Uncertainty about the technical future of mobile payments was named as a top business challenge, with 76 percent of retailers agreeing, according to a new report from RSR Research.

The payments landscape is quickly changing with industry coalitions, technology companies and telecommunications providers all trying to carve out a piece of the action. Even though retailers believe mobile payments are coming, few are willing to invest in mobile payments today because of ongoing uncertainty over how mobile payments will evolve.

“The biggest news to me was that retailers are really bullish on mobile payments, but the challenge is waiting for all the other players to figure it out,” said Nikki Baird, Denver-based managing partner at RSR Research.

“Retailers certainly seem to say they are not going to invest this year,” she said. “The way I read it is, if the other players in the payments space would get going on some standards and a method of adoption that they can roll out quickly to consumers, then we may all be surprised at how quickly retailers move to join in.”

Dominant payment forms
The results show that retailers expect mobile and digital forms of payment to be a leading form of payment in three years and that they are looking to consumer-focused technology companies such as Google and PayPal to take charge.

Key findings from the report include that 19 percent of retailers believe that mobile payments will be their dominant form of payment in three years compared to just 1 percent who say it is the dominant form today.

Smaller retailers earning less than $250 million in annual revenue expect to feel the greatest impact from mobile and digital payments, with 20 percent expecting this to be their primary form of payment in three years as the use of cash, their primary form of payment today, dwindles.

For larger retailers making over $1 billion in annual revenue, 11 percent expect mobile to be their primary form of payment in three years, up from 3 percent today. Debit cards are also expected to play a larger role while the significance of credit cards diminishes.

New opportunities
As consumers increasingly use a variety of channels, both physical and digital, to make a single purchase decision, this is creating an opportunity for consumers to use their mobile phones as a digital wallet to authorize electronic payments either inside or away from the store.

With the rapid adoption of smartphones, retailers are considering the changes to their operating models necessitated by the resulting new shopping behaviors.

Complicating matters for retailers is an influx of new players – Google, PayPal, mobile network operators, Square, Isis and a consortium of large retailers led by Walmart and called Merchant Customer Exchange.

“When we asked retailers who they are watching for innovation, the number one is PayPal, followed by traditional networks, then Google,” said Brian Kilcourse, managing partner at RSR.

“Sixty-three percent feel the traditional payment networks are a barrier, that they are preventing progress,” he said.

Holding pattern
Retailers recognize that consumers will dictate the payment form factors that retailers will have to accept and recognize the need to move fast but are reluctant to jump in before any clear winners are apparent.

Retailers also recognize that payment processing must be fast and flawless or they may lose a sale and that payment processing is critical to a satisfying customer experience. The survey found that 51 percent of retailers say that a consolidated payment processing capability that cross channels is critical the customer experience.

The report is based on a survey of 98 retailers conducted between Dec. 2012 and Jan. 2013.

“Retailers still expect credit cards or debit cards to be the main form of payment,” Mr. Kilcourse said.

“While retailers have expressed a very  high interest in new form factors, they are kind of in a waiting game because there is a lot of fear and loathing in the marketplace toward NFC,” he said. “While their biggest concern is the uncertainty of the technology future of payments there is also concern about how fast consumers will go and which ones they will  pick.

“There is also a great deal of dissatisfaction with the fee structure for processing payments. These things are troubling and have caused retailers to go into a bit of holding pattern.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York