Mobile Payments Growth Slower Than Expected

by Mark Walsh, Jul 21, 2011, 7:03 PM

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The frenzy around mobile payments this year has been driven in no small part by initiatives such as Google Wallet and the wireless carrier-led Isis project, based on Near Field Communications  technology. It would allow consumers to wave their smartphones in front of a small reader near the checkout to make purchases.

But a new Gartner report is skeptical about whether NFC-based payment systems will take off anytime soon. It also expects the growth of mobile payments won't be as explosive as some have projected. But that doesn't mean the industry won't enjoy strong gains this year.

Gartner predicts mobile payments worldwide will jump 76% this year to $86 billion, while the number of people making mobile payments will grow 38% to 141 million. Despite the eye-catching numbers, the research firm notes that the mobile payment market isn't growing as fast as expected globally.

In advanced markets, the firm believes the promise of mobile payments driven by NFC technology is at least four years away from reaching mass adoption. "The biggest hurdle is the need to change user behavior by convincing consumers to pay with mobile phones instead of cash and cards," said Sandy Shen, research director at Gartner.

Most m-commerce activity to date has been driven by mobile applications from major retailers like Amazon and eBay, leading merchandise purchases to far outweigh other types of buying in developed regions. "We predict that in 2011, merchandise purchases will account for 90% and 77% of all transactions in North America and Western Europe, respectively," said Shen.

In developing areas, Gartner said mobile payments haven't caught on because service providers have not adapted their strategies to local market requirements. It expects SMS and Unstructured Supplementary Service Data to remain the dominant access technologies in emerging regions because of the constraints of mobile phones there.

A separate report by Juniper Research last month forecast that the number of mobile phone users making payments for digital goods would reach 2.5 billion worldwide by 2015, up 40% from 1.8 billion this year. It pointed to travel ticketing and entertainment as key areas influencing growth, along with new services and apps delivering things like mobile coupons and rewards programs.

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