A report by Intercede found 53% of consumers would not use mobile banking services because of concerns about device security.
The digital identity firm found 75% of those surveyed were concerned about data loss, and were most concerned that losing their phone would lead to identity theft.
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Richard Parris, CEO of Intercede, said consumers are losing confidence and the only way to get that back is to work harder on securing apps and mobile devices.
He said: “Nearly every week we read about another high-profile hacking story in the news. From major attacks – such as Heartbleed – to eBay’s recent data breach, it’s not surprising that consumers just don’t trust mobile security."
The launch of Paym in April 2014 added to the number of financial services available on smartphones, and the Payments Council announced in August 2014 that Paym accounted for over £6.5m of transactions in its first 100 days.
But Intercede found most consumers will not use mobile banking services at all, and 18-24 year-olds are the least trusting of mobile banking services, with 60% of this age group refusing to make mobile payments, and 52% claiming they would never use Paypal.
More on mobile payments
There is still a growing concern that people are lacking knowledge of mobile security. A number of those surveyed said they gave applications access to their data, and 76% of participants claimed they allow social media apps to stay automatically logged in to accounts, while 60% would use weak passwords that are easy to remember instead of keeping more complex ones.
Parris said: “We all already have multiple digital identities, from online banking to social networking to email and others – but these identities are becoming more and more prevalent, and how we secure them is a growing concern for consumers.”