Gen Y Happy to Pay for Mobile Banking

76 per cent of Generation Y consumers (18-26 year olds) would be willing to use mobile banking services, and consider a monthly fee of £5  a fair price to pay, according to the results of a study conducted by global strategy and marketing consultancy, Simon-Kucher & Partners.

The company says the study is the first to demonstrate how mobile banking could provide a new revenue source for banks by charging for a monthly service plan, rather than providing the service for free as they do currently. The Generation Y demographic equates to 12 percent of the UK population.

Most banks see mobile banking as a means of reducing costs by migrating expensive branch and call centre transactions to mobile devices. Consequently, mobile banking is offered to customers for free. But as Georg Wuebker, global head of banking at Simon-Kucher & Partners points out: “This demographic represents an untapped market opportunity; this group identified a fair price for mobile banking, and over three quarters of respondents are willing to use it.”

The study investigated respondents’ preferences for services across three categories, each increasing in functional richness. The first was ‘Informational’ (flat, presentation of information). No. 2 was Transactional (operational and unidirectional events). The third was Interactive (personalised and multidirectional) mobile banking services.

Balance checking (60 per cent) was seen as the most important informational service. Blocking lost/stolen cards (94 per cent) was the most essential transactional service, and fraud monitoring (87 per cent) was the most important interactive mobile banking service. The latter two point to the fact that customers see security as a priority.

Payment-related services were important to 57 per cent (peer-to-peer) and 59 per cent (for purchases) of respondents. This is interesting given the industry developments around mobile-based contactless payments, mobile wallets and the emergence of financial services offerings from major telecommunications groups.
Notably, respondents’ preferences for service declined with the increasing richness of functionality. Informational services were considered the most important (81 per cent), followed by transactional (69 per cent) then interactive (53 per cent). This suggests that functional richness is not the deciding factor for placing a price on mobile banking. In fact, respondents said that the main benefits of mobile banking were flexibility, time saving, and accessibility.

The results of the study also have deeper implications for banks, Simon-Kucher & Partners says. Ben Snowman, senior consultant, banking division, UK, and author of the study, observes: “Paid-for mobile banking can also play a long-term strategic role in customer succession planning. If banks launch fee-carrying mobile banking services, they will see consecutive generations of customers moving towards paid-for services, and an increasingly lower portion of the customer base will use free banking.”