Mobile payments poised to take flight

Mobile payments have finally started to take off in recent years, and are likely to grow from US$240 billion in 2011 to US$670 billion worldwide in 2015, according to Juniper Research. The overall mobile payments market is also expected to rise quickly, thanks to things such as mobile ticketing and coupons, money transfers, and the ability to purchase physical goods.

Even faster growth will occur with Near Field Communications (NFC), which can be used in retail locations to buy physical items. Juniper says 20 countries are expected to launch NFC services in the next 12 months, although how quickly the market will adopt it remains to be seen. NFC can be defined as a set of standards for smartphones and similar devices, such as readers in stores, to establish radio communication with each other, by touching them together or bringing them within a few centimeters of each other.

Present and anticipated applications include contactless transactions, great for easy payment via mobile. Anyone who has traveled on the London Underground will have seen the Oyster Card, with its “touch in, touch out” operation, in which payment is taken instantly from a pre-loaded travel card. This is the same technology coming fast to a smartphone near you.

Developing countries may also help drive the growth in mobile payments. Markets that rely less on traditional credit cards and banks are ideal for new payment options. Juniper believes mobile payments in developing countries will double by 2013. However, the “more mature” markets in East Asia and China, Western Europe and North America will represent 75% of mobile payment transaction value by 2015.

Separately, Forrester Research believes that mobile commerce will rise, but at a slower pace as companies struggle to understand their mobile investments and how to integrate mobile into their sales operations. This will be key to newsmedia operations in the future. For more on this, see my last blog post, “How newsmedia companies can sell mobile to advertisers.” 

This all highlights the two different sides of mobile payments: Paying for goods online using a mobile phone, and using a phone as a real wallet replacement. Though online commerce is where things have been mainly active around the mobile world, the real opportunity is to get offline payments in the physical world. That is still an emerging market, but firms like PayPal and Google are now trying to persuade people to embrace mobile payments in stores. If they succeed, we could see mobile payments quickly take off in a huge way.

So, can it be worth US$670 billion? It’s looking very possible. NFC still needs to become mainstream, and consumers and retailers still need to be convinced the technology is worth the risk and their investment. But things are starting to motor now. Watch this space.

P.S.: Enders Analysis recently announced Apple has sold 40 million  iPads and with no credible competitors beyond Amazon’s Kindle Fire, which so far is available only in the United States.

Android phones are selling in huge numbers at half the price or less of the iPhone, but would-be iPad competitors are the same price or higher. With the continued absence of a meaningful content ecosystem for Android tablets, Enders says it is hard to see consumers buying them in substantial numbers.

Competing Android tablets have sold around a tenth as many units as the iPad, but others have sold far less: RIM’s Blackberry PlayBook has been a major disappointment, forcing RIM to write off US$485 million of inventory.

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