using a cell phone or other mobile device — are practically the same as online banking. You can do simple functions like check your balance, move money from one account to another, or set up automatic bill pay. But technology allowing people to use their phones like credit or debit cards is developing.

Meanwhile, marketing efforts aimed at luring customers to online banking has trailed off a bit since last year, Holland said.

"It was maybe a little overheated last year, but is seeing some retrenchment as banks ask, what are we going to do to actually generate revenue?"

IBM's survey showed that 84 per cent of consumers would not be willing to pay a fee for mobile banking.

But banks, still struggling with the U.S. mortgage crisis, should see mobile banking as way to attract customers and their deposits, Holland said — and trim costs, too. Customers' calls to call centers, he said, cost banks an average $14 each.

Source: AP