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Hold the Phone

What You Must Know About Mobile Banking

With a cellphone in almost every pocket and smartphone sales growing rapidly, it won’t be long before mobile banking takes off. But although mobile banking provides convenience, the jury’s still out on what fees might be piled on down the road and how secure your personal information is when your bank branch is your phone.

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Jeannie Mandelker long has viewed her cellphone as a must-have business tool. Lately, it’s become a critical financial tool too.

Mandelker, who is a public-relations and marketing executive in Memphis, Tenn., uses her phone to check her Bank of America account when she’s about to make a purchase by debit card or to see whether a particular check has cleared. But her most important transaction these days is to send money to her daughter, who is in college and on a tight budget.

“We wanted [our daughter] to learn to control and track her spending, so we decided to give her spending money twice a week,” Mandelker says. She uses her cellphone to transfer funds to her daughter’s account. Occasionally, Mandelker sends extra money for on-the-spot purchases, such as books and train fare. “I can do it in 2 minutes, and it’s instantly available to her,” Mandelker says.

Of course, she could do the same thing through traditional banking channels. “But the phone is always by my side,” she says. “I can make the transfer from wherever I am—at a meeting, at a concert, traveling. I’ve become dependent on being able to do that.”

Mandelker is a disciple of mobile banking, sometimes called m-banking. Simply put, mobile banking means that you manage your finances by cellphone.

According to Javelin Strategy & Research, which is a financial-services consulting firm, at least 95 percent of today’s cellphone models are capable of mobile banking. That means that you can manage your finances from the car, the coffee shop or anywhere else where you can get a signal. (Fund transfers, like the ones Mandelker makes for her daughter, require a phone that has Internet access.)

But there is a murkier side to the glow of convenience: Although your transactions and identity seem safe and financial institutions don’t charge fees, it’s unclear for how long either situation will last.

FAST TIMES. Of the approximately 167 million U.S. adults who use a cellphone (according to a June report by Javelin), more than 36 million have jumped on the mobile-banking bandwagon, Javelin says. The firm predicts that that number will reach 99 million by 2014.  

Online banking—managing finances over the Internet by computer—has been around, but in 2009, for the first time, more consumers banked online than by any other method, according to American Bankers Association (ABA). From there, it’s a short step to mobile banking, which experts expect to quickly outstrip online banking: At least 70 percent of U.S. banks already have mobile-banking services, according to ABA.

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David Eads, who is the CEO of consulting firm Mobile Strategy Partners, expects that the number of mobile-banking users will catch up with the number of online-banking users in 2011. The reason: Although you might not carry your computer everywhere, chances are your phone is always at hand.

“It’s even better than ‘always on’— it’s ‘always with’—as in always with you,” says Mark Schwanhausser of Javelin.

That anticipated growth means that customers who sign up for mobile-banking services typically get the same free (at least for now) services that financial institutions provide for online and face-to-face customers. Customers can view balances and account activity, order checks, receive alerts and transfer funds. In some cases, customers can pay bills and even buy and sell stocks. However, complex transactions, such as applying for or refinancing your mortgage, typically still require a trip to the bank.

BANKING ON SECURITY. The biggest question, of course, is whether it is secure. The best answer seems to be “so far.”

“As with almost anything, there is some risk,” says Don Rhodes, who directs risk-management policy for ABA and who uses a smartphone for mobile banking.

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