While an estimated 90% of U.S. consumers use mobile phones, far fewer use them for banking. In fact, a Gartner report released in June said that out of the group studied, only 15% had used mobile banking in the past month.

This adoption rate might seem small compared to the overall use of smartphones and other mobile devices and in light of the buzz the channel has generated. However, industry participants say the potential is there.

"The movement of data by mobile device is doing very well, and that's not due to financial institutions right now," said Red Gillen, a senior analyst with Celent in Boston. "People just love their mobile devices, and in fact, the transmission of information now exceeds the transmission of voice in the United States."

Industry participants say mobile banking is now what online banking was a decade ago as it transitioned from static "brochureware" to essential functionality.

And some argue that, like online banking, mobile banking soon might not be much of a choice for any credit union that wants to be its membership's primary financial institution.

"Get it on your radar," said Ryan Hickman, new media specialist at $359 million Sunmark Federal Credit Union in Latham, N.Y. "Beyond a service, mobile banking offers product marketing opportunities [and] research into where your members are so if you were to create new ATMs or branches, you have data to back up your implementation.

"Really, it's what online banking was 10 years ago, becoming a major decision variable in where to bank. And it will become what online banking is today–a total necessity for new member acquisition."

From core processors to payments specialists and in-house developers, technology providers are responding to the credit union demand by cranking out new platforms or integrating third-party offerings.

"We're getting lots of pressure from our customers, who are getting pressure from their members," said Kevin Kolar, a vice president at Bradford-Scott Data Corp., an Indiana-based provider of core processing and related solutions to about 170 credit unions. "They're telling us that if we don't offer this, their younger members are going to find someone who does."

That resonates with a veteran analyst at another think firm.

"When's the last time you saw someone from Gen Y with a checkbook in their pocket? The phone has become their check register," said Emmett Higdon of Forrester Research in Cambridge, Mass. He said a Forrester Research study conducted in June put the rate of adoption for online banking at about 12%, a sharp jump in recent months.

However, Higdon and others said, to really accelerate adoption, financial institutions need to clarify the value proposition to the end consumer and keep an eye on the quality of their offerings, especially in the rush to get smartphone apps up and running and ready for download.

"Take a look at the customer comments about those applications," Higdon said. "It's free research and I encourage all my clients to do it. What a lot of consumers are finding out right now is that mobile banking is a subset of what's already available online and in many cases, not a very good subset."

In fact, about half the respondents in a recent WorkLight survey said they were not satisfied with their bank's mobile banking application.

"We attribute a lot of that low level of satisfaction to missing functionality, things like bill pay, personal budgeting tools and the ability to transfer between accounts," said Kurt Daniel, chief operating officer of the New York-based company, which sells multi-channel software and services.

John Best, chief technology officer at Wescom Resources Group, said he's seen some mobile apps that were clearly the result of the credit union "just hanging a shingle out there, like when people used to put up websites that did nothing."

"I'm not looking to throw rocks at anyone, but I think you're underestimating mobile bankers as a group if you have the perception that this is just a bunch of kids using this app and they don't expect much."

Best said WRG, which includes mobile banking in the lineup of e-commerce products it markets to credit unions, at first received low consumer ratings for the downloadable mobile apps launched by parent Wescom Credit Union. "But we learned from them," he said. "Instead of us deciding what our members want, we put out the beta version, learned what they wanted and are fixing what we can."

Higdon at Forrester also advises financial institutions to ensure that the basic functionality is sound. Members should, for instance, be able to rely on their mobile banking application to quickly check balances and transfer funds while standing in the checkout line. But don't sweat the more advanced solutions for now, he said.

"Will people be doing mortgage applications through mobile banking? Probably not. But they need that basic functionality to be right."

Daniel at WorkLight said that in addition to improving functionality, credit unions should work to educate their members about the advantages and security of mobile banking.

And regardless of how the service is delivered and to what device, some industry participants argue that despite mobile banking's currently relatively small size, financial institutions cannot afford to ignore it. The growth of smartphones, they add, will just accelerate adoption.

"The business case for mobile banking is obvious and all financial institutions should be planning a strategy around it," said Jeff Coppolo, managing partner with The Alliance Companies, a Boston-based specialist in credit union cards and payments. "Still, less than half of consumers carry smartphones and smartphone penetration is critical to mobile banking adoption. But that adoption is likely to increase rapidly as the devices become more affordable and the technology advances."

While some argue that smartphone sophistication may make the argument moot someday soon, vendors like Fiserv aren't taking any chances and continue to offer the "triple play" of mobile applications: SMS text, downloadable applications and wireless, browser-based application protocol websites.

"We offer all three delivery channels and expect to continue to develop others, including ASP channels, to make iPhone applications affordable and available for smaller institutions," said Amy Wilkinson of Fiserv's mobile product development operation. "We do that because we believe consumers want choices."

She said about 10% of the company's core processing clients currently offer mobile banking, "and we expect that number to go up as we integrate more of our business units and make it more widely available."

Explaining why mobile banking matters will also help drive adoption, said Calvin Grimes, Fiserv mobile product marketing manager.

"As we go out and find out what's preventing adoption, we're seeing it's not necessarily the user experience," he said. "And it's not necessarily security concerns. It's the value proposition. What's in it for them? So we're trying to convince our clients that their marketing should emphasize problem-solving for the consumer. It's more about that than the actual channel they're using."

Jason Marshall, director of product development at Harland Financial Solutions, said mobile adoption resembles a hockey stick in that it was stagnant from 1998, when his company first got into it, until 2008, when it began to rise sharply. About 130 credit unions and 70 other customers are currently using his company's solutions, he said.

"People who adopt it and market it well are seeing their consumers react to it," he added.

And, with all the discussion surrounding what mobile banking channel to use and what device to target, perhaps another brass ring is the ability to land the business of the millions of consumers not banking by Internet at all.

"This might be the new conundrum in mobile banking," said Stessa Cohen, a research director with Gartner in Stamford, Conn. "Many credit unions and banks are focusing on the potential of migrating customers of online banking to mobile banking. But what about the 50% of consumers who don't use online banking at all?"

Cohen pointed out that there are many people who don't have ready access to broadband service, either at home or elsewhere, but do, however, have mobile phones. Gartner survey data, she added, shows that people who don't have broadband are much more likely to use mobile banking than those who do.

"How many of these people might use their mobile device for a banking self-service channel?" she said. "The number of people using mobile banking right now is really very small, but it's only just started."

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