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Who will be the winners in mobile payments?

Recent developments suggest that mobile payments at scale is getting closer, but with new players introducing their own services regularly, is there room for everyone and if not, which solutions are most likely to take the lead?

There has been a flurry of activity in the mobile payments space lately, with the introduction of the Google Wallet, PayPal’s new peer-to-peer NFC solution and Isis signing up the major payment networks to name just a few. While these developments are helping to enable mobile payments and build awareness, it still is not clear which solutions are likely to drive the most usage, something that is key to success here.

“The various players coming to mobile payment sure builds momentum for that,” said Sandy Shen, Shanghai, China-based senior analyst at Gartner.

“But we are still far away from the mass market as many challenges are yet to be overcome such as lack of user demand, fragmentation of technologies and lack of infrastructure and devices when it comes to NFC,” she said.  

Let’s get physical
Mobile payments are predicted to grow 40 percent and reach 2.5 billion users globally by 2015, according to a recent report from Juniper Research. The dollar volume of transactions made via mobile will also continue to grow and is expected to exceed $1 trillion by 2015, according to a new study by Yankee Group.

While consumers continue to become more comfortable using mobile devices for digital media purchases, the one of the main hurdles for mobile payments continues to be driving usage and adoption for physical goods.

One of the reasons for this is that most of players are not yet adequately addressing the consumer experience in mobile payments, per Charles Golvin, principal analyst at Forrester Research, Cambridge, MA

“What is being promised by the mobile payments offerings is really not offering all that much to consumers,” Mr. Golvin said.

While mobile payments providers promise greater convenience to consumers, Mr. Golvin contends that  is not clear how pulling out a phone, waving it over a device and keying in a code is more convenient than pulling a credit card out of a wallet and swiping it through a point-of-sale machine.

“One of the things that we’ve learned is that consumer behavior changes very slowly,” Mr. Golvin said. “Until we see other benefits being marketed to consumers, such as automatic rewarding of loyalty points, automatic redemption of coupons, digital receipts and a deeper integration into the consumer experience, I don’t think mobile payments will take off.”

With deeper integration into the consumer experience a key criteria for success in mobile payments, some vendors do appear to trying to address these issues.

For example, Google Wallet promises the delivery of mobile offers and the ability to redeem them in-store.

“The ability to receive that offer, go to the store and have that offer redeemed seamlessly by virtue of paying with Google Wallet – that’s the one piece of deeper integration,” Mr. Golvin said.

The retail equation
Integrating with retailers will also play an important role in driving mobile payments adoption. If a mobile solutions provider like Isis or PayPal were able to offer retailers a way to lower the fees they pay to credit card companies with lower-priced mobile transactions, then greater numbers of retailers would embrace mobile payments and use their own marketing in-store to encourage consumers to pay with their phone, per Mr. Golvin.

“If several options were to come into play that undercut these fees, than you have something that could change the rate of adoption,” Mr. Golvin said. “Money talks pretty loudly for merchants.”

While many mobile payments solutions are looking to achieve success by going around the credit card companies and thereby lowering fees for merchants, Isis’ partnership with the major credit card companies could give it a boost.

“Isis’ signing of major credit card companies presents the prospect of an open system which will foster market adoption,” Gartner’s Ms. Shen said.

Single mobile payments cannot happen with a piece of software alone and require the involvement of merchants, financial services companies and carriers. This means that the successful players here will also have to build an ecosystem for mobile payments.

“It takes more than a single player to make mobile payment happen,” Ms. Shen said. “Rather, it calls for an ecosystem where all parties work towards the same direction and where users find many options and ease-of-use.

“There are examples in Africa and Philippines where mobile wallet has been successful, and that benefits the service providers, the solution providers and the end users,” she said.

Since mobile payments is still an evolving market, there could also be some surprises in store, such as a new solution or the quick rise of one of the players currently on the sidelines.

“I think Apple iTunes is always the obvious dark horse,” said Gary Schwartz, CEO of Impact Mobile, Toronto, Canada. “Google has focused on brick-and-mortar which is a sink hole.

“I would also look to players like Verifone in physical checkout and Visa Quick-Checkout for mobile cloud commerce,” he said.

Simply put, those mobile payments solutions that offer a simple solution that drives adoption and transactions will be the winners.
‘It’s a crowded space,” said George Kennedy, director of global marketing at InMobi, Palo Alto, CA. “There are a lot of different players angling for control of the mobile payment gateway – from banks to hardware manufacturers to telecom operators, everyone sees value in this and wants to be part of it.

“A successful solution simplifies the process for vendors and gives them access to the largest market possible,” he said.

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily