THE MOBILITY OF CASH

Ah, the amazing feeling you get when you touch and smell crisp, clean, new $20, $50 or $100 bills. That feeling is certainly hard to beat for any self-respecting banker. Indeed, much has been said about the cash that finds its way into and out of your wallet. Eventually, all paper money wears out because it is handled so much and it must be replaced. It is interesting to note that the $1 bill lasts about 18 months (and represents nearly 50% of all money printed every year because it is handled so much and wears out so frequently); the $5 bill lasts 2Ys; the $10 lasts 3Ys; the $20 4Ys and the $50 and $100 last about 9Ys. Given the growth in mobile banking activity, it makes you wonder how it will ultimately impact the production, use and circulation of money. Mobile banking is certainly finding an audience, with recent surveys finding almost 33mm Americans have accessed their bank accounts using a mobile device. To put that in context, that means about 14% of all wireless subscribers in the U.S. used this channel, a 21% increase over the prior 6 month period. A recent American Banker survey on the subject found 42% of banks currently offer mobile banking and another 40% plan to do so in the next 12 months. By asset category, 76% of banks with assets $10B or more currently offer mobile; 58% of those with assets $1B to $10B do so; 42% of those with assets $100mm to $1B have mobile and 36% of banks with assets $100mm or less offer it. This tool is quickly gaining adoption and bankers are moving to meet the challenge head on. The large numbers of banks that offer mobile now or are expected to do so in the next year, are also driving enhanced features and benefits to the user. For instance, the same American Banker survey found features going into mobile applications include the ability to deposit checks (55%); person to person payments (46%); mobile payments (27%); personal financial management or budgeting (20%); location based offers or coupons (20%); click to call capabilities (18%) and near field communication "click to pay" payments (17%). These are all interesting areas for users, but they also open the bank up to additional security and other risks. Aite Group did some research in this area and found that 75% of financial risk management executives in one survey believe the mobile channel poses risk but threat vectors are not yet fully understood and another 88% feel the mobile channel will be the next big area of financial services fraud. Meanwhile, 25% of risk management executives said they plan to increase spending on mobile banking security, but they are waiting to see where threats will materialize. Perhaps seeking to get ahead of this, the Fed did its own research on mobile banking recently and found 21% of mobile phone owners have used mobile banking in the past 12 months to check account balances (90%), transfer money between accounts (42%), receive a text message alert (33%), make a bill payment (26%) or locate an ATM (21%). It also found people who were not using mobile banking said the main reason was that their banking needs were already met without it (57%), they were concerned about security (48%), they didn't trust the technology to properly process transactions (22%), the cost of their data plan was too high (18%) or it was too difficult to see on the mobile banking screen (17%). No one thinks cold hard cash will go away anytime soon and mobile banking still has a ways to go to reach full adoption, but the trajectory is impressive. In the meantime, it is at least fun to note that the Bureau of Engraving and Printing produces about 38mm notes each day - 95% of which replace cash in circulation.