Mobile banking, m-banking, or SMS banking refers to online banking that occurs via mobile phone or PDA rather than a PC. The earliest mobile banking services were offered over SMS, but with the introduction of smartphones and Apple iOS, mobile banking is being offered primarily through applications as opposed to text messages or a mobile browser.

Mobile banking reduces expenses by allowing customers to review transactions, transfer funds, pay bills, and check balances without relatively expensive phone calls to a bank’s customer service call center. More than half of all customer service calls already come in from mobile phones, and studies show consumers are twice as likely to have a cell phone than cash when out and about. Younger consumers, who are most likely to carry cell phones, are also heavy debit card users who require frequent balance checks.

Enhanced security with SMS transaction notifications and the ability to turn card accounts on or off, and new technologies like mobile check deposit, in which you simply take a cell phone picture of the check, are contributing to the increasing popularity of mobile banking. Eventually, mobile phones may even replace ATMs and credit cards.

About 10% of U.S. households currently use mobile banking, according to market research firm Nielsen, and Forrester predicts that one in five adults in the U.S. will be useing mobile banking by 2015:

“Consumer adoption of smartphones and increasing use of the mobile Web will drive sustained growth of casual, informational use of mobile banking — to check balances, review transactions, or receive alerts. Creating preference for mobile banking broadly will require banks to deliver more obvious value and superior execution than other channels offer. Functionality like mobile remote deposit capture and contactless mobile payments alone, though, will not anchor mobile banking the way that bill payment and account transfers have done for online banking. Channel managers must address issues of duplicate functionality, marginal user experiences, and a general failure to exploit the most valuable aspects of the channel if mobile banking is to become a critical part of how consumers manage their accounts.”

Standard, PC-based online banking is holding steady at around 40%, banks like USAA and Bank of America are reporting big increases in mobile banking in the last two years.

Like regular online banking, mobile banking won’t be for everyone. But as more banks and credit unions recognize the financial efficiency of mobile banking, they will invest in applications that make banking that much more convenient for their customers. And as those customers take advantage of the timesaving features provided by their banks, mobile banking will grow exponentially.

Robert Siciliano is a personal security expert contributor to Just Ask Gemalto. (Disclosures)