Whether it’s checking the weather, getting directions or sharing photos, people use their smartphones for just about everything these days. However, there’s one function that has yet to capture widespread attention: mobile payments.
Despite a relatively slow start, a Gartner report predicts a 44% global increase in mobile commerce by the end of 2013, totaling $235 billion in transactions. However, mobile consumer purchases will remain a distant third to bill payments and money transfers.
The star of the mobile payments market is international caffeine pusher, Starbucks. The Starbucks mobile app is perfectly designed to help users find locations, browse menus and most importantly, make purchases. According to research firm Berg Insight, the company saw nearly $500 million worth of mobile transactions last year.
For less company-specific purchases, there are apps like Google Wallet and Isis, which use Near Field Communication (NFC) to streamline the in-store checkout process. NFC allows users to make point-of-sale purchases by tapping their phone to corresponding terminals throughout a store. Customers then receive a transaction record with the merchant name and dollar amount on their phone. While NFC makes payments incredibly easy, this technology isn’t widely available yet, and not all phones and stores have NFC capabilities.
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Google, however, isn’t limiting themselves solely to in-store purchases. At this year’s I/O developer conference, Google demonstrated a new Wallet feature that allows people to transfer money by sending an email. Once users connect their Google Wallet to their Gmail account, they’ll be able to attach money to their message just like they would an image or word document.
What’s holding America back?
Even though the opportunity to pay by phone is becoming more available, Gartner found American consumers aren’t embracing mobile payments because “the buying experience has yet to be optimized.” The firm also noted that e-commerce got off to an equally slow start, but transactions rapidly increased once enough consumers began trusting the technology.
According to financial software company, Intuit, the explanation is simple, “America is too developed.” The sophistication of America’s banking system makes us slower to adapt to new financial technologies than developing countries like Kenya, where over 50% of the population is using mobile commerce.
One of the biggest barriers to America’s widespread acceptance of mobile transactions is convenience. Unlike Kenyans, U.S. citizens have an endless supply of credit cards and banking options at their fingertips. Although converting to a mobile wallet may be convenient in the long run, consolidating every card and bank account onto a smartphone takes more time than most Americans are willing to invest. After all, is a credit or debit card really THAT cumbersome to carry around?
Then there are the security concerns over hackers and misplaced phones. Mobile payment services like Google Wallet and Isis have taken extensive precautions to make sure their apps are just as safe as a physical credit card, but identity theft continues to weigh on the minds of consumers.
The final hurdle to mobile banking in America is opposition from the banking sector. As currency becomes mobilized, people are more likely to store their funds in online repositories like PayPal and Bitcoin rather than brick-and-mortar financial institutions like Bank of America and Wells Fargo. These financial leaders are fumbling to prepare for the mobile commerce boom, and will take all the time they can get before the inevitable shift occurs.
But even with those barriers, America is in a great position for the mobile payment transition. According to the MasterCard Mobile Payments Readiness Index, America is the third most prepared country for a mobile financial system, with a score of 41.5. That puts us just above Kenya (40.4) and just behind Canada (42.0) and Singapore (45.6). And although we beat Kenya in categories like Environment and Financial Services, they remain the leaders in Consumer Readiness.
America has all the right conditions for a thriving mobile payment system. The question is, do we want it?