A new study suggest that mobile payments – the use of smartphones to pay bills and purchase items in stores – is finally primed to catch on, but don’t expect it to take off overnight.
The study from the Aite Group, a research and advisory firm, projects mobile payments – including bill pay and point-of-sale – to increase steadily over the next five years, from an estimated $16 billion in 2010 to $214 billion by the end of 2015. That’s good news for a sector that has seen numerous false starts and struggled to catch up with Europe and Asia, where the use of mobile phones payments has been more readily adopted.
“We’re very optimistic after 10 years of being bearish,” study author Gwenn Bézard told MainStreet. “Finally the pieces are coming together.”
The biggest of those pieces has been the smartphone itself, whose heavy market penetration is finally heralding the mainstream arrival of mobile payments. Banks, handset manufacturers, mobile carriers and operating systems developers are all well aware of the potential application, and are pursuing it in their own ways. AT&T (Stock Quote: T), Verizon (Stock Quote: VZ) and T-Mobile recently announced a partnership with Discover Financial Services (Stock Quote: DFS) to develop a processing system that enables point-of-sale purchases with the wave of a smartphone. Visa (Stock Quote: V) and Bank of America (Stock Quote: BOC) have also teamed up for a pilot program to test mobile payments at New York-area merchants. Finally, earlier this week, Google (Stock Quote: GOOG) CEO Eric Schmidt announced that the new version of the Android Operating System, “Gingerbread,” would support mobile payments.
Still, having all the components in place doesn’t mean that mobile payments are about to take the country by storm. Bézard projects that smartphones will still account for less than 1% of point-of-sale purchases in 2015. “There are tons of roadblocks that will need to be addressed for it to really take off,” he cautions.
While much of the infrastructure for point-of-sale payments is already in place in the form of touchless credit card terminals (which can be used for mobile phone payments), Bézard notes that these exist at only 150,000 retail locations in the U.S. Another important factor is getting the various interested parties – particularly banks and mobile carriers – to learn to work together and agree on pricing issues.
“They need to play nice with each other,” Bézard says. “After all the details are figured out, we’ll have exponential growth.”