“Momentum in the mobile payment market gathered further in 2008 with a number of high-profile launches of mobile money transfer services in multiple markets, participation of major global institutions in near-field communication (NFC) payment trials, as well as new payment solutions entering the market,” said Sandy Shen, research director at Gartner. “However, at the same time, security concerns, an inadequate ‘ecosystem’ and undefined areas in banking regulations remain challenges for mobile payment.”
Gartner defines a mobile payment as paying for a product or service using mobile technology such as a short message service (SMS), Wireless Application Protocol (WAP), Unstructured Supplementary Service Data (USSD) and NFC. It includes transactions that use banking instruments such as cash, bank accounts or debit and credit cards, as well as noncarrier stored value accounts, such as travel cards, gift cards or Paypal. It does not include transactions that use mobile operators’ billing systems, such as purchase of mobile content or telebanking by mobile to the service center via an interactive voice response (IVR) system.
“Mobile payment has very different user cases and impact on developing markets to that of developed markets,” Ms. Shen said. “In developing markets, together with mobile banking, it allows people to use financial services in a more-efficient way - and sometimes the only way - at more-affordable costs, and can greatly improve standards of living. In developed markets, mobile is more of an extension of the existing payment infrastructure that allows people to deal with their financial needs on the go and in a timely fashion.”
This disparity leads to the presence of different products in different markets. For example, many services in the U.S. rely on a full browser and credit card, but this won’t work in developing markets, as many people don’t even have a bank account or bank card. On the other hand, Ms. Shen said USSD banking wouldn’t be acceptable in the U.S. as mobile operators have never made use of this for customer services and users may find it very awkward to work with.
In terms of both number of users and transaction volumes, Gartner expects Asia/Pacific and Japan to maintain a larger share of the market through 2012. While mobile payment penetration in Western Europe is expected to rise from 0.9 percent in 2009 to 2.5 percent in 2012, and from 1.7 percent to 3 percent in North America; penetration in Asia/Pacific and Japan will rise from 2 percent in 2009 to 3.8 percent in 2012. Mobile payment penetration in Eastern Europe, the Middle East and Africa (EMEA) and Latin America is also expected to exceed 3 percent by 2012.
“The most profound impact of mobile banking and payment services is that they provide the nonbanking population with access to modern financial services, giving them tools to improve their living standards,” said Ms. Shen. “For mobile operators, mobile payment can help attract and retain users and generate new revenue streams. For financial institutions, mobile payment is an opportunity to reach users who may have been previously unreachable, due to a lack of retail infrastructure.”
Ms. Shen said that overall, the market will see fragmentation in both technologies and business models, meaning that services need to be adapted for individual markets - even when deployed with the same partners - and that long lead times will be needed for deployment. This, together with the time required for creating user awareness, leads Gartner to believe that mobile payment is at least three years away from entering the mainstream market.