Commentary

M-Payments Alliances Sound Great, But Will They Deliver?

2d mobile

A true clash of the titans is shaping up in the emerging mobile payments space, with Verizon Wireless and AT&T on one side and Visa and Bank of America on the other. The companies have recently revealed competing initiatives to try to wrest control of mobile payments, which are expected to grow quickly in the coming years.

According to Juniper Research, the value of digital and physical goods that people buy through their mobile phones will more than double to $200 billion globally by 2012. Separately, Gartner has projected the number of mobile payment users worldwide will reach 108.6 million this year -- a 54.5% increase from the 70 million in 2009.

Both the wireless giants and their counterparts on the payments side want to cash in on the opportunity. The Verizon-AT&T joint venture involves enabling contactless payments for goods and services via mobile phones, with Discovery Financial Services processing transactions and Barclays PLC on board as the banking partner.

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BofA and Visa, meanwhile, are reported to begin a trial next month in which customers would install near field communication (NFC) chips into their smartphones to pay for products at participating retailers by waving their handsets at checkout points in stores to transmit bank account data.

Because of the players involved in these digital wallet projects and the roughly parallel timing of their initial testing, both clearly bear watching and signal intensifying competition to get the jump on mobile payments. That's especially true for the North America market, which lags behind Asia and Europe in using cell phones like debit or credit cards.

But grand alliances in mobile and technology in general often fail to live up to the expectations and hype they generate. Factors like complex implementation, in-fighting among partners, varying service levels and low user adoption have hobbled plans to expand mobile transactions in the past. NFC technology and the push toward mobile payments has been hyped for nearly a decade without much to show for it.

Of the 108 million mobile payments users Gartner predicts worldwide this year, only 3.5 million will be in North America. But if ambitious alliances to crack the code on mobile payments are accelerating, wouldn't it make sense for wireless heavyweights like Verizon and AT&T and payment services giants like Visa and MasterCard to try to work more closely to help sort out issues on both the mobile technology and financial services sides of the equation?

The Verizon-AT&T effort seems closer to that approach, with Discovery and Barclays participating in the venture. Barclays itself announced a long-term m-payments initiative with mobile operator Orange U.K. last year.

But it's always difficult for larger companies and institutions to give up direct control over operations or clients in order to share responsibility for developing new markets. So the testing of new mobile payments systems by the big wireless and financial and banking players is a positive sign for the sector -- but no one should get too excited about it just yet.

1 comment about "M-Payments Alliances Sound Great, But Will They Deliver?".
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  1. Pamela Tournier from Focus: Productivity, Inc., August 26, 2010 at 5:48 p.m.

    The author's assessment of Verizon/ATT/Discover/Barclays as potentially more "successful" than Visa/BofA ignores the epic struggle between the carriers (AT&T/Verizon) and card payments interests for control of micro payments. There's no chance of big carriers/big cards cooperating to develop the market -- they're looking to eat each others' lunch. Carriers' revenues have been battered by inroads from cable and broadband suppliers, so they're casting a predatory eye on new markets. Discover threw in its lot with the carriers only because it comes in a distant 4th in card payments, and it's US only besides ... Barclays is essential for the overseas piece. Teaming up with the carriers is pretty much Discover's only move if it wants to remain relevant in m-payment. As for who will be successful, remains to be seen ... there are security and speed issues to solve, and partnership structure is only one aspect ... and perhaps not the most critical success factor.

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