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Introduction

With the development of smartphones came phone applications such as mobile banking and mobile payment. The development of mobile banking and payment has made a significant difference in how individuals transfer money to each other and how retailers and consumers use their money. The mobile banking and payment applications have many potential benefits as well as disadvantages. The apps make it very convenient but, with technology, come security risks.

Lots of banks now offer mobile banking making it easy for individuals to not only check balances on their accounts but also to send and receive money. Just phone number or email can transfer money into different accounts. Mobile payment apps such as Venmo, PayPal, or Apple Pay make it easy for consumers and businesses to send and receive money as well. As soon as bank information is linked to the mobile payment app, it becomes a virtual wallet. However, the easiness of the app increases the security concerns of the technology.

#Introduction

Background

So what exactly is mobile banking and mobile payment? How did this all start? As the use of the Internet arose, so did the banks’ websites. Then, as the development of mobile phones became smartphones, banks were developing mobile banking apps. Mobile banking is when an individual can manage financial transactions from a mobile banking app without having to go to his or her local branch (Discover, 2018). Mobile banking apps can be convenient for one to make mobile check deposits, transfer money, pay bills and locate ATMs.

According to Hayashi (2012), there are three types of mobile payments. The first is person-to-person money transfers from a mobile device similar to the mobile banking apps. This could also include noncommercial or commercial payments from one consumer to another or small-scale merchant (Hayashi, 2012). The second is for “goods and services purchased over the internet on a mobile device” (Hayashi, 2012, pg. 37). Lastly, the third type of mobile payment is at a point of sale (POS). POS is “payments initiated from a mobile device at physical locations, such as grocery store, restaurant, or gas station” (Hayashi, 2012, pg. 37). Today, with the uprising up technology, there are “more than 24 million active mobile users and more than 30 million Online Banking customers” (Bank of America, 2018, para. 5).

According to the Federal Reserve, in 2015, about 87% of the United States population ages 18 and above owned or had access to a mobile device (Federal Reserve, 2016). Within that population with mobile devices, an increasing proportion owns a smartphone. In 2015, “77% smartphone ownership rate among those with mobile phones is a substantial increase over the 71% rate reported in 2014, 61% rate in 2013, 52% rate in 2012, and 44% rate in 2011” (Federal Reserve, 2016, pg 4). This quote shows the increase rate of Americans that own smartphones over the years.

#Background

Current Use

The use of mobile banking and payment are increasing and becoming every day tools at the check out line. Jesus Tellez Isaac and Sherali Zeadally focus on the design and implementation of mobile banking applications. Isaac and Zeadally explain that on the consumer’s side, in the PCMS payment protocol, “a software is required for purchase transactions” (2017, pg 602). The PCMS allows the consumer to store the consumer’s personal information such as contact information, bank information, and issuer ID. Consumers are using the mobile banking apps for managing their accounts, payments, budgeting, and shopping (online and in-stores). Just last year, a consumer and mobile financial services report by the Federal Reserve showed “mobile banking apps were used on 52% of smartphones in the US” (Discover, 2018). With the increase of technology and a “broadening array of options” the adoption of mobile financial services such as mobile banking and payment apps has risen (Federal Reserve, 2016). According to the Federal Reserve, in 2011, there were 43% of smartphone users with bank accounts that have reported that they “used mobile banking in the previous 12 months” (2016, pg. 5). In 2015, the use of mobile banking increased reaching 53% of smartphone users (Federal Reserve, 2016). In addition to mobile banking, mobile payments have also increased over time. Reported by the Federal Reserve, in 2011, 12% of smartphone users reported to use mobile payments and in 2014, the usage of mobile payment increased to 28% (2016). According to the American Banking Association, the 2 age groups that most utilize their banking accounts through mobile were age groups 18-29 year olds and 30-44 year olds (2017). This shows that the younger generations are more current with the technology and apps that are used through smartphones.

The use of mobile banking has steadily increased and is continuing to grow with the advancement of technology. Some common ways mobile banking is used is checking account balances, transferring money, checking deposits and making bill payments. With the simplicity of mobile banking apps, 94% of mobile baking users have checked their financial account balances or transaction inquiries using their bank’s mobile banking apps in 2015 (Federal Services, 2016). Another popular activity used by 58% of users of mobile banking is transferring money between accounts (Federal Reserve, 2016). The mobile banking apps also allow notifications from push notifications on smartphones, emails, and text messages. Depositing a check is also widely used by 48% of mobile banking users (Federal Reserve, 2016). Mobile banking allows depositing a check from anywhere, anytime. Depositing a check on mobile banking app uses a remote deposit capture (using a smartphone camera). Lastly, about 47% of mobile banking users make online bill payments from their bank accounts using a mobile phone (Federal Reserve, 2016).

