A recent Javelin Strategy and Research study of over 5,000 respondents in the US found mobile banking usage down. The study has caused a lot of head scratching in the industry — myself included.  The report compares this year’s survey to similar surveys in 2009, 2008, and 2007.

Consumers switching for mobile banking reasons doubled and is as important as ATM locations in switching banks

The study also uncovers a number of other intriguing facts that have been less widely reported and which I think are more important to bankers and the mobile commerce industry as a whole. In particular the study finds security increasingly important to adoption and that consumers are switching banks for mobile banking.

Security was cited by 52% of non-mobile bankers as a reason for not using mobile banking. This is up significantly after holding steady around 42%-43% in previous years.

Let’s address the controversial topic first. Javelin found mobile banking usage down (not adoption, as has been reported, but usage in the last 30 days). Javelin has found mobile banking usage rapidly growing from 7% in 2007 to 15% in 2009. In 2010 they found usage down slightly to 14%.

So, what’s going on? Is the mobile banking fad over?

I immediately called Javelin to discuss. I’m seeing mobile banking adoption increasing at banks across the U.S. and Canada. Most banks are tracking their success on how many users enroll for mobile banking services. The Javelin study asks users when they last used mobile banking. The tallied result is the number of respondents that have used mobile banking within the last month. So, users are signing up, but they’re logging in less.

So one explanation may be that users are simply looking at their accounts less. I have seen speculation in that past that the recession would cause people to watch their money more closely. Perhaps the opposite is occurring. Lean bank accounts are painful to look at, so people are avoiding looking unless they must.

Another explanation is that this is a pause in the usage curve, in a technical pattern similar to stock increases. Stock prices tend to rise, then pull back up to 30% then rise again. A drop of over 30% or so would indicate a more bearish shift. A one percentage point decline in usage is only a slight decline, although it surely is a surprising lack of growth. There’s naturally a spike in usage when a service is new, then a pullback as the novelty wears off.

The full impact of the recession may also explain the pullback. Javelin found an overall reduction in mobile phone usage (74% down from 85% in previous years). The financial crisis caused many mobile plans to be put on hold in 2009 which in turn is affecting adoption of the products that would have been rolled out in 2010. Very few mobile banking projects were under active development in late 2009, and activity picked up significantly in early 2010. Those efforts are coming onto the market right now.

It also could be that users tried mobile banking then stopped using it.

Some users undoubtedly tried mobile banking and quit. But, I don’t think mobile banking is a fad whose time has passed. Javelin also found that mobile banking is as much of a factor in consumers switch banks as the convenience of ATM locations (7%). If consumers didn’t like mobile banking, they wouldn’t be switching banks for it.

I think users are abandoning mobile banking at banks with bad mobile banking offerings and they’re going to banks with good mobile banking offerings as soon as they get the chance.

I think users are abandoning mobile banking at banks with bad mobile banking offerings and they’re going to banks with good mobile banking offerings as soon as they get the chance.

That’s a big deal. Banks spend many millions to expand and maintain their ATM network. In comparison, mobile banking can move the needle in every market with far less expense.

Banks with no mobile banking implementation at all should pay attention. Mobile banking is clearly table stakes because consumers will endure the pain of switching banks to get a good mobile banking offering. So it’s not enough to “check the box” and provide a bare bones mobile offering. Customers are leaving banks without mobile banking and they’re leaving banks with poor mobile banking.

Retailers and the broader mobile commerce market should heed this example as well. Shoppers will buy from someone else if their mobile presence is better.