US mobile payments will skyrocket to $214 billion in gross dollar volume by 2015, representing a 68% compound annual growth rate over the next five years, predicts Aite Group’s Gwenn Bezard in a new report.
Factors underlying this expected growth include swift consumer take up of smartphones and continued consumer acceptance of mobile commerce, the wide use of NFC chips by carriers and handset makers, and a nationwide gain in mobile banking adoption. Each one of the multiple payment categories defined in the Aite report is expected to experience double-digit growth.
“Firms missing the signs that the market is now rapidly shifting will be at a serious disadvantage in the next few years,” Bezard says. “Many organizations within the industry remain unaware that mobile payments are in a period of rapid transformation. Those that have any desire to play a role in this market must wake up now.”
The Aite report notes that the US, long perceived as a laggard in mobile payments, is actually far more ahead of the curve than originally thought.
However, skeptical experts say it likely will be many years before phone-based mobile payments become mainstream. Mobile payments analyst Bob Egan expects several decades to pass before consumers migrate from paying for major purchases with credit cards to wireless phones.
Analyst Jack Gold notes that there is a wealth of traditional payment options for US consumers, and questions whether there is any benefit for consumers to use their phones to make payments. Skepticism of carriers’ ability to handle mobile payments is seen as perhaps the single largest barrier to mobile payment adoption, with Egan noting that “compared to banks, mobile operators are clearly the Wild, Wild West.”
Analysts also point out that the adoption of NFC hinges on having more NFC readers set up in stores and other outlets, at considerable expense. Nevertheless, Egan says the announcement about the latest wireless payment projects will ramp up interest in NFC after persistent disagreements among banks, card companies, merchants, and mobile carriers about how they will collect and share credit card data and payments for purchases.
Still, he cautions that even if the use of mobile phones for payments doubles by 2014 as many analysts predict, the total value of the transactions will equal just 1 to 3% of the amount of transactions conducted through credit cards or checks. “Some of the forecasts are trying to drive hype in the market, but even if you have four times as many handsets with NFC chips in the next two years, that’s still a rounding error compared to purchases made with MasterCard or Amex,” Egan says.