Mobile banking and mobile payments are very similar and play hand in hand. Stated by ISACA (2011), mobile payments are “payments for products or services between two parties for which a mobile device, such as mobile phone, plays a key role in the realization of the payment” (pg. 5). Some common ways mobile payments are used are bill payments, purchasing items online, purchasing items in stores, and sending money. Out of the activities listed, the most common way users use mobile payment is to pay their bills. There were 65% mobile payment users that had made mobile payment when paying their bills (Federal Reserve, 2016). About 42% of mobile payment users purchase physical items or digital content using a mobile phone, browser, or app (Federal Reserve, 2016). In addition to paying for an item online, 33% of users pay for items in a store. There are 25% of users that send money to friends or relatives using an app like Venmo or PayPal (Federal Reserve, 2016). Other mobile payments activities made by individuals in the United States are, parking, taxi and car services, public transit, making a donation through text message, and sending money to friends and relatives outside of the United States (Federal Reserve, 2016). Mobile payments are very easy to use and very convenient. Mobile payments can be used to pay for an item in a store or making payments through an app, website, or even a text message. The easiness of mobile payment through a push of a button or even just a text message concerns rise regarding the security of the technology.

#Current Use

Security Aspects

Survey participants for the survey done by Federal Reserve show their concern about the security measures of mobile banking and payment. Federal Reserve shares that, “despite the increasing prevalence of mobile banking and mobile payments, a significant share of consumers believes the technology to be unsafe or do not know how safe it is” (2016, pg 21). There are many different security concerns. One mentioned by a journalist from the NBC News, Nicole Spector, explains that marketers can use the mobile app user’s public information to target them. When using mobile payment apps such as Venmo, users can caption the payment when sending money with emojis and text. Although it’s entertaining to see the emojis, some of the details are “clear value to potential marketers” (2018). It is mentioned in Esther Swilley’s (2010) study that the “the negative influence of security and privacy on attitudes” toward mobile banking applications were equivalent to both non-mobile banking users and mobile banking users (pg 308). This shows another security concern from mobile banking is the service being hacked and having personal information along with bank information being stolen.

Alexey V. Bataev shares the types of liabilities when it comes to using mobile banking. According to Bataev, the three main vulnerabilities from mobile banking are physical access to the consumer’s device, attack “man in the middle,” “MitM”, and download of a malicious program to the consumer’s device in various ways (2017). Accidentally forgetting your phone or even dropping your phone causes a criminal to pick up that phone and access to the file system on your device. If the application “stores, the identification data or other sensitive data in clear text, or data ‘funneling’ in the clear, it is easy for an attacker to obtain this information and steal money” (Bataev, 2017, pg 147). Another way the consumer’s banking information might get hacked is by the attack of “man in the middle” (MitM). Bataev explains that this attack means that the data between the consumer’s device and the server are intercepted. This raises concern regarding untrusted Wi-Fi networks. Bataev states that for the purpose of MitM, it is “necessary to be in one network with the victim whether that is in public network Wi-Fi or using fake wireless access points” (2017, pg 147). In the result of MitM, the criminal can have access and replace the transmitted data that results in theft of money from the consumer’s account. Lastly, another type of vulnerability Bataev mentions is the download of a malicious program to the consumer’s device. The criminal can “steal sensitive data of mobile banking user or sensitive data of payment transaction” by installing malicious applications on the device and getting remote access with full access rights (Bataev, 2017, pg 147). The different types of ways a criminal can access one’s mobile banking information is frightening and concerning. To prevent and protect one’s information, it is important to encrypt data and if needed, reset data and implement control of security or the mobile banking and payment applications, as well as, mobile device.

#Security Aspects

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Legal and Ethical Issues

With mobile banking and mobile payment applications storing millions of consumers’ information, major legal and ethical issues regarding data security and consumer protection rise. Chung explains the “Electronic Financial Transaction Act” and “one of the main purposes of this Act is to ensure the reliability of electronic financial transactions by clarifying their legal relations” (2012, pg. 2). Acts such as the Electronic Financial Transaction Act in South Korea might be similar to the Act in the United States.

Conclusion

The use of mobile banking and payment continued to rise since 2011 and appears likely to continue to increase as the younger generations and more consumers use smartphones. The rate of mobile banking and payment may also increase over the next few years as current non-users realize the convenience of this service, also as more financial institutions offer mobile banking. The continuity of technology advancement, it allows consumers to connect with financial service providers on a different level and expand access to the businesses 24/7. However, even with all the benefits associated with using mobile banking and mobile payment, consumers should always stay aware of the potential security risks and report any unusual events on your banking statement to your local branch to avoid further risks.

