The relevance of mobile banking and the likelihood of its success have been in question. But mobile banking is here to stay and will grow significantly faster than online banking, according to a new report from Celent, "US Mobile Banking: Beyond the Buzz." By 2010, 35% of online banking households will be using mobile banking, up from less than 1% today. New functionalities will make mobile banking distinct from online banking and attract users.

For instance, mobile banking will eventually allow users to make payments at the physical point of sale. These "mobile contactless payments" will make up 10% of the contact less market by 2010. Mobile banking initiatives are of particular interest to 18- to 25-year- olds, also known as Generation Y. They will gravitate to mobile banking faster than the general population. According to the report, 40% of Generation Y indicate that mobile financial services will be a factor in their choice of bank. Five years from now, a significant percentage of this demographic will be in cell-phone only households, retrieving information and conducting transactions from their handheld devices frequently.

Celent estimates that by 2010, upwards of 70% of bank center call volume will come from mobile phones. Half of those calls will be related to basic balance inquiry information. This information will be readily available on a phone and will take less time than a phone call. A customer service inquiry via mobile banking (as opposed to a call center) will cost less and be an impetus for banks to embrace this new channel. "The mobile banking end game will not be about checking balances and paying bills. It will evolve into a mobile wallet, allowing banks to generate greater electronic payment volume through the combination of electronic loyalty programs, mobile marketing, and contactless payments," says Dan Schatt, author of the report and senior analyst at Celent.