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Consumers rejecting banking apps because of security – what does this mean for retail?

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Consumers are failing to adopt personal banking apps amid security fears, finds a new study in the US and UK, and the knock on effect may be that mobile retailing and mobile payments app uptake could also suffer.

The study from Kaspersky Lab finds that of those not using mobile banking at all today (36%), more than half of them (74%) cited security as the major reason, which could slow the overall adoption of mobile banking services during a time where mobile device usage is exploding.

While security concerns are holding back non-mobile banking users from embracing the convenient, digital self-service solutions on the market, those who are active users of mobile banking today also share the same concerns. Of both, users and non-users of mobile banking, 85% said that they would increase their usage to “some extent” if there was more security and nearly half (44%) of those surveyed said that they would “significantly” increase their mobile banking usage with more security.

For financial organizations, an increase in self-service banking usage can drive revenue and reduce transactional costs, but currently customers don’t see a promising future for mobile banking in their lives – with 32% of respondents claiming that they do not ever foresee using mobile as the primary channel that they will engage with their bank or credit union. Banks that do not properly strengthen mobile financial security measures could miss out on a significant business opportunity and risk losing valuable customers in the process.

But retailers too could suffer from this lack of trust and security fears too. As we reported earlier this month, a recent study by Episerver found that consumers aged over 55 are the most likely to be concerned by the security of their mobile apps – including retail ones – with 78% ranking security as a top priority. This compares to 60% for 25-34 year olds.

And while retailers and consumers can see the benefits of mobile payment, because of this the financial sector remains the weak link in the chain, often failing to make customers feel safe enough to make the most of mobile commerce.

“In today’s retail environment, mobile shopping has become a key part of the consumer experience, with mobile apps playing an increasingly vital role,” says James Norwood, CMO at Episerver. “Despite this fact however, the adoption of direct mobile payments remains slow, with many consumers still not trusting financial mobile apps to keep their payments secure. ”

Commenting on the lack of trust of mobile when it comes to money matters, Ryan Wilk, director at NuData Security, says: “We’re not at all surprised to see this reluctance on the part of consumers to adopt mobile banking wholeheartedly. It’s entirely understandable given the onslaught of daily stories about breaches, and the growing awareness about the security vulnerabilities of many mobile apps.

Consumers are gradually being schooled in online security, even if it is by getting their hands burned first. According to the new ACI 2016 Fraud Report, almost one in three UK consumers (29%) has been a victim of card fraud in the last five years, with much of that fraud perpetrated by fraudsters who made online purchases using hacked or stolen card details. Just as chilling, is the figure that a full 17% have been victimised multiple times.

Perhaps customers are learning from these negative experiences, or it might be a trust issue. They likely fear that banks really don’t have control of their mobile security, or a combination of both.

What’s concerning to us is the finding that 44% of those surveyed would significantly increase their mobile banking usage with more security. In general, we’d be in favour, provided this security is actual security and not just more “security theatre” as we’ve seen time and time again. By this, we mean that adding more single-modal endpoint security layers are likely to just add more and more friction into the process and have marginal fraud prevention impacts.

Instead of layering on more solutions that will continue to provide limited data, FI’s can see this study as an opportunity. It’s clear that customers actually want real security. This means looking at the entire lifecycle of the account and continuously identifying patterns of behaviour that indicate fraud. Understanding how good customers behave will enable them to address these customer fears and concerns.

The good news is that these solutions are readily available on the market and are positioned to help banks provide winning customer experiences, improve their rates of false declines and lower account-based fraud.”

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