What's in Your Mobile Wallet?
Source: ROBIN SIDEL
Leslie Fiet wouldn't mind if her customers paid for their sweet treats with a smartphone instead of cash or plastic. But in the eight months since the owner of Mini's Cupcakes in Salt Lake City installed a device that can accept mobile payments, no one has tried it.
"Nobody really has a mobile wallet," Ms. Fiet said, referring to the digital replacement for traditional credit cards and debit cards that can be loaded into a phone and used for payment.
Ms. Fiet's experience highlights the many hurdles facing widespread adoption of mobile payments. Banks, merchants and technology companies have bet billions of dollars on the technology, but those investments likely will take years to pay off. Even early-stage winners in the race to devise a new standard for mobile payments, such as Google Inc., GOOG +0.57% have barely made a dent in what is expected to be a giant market later this decade.
A hodgepodge of new choices for consumers and merchants, many of whom aren't familiar with the competing technologies, is being formed. For now, most consumers' financial use of smartphones is limited to checking bank balances, buying ringtones or using an Internet browser to make an online purchase.
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Reuters
A representative demonstrates how a PayPal customer can pay for goods using their mobile phone number at a Home Depot store in California.
"Mobile payments and purchasing at the physical point of sale have experienced little adoption in the U.S. marketplace despite abounding innovation in mobile and payments technologies," according to a new 45-page report on the mobile-payments industry from Javelin Strategy & Research, a consulting firm in Pleasanton, Calif.
The industry, which hasn't settled on a single standard technology, was slapped with another setback this month when Apple Inc. AAPL -1.24% released a new iPhone that doesn't contain a computer chip that powers mobile payments. The move likely will delay the large-scale adoption of a closely watched technology called near-field communications, or NFC.
Mobile payments are expected to provide a new way for people to pay for purchases at the cash register. Javelin estimates smartphone ownership will represent 72% of all mobile-phone users in 2016, up from 51% today.
Much of the industry is counting on NFC, in which a computer chip is embedded in a smartphone and can be tapped at a reader at the cash register.
The biggest player in NFC mobile payments is Google, which launched its mobile wallet last year.
"We think NFC is a great user experience and today provides the broadest reach in terms of merchant coverage compared to other technologies," said Robin Dua, head of product management for Google Wallet.
Yet even Google Wallet has been slow to gain momentum, industry watchers said, in part because it is available on only six devices, most of which are sold by Sprint Nextel Corp., S -1.27% the No. 3 U.S. wireless carrier by number of customers. Mr. Dua declined to say how many people use Google Wallet or how much money the system handles each month.
Nick Holland, an analyst at consulting firm Yankee Group who follows the mobile-payments market, estimated that about 2% to 3% of U.S. smartphones have NFC technology.
Some merchants are hesitant to upgrade their technology to embrace NFC because it isn't clear if it will become the industry standard. Visa Inc. V -1.52% and MasterCard Inc. MA -1.26% are giving them incentives to make the switch, but consumers are often slow to change their banking behavior, as shown by an assortment of technology flops over the years.
"Equipping the most popular phone with NFC would have a been huge education moment for consumers and a big validation for NFC," wrote Thomas McCrohan, an analyst at Janney Montgomery Scott, in a note to clients this month, referring to Apple's decision to forgo NFC on the iPhone.
Also this month, a joint venture of wireless telecom carriers delayed its first big test of a mobile-payments service in Austin, Texas, and Salt Lake City. The Isis payment system didn't disclose a reason for the delay, one of several since the venture was formed two years ago, only saying that it will provide an update next month.
Isis is a joint venture of AT&T Inc., T +0.05% Deutsche Telekom AG's DTE.XE -0.82% T-Mobile USA Inc. unit and Verizon Wireless, VZ -0.07% which is owned by Verizon Communications Inc. VZ -0.07% and the U.K.'s Vodafone Group PLC. VOD.LN -0.81%
Meanwhile, hundreds of millions of dollars have been poured into mobile-payment-related start-ups with names like Clinkle, Cardspring, Paydiant, BoxPAY and DigiMo. Some of them rely on technology other than NFC, such as offering services that let people pay for purchases by sending text messages or by scanning product bar codes using a phone's QR-code reader.
The new phones and new payment products alone aren't expected to propel mobile payments. Executives in the banking, retail, and technology industries acknowledge that mobile payments must tantalize consumers with targeted coupons and offers to demonstrate they are more valuable than an ordinary plastic card, which has been a fast and reliable payment method for about 50 years.
What's more, many consumers aren't familiar with mobile payments, meaning that there will be a long learning curve for the technology to take hold.
Ramon Llamas, a senior research analyst at International Data Corp., said he recently went into a half-dozen mobile-phone stores that sold an NFC-enabled phone, but only one sales associate alerted him to the fact that the device had the technology.
But then the sales associate quickly lost his edge, recalled Mr. Llamas, who works in the research firm's Mobile Devices Technology and Trends unit.
"He said, 'I would never use a mobile wallet,'" Mr. Llamas said.
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