When the iPhone launched in June 2007 some argued its debut was truly a "game changer" for mobile banking, ushering in an era of smart phones; judging by the numbers Bank of America and other institutions are posting, that wasn't hyperbole.

"We have over 1.7 million active users, and the majority of those are the smart phone base," says Doug Brown, svp of mobile product development at BofA, noting that mobile adoption nearly tripled in 2008 from 600,000 users at the end of 2007. Bank of America dominates the mobile market. TowerGroup estimated that the entire U.S. market for mobile would just exceed six million in 2008.

It's not just the iPhone that's driving mobile banking. The raft of copy-cat touch screen phones, especially the new Blackberry Storm, have ramped up sales and are making a significant impact on mobile banking. More than 70 percent of the end users of Jack Henry & Associate's goDough mobile banking application are smart phone users, says Lee Harrison, director of software engineering at Jack Henry.

What's driving smart phone users to mobile banking? Bigger screens, better browsers, and data plans all play into the smart phone's dominance. "The reality is that the iPhone is a game changer in the sense that this is the type of phone that has huge data usage, so those customers have a higher propensity for mobile banking," says Drew Sievers, CEO of mFoundry.

The fact that smart phones account for 50 to 70 percent of mobile banking logins is impressive given that The Kelsey Group says not quite 19 percent of Americans own smart phones. Aite Group senior analyst Nick Holland says 78 percent of the big mobile vendors in North America either have an iPhone offering or are planning one for 2009.

For a while, BofA's free mobile banking application was the most popular download in the Mac store; other banks with iPhone applications available in the store include Wells Fargo, Provident Bank and KeyPoint CU. Citi's Mobile Money Ventures JV plans to offer a Citibank iPhone app this month.

But for all the time they spend doing mobile banking - 12 to 14 sessions per month, Brown says - BofA's mobile users aren't as transactional as straight online users. Just 40 percent of mobile bankers take advantage of bill pay or inter-account transfers.

Still, the high adoption rate for mobile banking has produced quantifiable results: bankers report higher customer satisfaction and propensity for referrals; the channel has driven considerable new account growth-eight percent of the mobile banking base are new account holders; and mobile customers choose mobile access over higher-cost channels like call centers or branches, Brown says.

Eventually, m-banking vendors may see smart phones pushing consumers away from downloaded applications altogether in favor of the robust mobile browser. The most prevalent mobile banking applications, SMS text alert and two-way messaging from vendors such as ClairMail, don't require an app at all. "There is a dynamic going on where some people won't bother with mobile banking at all because they won't need to," Holland says. "They'll go straight to their online banking site."

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