In today's American Banker a viewpoint by Samee Zafar of Edgar, Dunn & Co. anticipates that mobile phone payments will reach critical mass in 5-10 years, toppling the credit card/debit card payment monopoly.
The article highlights converging trends that support the growth of mobile payments:
- Consumers are increasingly comfortable with purchase of downloads to their digital devices. Payment is effected through the consumers phone bill.
- Person to Person payments via cell phone/text messaging is growing – examples include PayPal Mobile in the US and Contopronto in Europe.
- RFID and near-field communication technologies make payments more convenient. Note that these technologies can be incorporated into a credit card, a keychain fob, or a mobile phone.
- International and US companies are experimenting with contactless payments in high-volume, low-value transaction environments and the programs are gaining traction.
- Banks, vendors and other constituencies are working toward universal operating standards that will pave the way for a network of contactless payment terminals.
Zafar identifies three critical factors that will determine the winners in contactless payments:
Billing. The phone statement, whether
online or on paper, in many ways owns the customer. Service providers
have been trying for quite some time to increase revenue from items
other than voice and text communications. There have been reports that
service providers are joining forces in the United Kingdom to offer
consumers payment services that will be billed directly to the phone
statement. These services initially will be applicable only to mobile
downloads, but they have the potential to expand to cover other
Branding. Influencing and controlling customer perceptions is
an obvious objective for all service providers. In addition to offering
banking software and a logo that can be downloaded, banks soon may
offer, as part of a standard package, mobile handsets or similar
devices that carry the bank's brand, much as credit and debit cards do
Bettering. A provider needs to offer a service that is
cost-effective, efficient, trusted, and better than what is offered by
others. In card payments, mobile service providers have a long way to
go before their fraud prevention, credit control, and
chargeback-related know-how match that of banks.
Viewpoint: The Reinvention of Mobile Payments
By Samee Zafer of Edgar, Dunn & Co.
American Banker (subscription required)
August 4, 2006