We recently attended a mobile payments conference and came away with three key conclusions: the industry now recognizes that simply replacing a card 'swipe' with a phone 'wave' is not a strong enough value proposition, the most likely way to drive consumer adoption of mobile is enhancement of the overall shopping/buying experience, mainstream adoption of mobile payments at the physical POS in the U.S. is likely 3 to 5 years away, said Jason Kupferberg, the analyst at Jefferies.
Based on discussions with industry participants at a mobile payments conference, Kupferberg believes all players in the mobile space now finally agree that new technology alone is not enough to spur widespread adoption of mobile payments at the physical point on sale (POS) in the U.S.
Consistent with comments made at his Electronic Payments Summit last month, discussion at this industry conference centered around how to use some combination of mobile-based permissive (i.e., opt-in) marketing, dynamic/location-based couponing, and shopping tools/services (price comparison, product info, user reviews, multi-channel capability) to enhance the consumer's overall in-store shopping and buying experience.
Kupferberg said focus of mobile payments should move beyond just enabling the payment itself with a mobile device.
While Near Field Communication (NFC)-enabled phones and POS devices were becoming more widely available in the U.S., availability of the technology for consumers and merchants was just one hurdle that should be overcome, and the industry didn't seem to be fully convinced that NFC would be the only (or the dominant) mobile technology, said Kupferberg.
Consensus among people Kupferberg spoke to at the conference suggested that mainstream adoption of mobile payments at the physical POS in the U.S. was likely 3 to 5 years away, and there didn't seem to be any near-term tipping point. They said it was also premature to say which of the many mobile wallets ultimately would be the winners.
Maintain our view that mobile payments are neutral to positive for payment processors. We don't believe the economics on mobile-based transactions are materially different for the card networks (Visa, MasterCard) or merchant acquirers/processors (Global Payments, Total System Services) that we cover, said Kupferberg.
To the extent mobile technologies help dis-intermediate cash/checks, this would be positive for the processors. For the next couple of years, Kupferberg still expects broader adoption of mobile payments outside the U.S. than domestically -- on a global basis, more people have cell phones than electricity.