The day when the mobile phone could replace a wallet has started to dawn for an increasing number of consumers. Pilot projects and commercial launches allow users to pay for taxis, transit fares, coffee and more with the tap or wave of a smartphone rather than slide of a credit card. After years of testing and hype, card networks, banks, mobile phone networks and third-party developers in recent months have started to deliver mobile payment functionality. New entrants--perhaps even Google, according to published reports--are studying the space more closely.
Unclear is when commercial card customers and cardholders might enjoy the ease, speed and convenience of mobile payment at airports, hotels, restaurants and other oft-frequented locales. For now, mobile is squarely focused on consumers and ways to build support, transactions and revenues.
Consulting Strategies principal David Hillman said there's no reason why mobile payment won't trickle down to corporations, but corporate clients have yet to ask about it. "Corporations typically wouldn't ask until it's available," Hillman said.
Card consultant Steve Abrams agreed that there's potential for corporations to use mobile phones as form of payment or perhaps to transfer or preload a prepaid card for employees in the field. "Will a large corporation use mobile payment in the short term? I can't see it," said the former MasterCard executive, now head of The Abrams Group Ltd.
A $680B Market By 2016
"Mobile payments are at the cutting edge of innovation in electronic payments and stand to radically reshape the way we think about payments and financial services," according to the Advanced Payments 2011 study released in early February by Edgar, Dunn & Co. and Payments Card & Mobilemagazine, sponsored by MasterCard Worldwide. The authors in November and December surveyed more than 655 mobile payment stakeholders--banks, mobile network operators, technology providers, consultants, retailers and payment entrepreneurs--about the future of payments.
[PULL_1]Focused on three types of "advanced payments"--mobile, online and contactless--the study projected mobile would grow to a $680 billion market by 2016. In a separate study, Juniper Research valued the mobile payment market at $170 billion in 2010 and projected it to grow to $630 billion by 2014.
Where To Mobile Pay?
Today, U.S. consumers can use mobile phones to make payments "at more than 150,000 places," such as public transit, fast-food restaurants and drug and convenience stores, said Visa Inc. mobile head Bill Gajda.
MasterCard for its PayPass contactless payment feature at the end of 2010 reported 83 million cards and devices in use at 265,000 merchant locations. MasterCard reported PayPass trials and rollouts in 34 countries.
Some of those were of Tap & Go, a product that allows users to initiate payment by tapping traditional plastic cards, mobile phones, watches or stickers to special check-out terminals.
Both card networks, as well as American Express, also have invested in applications that allow customers to use mobile phones to check balances, pay bills or opt for real-time alerts to help deter fraud.
In mobile payment, "so far, we've focused on key verticals or places where it makes sense. But I think we're going to see the case change for merchants during 2011 because we're going to see consumer demand to use mobile phones to make payments," Gajda said in a video interview with Bloomberg Businessweekthis year. "The cost of the infrastructure for merchants is coming down as innovation continues. And mobile payments are more than just about payments. Merchants are going to be able to send consumers offers in real time at the point of sale. If you add these three things together the case for merchants" to put these terminals in their stores grows stronger.
Reterminalization to support mobile is one deployment obstacle, most agree. So too is the highly fragmented market with card and phone networks, card issuers, acquirers, phone manufacturers and technology providers.
Beyond apps and phones, American Express, MasterCard and Visa in recent months all have hired new mobile strategists and invested in new technologies as they target the future of mobile.