Mobile Payments Momentum |
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Technology has been the force behind change in our economy in recent years, altering the way consumers interact not just economically but socially. Technological advancements also have given consumers boundless mobility – the freedom to stay connected anytime, anywhere.
This mobility has driven demand for the ability to perform tasks such as reviewing bank statements, transferring money, paying bills and even making purchases. In fact, the U.S. mobile payments market is on an incline, forecast to increase by 68 percent between 2010 and 2015, according to a survey by Credit Suisse.
The benefits of mobile banking are fueling its growth, but with opportunity come challenges. A new report from Aite Group predicts the U.S. mobile bill payments market will reach $214 billion in gross dollar volume in 2015, up from $16 billion in 2010. This growth can be attributed to consumers’ adoption of smartphones, their continued embrace of m-commerce and mobile banking, as well as carriers’, handset manufacturers’ and card issuers’ adoption of near-field communication (NFC) chips.
Consumers are more concerned with the hardware end of the mobile equation – the choice between an iPhone, DROID or BlackBerry. But growth rests on the software that enables the hardware to perform certain tasks. The following advancements in software technology could transform the phone into a wallet: |
NFC chip technology – A phone enabled with an NFC chip supports contactless payments by enabling two-way communication, meaning the phone can send transaction information to payment terminals or download information such as coupons from promotional signage.
On-screen barcode scanning technology – Retailers such as Starbucks and Target use mobile barcode technology as a payment system for their store-branded gift cards. This option has proven to be a fast and convenient solution, as customers simply hold their phone’s screen in front of a special reader at the point of sale, decreasing time spent at the register. Some mobile applications use barcode technology that displays the user’s digital image, helping merchants authenticate transactions.
MicroSD cards – MicroSD cards are essentially memory cards that contain payment card information. Consumers can self-install the card for mobile payments, coupons and much more. |
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As you can see, there is no shortage of technology to support mobile payments, but having too many options can be a double-edged sword. Having multiple technologies available stalls the market because there is not critical mass in any one. Consumers cannot decide on the best device or features that fit their lifestyle, without fear of the device becoming obsolete in the short-term. Merchants cannot determine which technology is most suitable for their business and customers because incentives are not yet clear.
Even as the competition among technologies remains unresolved, carriers and manufacturers continue to move forward with their favored systems. In order to stay relevant, organizations are encouraged to do the same by educating themselves and making appropriate provisions to address the market need. Being flexible, and even changing business models to favor the emerging technology, will be the key to success in mobile payments.
For more details on how debit card issuers view mobile payments, see the 2010 Debit Issuer Study executive summary at www.pulsenetwork.com/research (login is required). |
