How Mobile Phones and Bulk SMS Impact Consumers Financial Decisions

Banks and credit unions are well aware that their consumers are accessing their accounts and engaging in many different ways, through a range of channels. By far the most talked about of these is mobile – digital banking is heading to a mobile-first world for sure.

But while this is hardly breaking news, what is interesting is how the mobile phone can change the way consumers make decisions about their finances. Needless to say this has important ramifications for financial institutions looking to maximize revenue potential from their mobile strategy.

“As the use of mobile banking increases, mobile phones are increasingly becoming tools for managing personal finances and controlling spending,” says a recent study of American consumers conducted by the Federal Reserve.

For example, its research shows that 63% of mobile banking users with smartphones use their device to check account balances or available credit before making a large purchase.

Of these, more than half (53%) reported that they decided not to buy an item because of the amount of money in their bank account or the amount of available credit. Obviously banks know they should use mobile services to deliver a better customer experience, but this paints a vivid personal picture of exactly how this is happening.

More than half (57%) of mobile banking customers receive alerts from their bank, such as an SMS.

“Many consumers have near-constant access to their mobile phones, and these results illustrate that these devices have the potential to provide ‘just-in- time information’ that can influence consumer financial behaviour,” says the Fed.

But the real benefit is in being able to deliver accessible and timely prompts that may help consumers make different, smarter financial decisions.

Virtually everyone who uses mobile banking and who received a low-balance alert from their bank reported taking some action in response. This ranged from transferring money into the account (44%), reducing their spending (28%), or depositing additional money into the account (31%).

“The actions consumers take in response to the receipt of text message or e-mail notices from their financial institutions demonstrate some of the potential effects of this technology for encouraging consumers to engage in different financial behaviors that may prove to have beneficial outcomes,” the report’s authors concluded.

In other words the idea of bulk SMS services for banks is about much more than reducing costs associated with run-of-line operations.

At a very basic level, a text is cheaper than a letter to a customer. It provides the same information about their account, but because of the direction of consumer behaviour around mobile banking, it has the chance to not only be less costly at doing the same function as a letter, but also deliver a much better customer experience.

The research from the Fed chimes with a similar sort of report from the UK’s Financial Conduct Authority, which said text alerts were important in helping consumers to reduce overdraft charges.

In a guide urging financial institutions to make more use of bulk SMS services, the financial watchdog said text alerts and mobile banking apps can cut current account balances by 17 per cent to 24 per cent as they help consumers to move their money to higher-earnings savings accounts.