Payment predictions for 2012

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Several companies have made predictions about what will happen in the payments industry in 2012.

For example, Visa Europe predicts that this will be the year when the adoption of contactless payment technologies will become mainstream. That prediction was made following the release of the results from Visa Europe’s Contactless Barometer study, which found that consumers like to use contactless technologies to make payments but that not enough contactless terminals have been deployed at the point of sale.

Meanwhile, McAfee Labs predicts that there will be more mobile threats, incidents of hacktivism, exploitation of social media, and targeted attacks this year, with some targeting virtual currency systems. McAfee also expects that industrial threats will become more sophisticated and increasingly segmented this year, while the number of embedded hardware attacks will increase.

Mercator Advisory Group is predicting that 2012 will witness major changes in payment transaction origination and acceptance in the US. This will include the US introduction of the EMV security standard, as well as the arrival of NFC. The introduction of these two technologies at the same time means that US retailers will have to carefully plan their investments in POS infrastructure over at least the next five years, says Mercator’s George Peabody.

The appointment of Scott Thompson as Yahoo’s new CEO may signal its intent to deploy a payments service, as Thompson spearheaded similar, successful initiatives as president of PayPal.

Although Thompson has not explicitly specified Yahoo’s payments strategy, he notes that mobile devices would be key to serving the company’s 700 million users. “Mobile, I think, is a really big question for Yahoo and a really big opportunity for this business,” he says.

Under Thompson’s guidance, PayPal expanded to POS payments, broadened its mobile payments services, and investigated other efforts to take its payment system outside of e-commerce.

“Scott Thompson has done a good job focusing PayPal and putting it on track for growth with person-to-person and mobile payments,” says Aite Group analyst Ron Shevlin. First Annapolis reports that almost 50% of last year’s 10 leading online merchants offered PayPal as a retail mechanism. Yahoo lost a foothold on payments in 2010 when China’s Alibaba Group Holding transferred ownership of its Alipay payments branch to satisfy Chinese licensing mandates.

Finally, analysts forecast that commercial mobile payment services will become more common in 2012, but acceptance by the mass market will take longer to emerge. In addition, results are expected to be seen from operator partnerships and small-scale mobile payment trials this year, while Apple might launch a mobile wallet service to take away market share from operators.

“We now also have a number of handsets with NFC, albeit a small number, and not as many as people were saying there would be at the start of the year,” says ABI Research’s John Devlin. He also notes that Google Wallet could become popular among customers by the end of 2012 because it is encouraging operators across several countries to work together to establish a single platform.

Operators that introduce commercial services in 2012 will enter the fray between Google and operators’ joint ventures. Verizon Wireless, a member of the Isis payment venture, is requesting Google not to place its Wallet app on the operator’s version of the Galaxy Nexus. “It is about being first to market right now and the likes of Verizon will be very wary that if consumers start using Google Wallet it is going to be very difficult to change them from that in the future,” Devlin says.