There’s been a lot of talk for a long time about mobile payments.
Generally, however, the discussions focus on the actual paying of something on location using a mobile phone.
Highlighting those discussions are typically mobile wallets and NFC (Near Field Communication), where a consumer taps or waves a phone to execute a payment.
There is no doubt that NFC is coming, with 630 million NFC-enabled phones shipping in three years, according to KPMG. This would be an increase from 44 million NFC phones shipped last year.
I’ve had Google Wallet on my NFC-enabled phone for many months and I can attest that it does work. But NFC being delivered and enabled is not the same as it being used on a grand scale.
It will take some time for NFC-enabled phones to saturate the marketplace as older phones are gradually retired. It’s a lengthy process.
Other innovations in payment options, such as Square and Dwolla, will likely continue while credit card companies and banks look to secure their positions in the mobile world.
And the payment-by-mobile phone is a global phenomenon, with some countries ahead of others.
For example, more than half (52%) of mobile users in China use mobile wallets, while only 12 percent use them in Spain, Germany, Argentina and the U.S. combined, according to an Assurant Solutions study.
But there’s another side of mobile payments with a far larger scope. Mobile payments generally refer to using a mobile phone to pay for things where you are.
The much bigger -- and more significant -- market involves using a mobile phone to pay for things where you are not.
It is an issue of mobile payments vs. payments while mobile.
One indicator of this was the finding this week that 33 percent of U.S. consumers make payments via mobile devices. The IDC study also found that more consumers buy physical goods compared to digital services from the phones.
It is this end -- payments while mobile -- where the real money and potential reside.
In three years, $930 billion in mobile payments is projected to be spent, according to KPMG. That’s close to 100 percent a year over the next three years, fueled by the increase in the number of smartphones and tablets.
As more people become comfortable buying from their phones, more purchasing will occur.
As another data point, 23 billion tickets (concerts, etc.) are expected to be delivered to mobile phones within four years, according to Juniper Research. This would be up from four billion delivered last year.
Payments while mobile will affect all products.
The key for marketers is to realize that focusing all their efforts at the end of the transaction by any myriad of point-of-sale strategies and tactics is short-sighted.
The decisions in shopping -- and buying -- are being made all the time in many places, most of which the product or service seller has little or no control over.
The change in buying (and shopping) is fundamentally behavioral.
Using mobile devices to shop, find and buy pretty much anything is becoming a totally iterative process that can be done anytime, anywhere.
Payments while mobile is about the behavior of the consumer more than the technological intricacies of mobile payments.
Great perspective on how mobile payments are more than just about mcommerce!
Thank you John, much appreciated
Chuck you have done a good jon in the most simplistic form to describe payments from mobile devices. A few considerations:
- NFC market is very immature at the moment to bring on board growth. Even through there will be phones sold that are NFC capable, you need NFC capable terminals at merchant / service locations to make transactions happen
- NFC related standards are yet to be defined by the payments industry. And that will take a few years to evolve.
- Facebook, Google, and Amazon are launching phones that will pilfer the 'payments by mobile' market. It does not mean NFC will spur transaction growth at brick and mortar locations.
- Square is making sound progress in selling it product to the right market - small to mid-size businesses that enable transactions at your doorstep.
- Wallets operate quite effectively already, Paypal and Amazon have been leading the pathway for years - both mobile and online. Other new wallets like MasterCard Paypass has now been introduced and Visa has its Visa.me product
- Apple from my understanding has moved away from NFC enabled phone for the time being. The reason being the amount of flux in the payments by mobile space that can lead to unpleasant experiences. This is a big impact to the mobile payments space - Apple has 400 million users with cards on iTunes and the 65% of market share it commands.
- Facebook is likely launch a wallet too; following their developments. FB allows mobile carrier charges for credits.
- The marketing professional will need to tailor selling on a market by market basis. Kenya has been successful with mobile payments without smartphones using SMS. Europe has a different flavor due to the high debit card and direct debite / GIRO usage; similarly other Asian markets have specific nuances. One marketing solution will not fit all markets, if thinking global.
Quite an interesting space and with the amount of flux in 'payments using mobile' - it will take a few years before we see a more structured industry / set of standards. Just like Blue Ray is now the standard for DVD ... companies likes ISIS and other innovations will keep removing current kinks from this evolving ecosystem.
Good points, Vinny, thanks. NFC clearly is coming in various forms around the globe, as you note in some of your examples. Of course, there are mobile wallets and then there is NFC.
More interesting may be the behavioral changes that occur in how a person physically handles their phone during a transaction, such as PayPass vs Paypal. The market still has a ways to go as it relates to NFC. Thanks for your thoughtful comments.
Chuck - this is a difficult topic considering where we are in the 'payments using mobile' product industry life cycle. You have articulated very succinctly using the known denominators today.
I will look forward to your future blogs. Thanks