Banks must “adapt or die” in the digital world to meet the surging demand for mobile banking with the number of mobile customers set to jump to more than a quarter of the world’s population, a new study has warned.

Mobile banking usage is expected to more than double over the next four years, from 800m people to 1.8bn, according to research by investment bank UBS and accountancy firm KPMG.

The increase comes as more people gain access to mobile phones and seek efficient ways to transfer money. This has stoked competition among established banks, technology giants and digital start-ups as they battle to capture a larger slice of the nascent market.

Experts warn traditional banks that are busy maintaining their old technology systems are at risk of losing customers and revenue to nimble digital firms if they fail to offer efficient mobile banking.

David Hodgkinson of KPMG said: “Banks must adapt or die. Mobile banking is clearly supplanting all other channels as the main portal between the bank and the consumer.”
He said although many banks have already “risen to the challenge” and invested in new infrastructure and “pioneering initiatives”, others need to follow suit to keep up with the pace of change.

Royal Bank of Scotland experienced its second technology glitch in six weeks on Friday, leaving customers unable to access their online and mobile accounts. It comes after a previous systems meltdown in June.

Philip Finch, a researcher at UBS, said traditional banks now consider mobile banking a priority. “Three years ago, banks were questioning how important investing in mobile banking was. Now, everyone is investing in mobile banking. Board commitment is high, which is necessary to allow banks to invest in IT.”

He added: “The global financial crisis, regulations, pressure on revenues and the need to keep costs down has made it tougher for developed market banks,” said Mr Finch.

So-called challenger banks with new technology systems are spearheading mobile banking initiatives. Atom Bank, for example, is set to launch in the coming months in the UK as the first mobile-focused lender.

Certain incumbent banks, such as BBVA in Spain, are at the fore of digital developments, according to the report.
Security is another issue, deterring one-fifth of consumers who do not currently use mobile banking, according to UBS’s research.
Enticing revenue growth is stoking competition to win market share of mobile banking, Mr Finch added.

Bank management teams expect average revenue growth of 6 per cent over three years, UBS said. Based on mobile services helping to reduce costs by about 10 per cent a year by 2018 and 6 per cent boost in retail banking revenues, banks could see a rise in return on equity of up to 140 basis points.