References

American Banking Association (2017). ABA Survey: Two-Thirds of Americans Use Digital Banking Channels Most Often. Retrieved from https://bankingjournal.aba.com/2017/09/aba-survey-two-thirds-of-americans-use-digital-banking-channels-most-often/

This short article from the American Banking Association states statistics of the amount of Americans that access their bank accounts through their mobile apps. It’s very interesting to see the number differences as well as the banking methods by age group. This article really shows how big and widespread mobile banking became.

Bank of America (2018). The birth of mobile banking. Retrieved from https://about.bankofamerica.com/en-us/our-story/the-birth-of-mobile-banking.html#fbid=qPWIR9LjTBU

This link shares a backstory of how Bank of America’s services widen from just being a branch to mobile banking. It’s interesting to learn how much Internet has changed the financial banking services for the better. It allows consumers and businesses to interact beyond business hours.

Bataev, A. V. (2017). Innovative forms of remote service in russian banks: Mobile banking. International Review of Management and Marketing, 7(1) Retrieved from https://search-proquest-com.mutex.gmu.edu/docview/1865226742?accountid=14541

This article analyzes the security and the amount of money stolen from consumers and clients that use mobile banking. It also talks about the development of mobile banking in Russia. This article also provides statistics on the number of people in Russia using mobile banking and the number of transactions done through mobile banking.

Chung, C. (2012). Legal Issues Arising from the Use of Mobile Devices In Electronic Commerce. Retrieved from https://www.uncitral.org/pdf/english/colloquia/EC/UseofMobileDevices_Chang-ho_CHUNG.docx

This article explains the legal and ethical issues in South Korea for mobile banking. It is interesting to learn the actions taken by South Korea. It also shares background information regarding mobile banking.

Discover (2018). What’s the Difference Between Online and Mobile Banking?. Retrieved from https://www.discover.com/online-banking/banking-topics/whats-the-difference-between-online-and-mobile-banking/

This website from Discover just explains the difference between online and mobile banking. It also provides some statistics on the number of people that use online banking and mobile banking. In addition to the statistics provided, it also provides information on how the online banking and mobile banking are used by their consumers.

Federal Reserve System (2016). Consumers and Mobile Financial Services. Retrieved from https://www.federalreserve.gov/econresdata/consumers-and-mobile-financial-services-report-201603.pdf

This report shares a great amount of information between consumers and mobile financial services. It shares statistics on the amount of consumers using mobile payment and mobile banking services. It also shares the activities done through mobile banking and payment.

Isaac, J. T., & Zeadally, S. (2014). Design, implementation, and performance analysis of a secure payment protocol in a payment gateway centric model.Computing.Archives for Informatics and Numerical Computation, 96(7), 587-611. doi:http://dx.doi.org.mutex.gmu.edu/10.1007/s00607-013-0306-4

This article mainly focuses on the design and implementation of mobile banking and payment. The study approach for this article evaluates the performance of mobile banking as well as the security and implementation protocol. This article shows the study of how the mobile banking works such as how fast it takes for a payment to go through using mobile banking.

ISACA (2011). Mobile Payments: Risk, Security and Assurance Issues. Retrieved from https://www.isaca.org/Groups/Professional-English/pci-compliance/GroupDocuments/MobilePaymentsWP.pdf

This article is a little bit longer than the other ones but even just the couple of first pages really helped define “mobile payment”. The article has a great listing of business benefits and challenges when it comes to mobile payments. It also continues to address risks, security and assurance issues that we might have with mobile payment transactions.

Hayashi, F. (2012). Mobile Payments: What’s in It for Consumers?. Retreived from https://www.kansascityfed.org/publicat/econrev/pdf/12q1Hayashi.pdf

This article talks about what mobile banking and payments are and the benefits of mobile banking and payment. It also explains the technologies used for mobile POS payments. It has a solid amount of information that would benefit my research paper regarding mobile banking and mobile payment.

Spector, N. (2018). A better, smarter way to use Venmo. Retrieved from https://www.nbcnews.com/better/business/what-your-venmo-feed-says-about-you-your-financial-data-ncna863881

This segment from NBC News, reported by Nicole Spector explains the use and the hype of Venmo. Venmo is a mobile payment app that allows individuals to send money to their friends and families. This segment shares the safe way to use the Venmo app.

Swilley, E. (2010). Technology rejection: The case of the wallet phone. The Journal of Consumer Marketing, 27(4), 304-312. doi:http://dx.doi.org.mutex.gmu.edu/10.1108/07363761011052341

This article is mostly consumer based. The article explains the study approach done on consumers to understand if consumers prefer paying through mobile banking or keeping cash and card in hand. It’s interesting to see the change of minds when the level of security for mobile banking gets involved.

#references

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