Magic 8-Ball on Mobile Payments: Outlook Hazy, Ask Again Later

Mobile Payments are getting a lot of press right now and are being heralded as the future of commerce. There are quite a few media sources playing the role of prognosticator, tagging Mobile Payments as a billion-dollar boom waiting to explode. But as we creep right up on the 2011 holiday shopping season, the actual impact of Mobile Payments is still short of its predicted potential. So today The Official Merchant Services Blog is going to take a brief look at Mobile Payments, shaking the topic up vigorously and seeing what the Magic 8-Ball (a potential holiday gift in itself) has to say about the whole thing.

Sunshine and Positivity

One of the most commonly quoted statistics about Mobile Payments can already be found in Host Merchant Services Article Archive in a story about Mobile Payments and how bright the future is: A Juniper Research study that predicts the value of all mobile money transactions will grow from $240 billion to $670 billion. That’s a hefty number and makes for sexy copy. Other stats cited often from the Juniper Research study are that digital goods will make up nearly 40% of the market that the $670 billion figure is drawn from. And that Asia, Western Europe and North America will make up nearly 75% of the entire market for those goods.

So that’s the good news. What’s the bad news?

Two Big Problems

The bad news is mobile payments haven’t taken off as quickly in the U.S. as the media reports suggest. The Juniper study sets things in four years in the future. So the boom is still very much capable of happening. But two things are holding Mobile Payments back in this country:

1. The technology isn’t developed fully yet.
2. Security issues scare consumers.

The technology is sort of all over the place right now. You have a variety of different ways to process a mobile payment. And the biggest competitors in the industry (Google, PayPal, Amazon.com, MasterCard, Amex, Visa) are all still racing to outdevelop each other. Google Wallet is still not fully there yet. Near Field Communication (NFC)  is still only being tested on a small scale in the United States. The phenomenon simply hasn’t taken root.

Security Concerns

The other major problem holding a Mobile Payment boom back in the U.S. is security. People are already worried about credit card hacks, phishing scams and the security of their transactions with plastic or with online transactions. PCI Compliance is a hot button issue, especially in light of Sony’s security breach earlier this year as well as the recent DigiNotar Hack. So technology like NFC where people just wave their cell phone at a scanner make people nervous about how secure the transaction really is. And of course it was already shown this year at a security conference that the Square device from Square Up could be hacked and used to steal credit card information.

All is Not Doom and Gloom

While there isn’t much anyone can do but wait when it comes to the technology being developed, Host Merchant Services provides a nice set of tips for addressing the security concerns.

And the Mobey Forum provides a whitepaper extensively reviewing the ability for NFC mobile payments to take hold, and detailing ways to make that happen.

Blogger Keith Cowing also wrote this interesting read on mobile payments, addressing the issue of security and the worries consumers have over eReceipts. In his blog he asks: “The world of retail is changing faster than it ever has before. Nobody had heard of flash sales, group buying, or NFC three years ago. One of the most exciting changes will be the adoption of mobile payments and eReceipts, which will combine to provide a paperless way to checkout and manage your expenses. But when mobile payments and eReceipts become widespread, who will own your purchase data and how will they use it?”

A very compelling question. He goes on to touch on many of the same talking points The Official Merchant Services Blog brings up about mobile payments. I’ll leave you with Mr. Cowing’s final point: “When a customer visits your website, walks into your store, makes a purchase, gets an eReceipt, or talks about your brand on Facebook, these are all touch points in an ongoing customer experience. Your brand is represented by every step along the way and doing the right thing for your customer is doing the right thing for your business. When it comes to mobile payments and eReceipts, providing a convenient and simple solution is part of the customer experience. “

That’s exactly what it’s going to take for Mobile Payments to reach those lofty Juniper Research predictions. The customer has to experience mobile payment as a convenient and simple solution to their transactions. That’s when the mass of consumers will just seamlessly shift their gears (and their dollars) into mobile payments.