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[9 comments]

Gartner: Mobile Payment Adoption At Least Four Years Away

August 15, 2011

According to a study from Gartner, worldwide mobile payment users will surpass 141.1 million in 2011, a 38.2 percent increase from 2010. But the research firm said mobile payments are not growing as fast as originally projected due to slower than expected uptake in developing countries.

The report noted that while consumers are increasingly embracing smartphones and the mobile, retail, and financial industries are all rushing to roll out near-field communication (NFC) to coax consumers to use e-wallets, implementation has been sluggish because service providers have yet to adapt their strategies to local requirements.

"In developed markets, companies are trumpeting the prospects of NFC without realizing the complexity of the service model," Sandy Shen, research director at Gartner, said in a statement. "We believe mass market adoption of NFC payments is at least four years away. The biggest hurdle is the need to change user behavior by convincing consumers to pay with mobile phones instead of cash and cards."

A comprehensive article last week in USA Today outlined four key hurdles toward adoption:

Changing consumer behavior: Shoppers are long-conditioned to using cash and credit cards. Omar Green, Intuit's director of strategic mobile initiatives, told USA Today, "There isn't anything harder or more expensive than changing people's behavior."

He added that consumers will likely need value-added services to make the switch, such as a smart wallet that helps find discounts or offer alerts on credit limits. Mr. Green said, "What I'm hearing isn't so much, 'Please give me a way to tap and go.' What I'm hearing is, 'Please help me better manage my money when I'm actually out there spending it.' "

Security and privacy: Losing an actual wallet promises to be more risky since mobile phones (and apps) can be password-protected. But Consumers Union senior attorney Michelle Jun believes that consumers will likely need the same level of protections that come with credit cards before they feel comfortable with mobile payments.

Privacy rights also need to be better explained. Google mobile-payments executive Osama Bedier, told USA Today, "The consumer has to be very aware of what data they may be making available, and they've got to give their consent in every case."

Infrastructure: Merchants have to be persuaded to send the time and money to upgrade checkout terminals. Alberto Jimenez, who leads IBM's mobile-banking and payments initiatives globally, said, "Merchants are not ready and the ecosystem is not coordinated."

Competing models: As banks, credit card issuers, wireless carriers and technology companies all vie to take the lead in delivering mobile payments, many different options are emerging. It's still not known if shoppers will carry multiple payment or wallet apps or just multiple cards within a digital wallet. The Gartner study noted that the slow adoption of e-wallet services may be a sign consumers are waiting for a cohesive system to emerge although some mobile experts quoted in the USA Today article believe the overall opportunities are still emerging and looming larger.

Dan Schulman, president of enterprise growth at American Express, told USA Today, "A lot of experimentation is happening. There's no silver bullet, no definite winner out there at this moment."

FINANCIALS:     [NYSE:IBM]

Discussion Questions:

Discussion Questions: What do you think are the hurdles in front of mobile payment adoption? What will be required to encourage consumers to switch from cash and cards to e-wallets?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Which is the largest of the four hurdles mentioned in the USA Today article toward mass adoption of mobile payments?

Comments:

In my mind, it's all about the competing models. Consumers are ready, willing, and able to use mobile payments -- except for the absence of a "trusted provider." Once that happens, adoption will really take off, which will create an umbrella for other firms to successfully enter the market as well. So the big question is whether one of the myriad small startups will gather enough steam, or will some well-established company figure it out first?

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Peter Fader, Professor of Marketing, The Wharton School of the Univ. of Pennsylvania

This well written article did a great job of laying out the reasons why consumers are hesitant to use mobile payment systems. Without a strong reason to change their behavior, why should they? Consumers are trying to save money. Mobile payment systems have to meet that demand to be taken seriously.

Among other questions consumers might ask: Do I really need/want another way to spend money? What will mobile payments do that will make my life easier and better? Why do I want to hassle with different forms of payment for different retailers?

It is any wonder that Gartner predicts that it will take at least 4 years for consumers to adapt this technology? And who knows where competing technology will be by then?

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Max Goldberg, President, Max Goldberg & Associates

There are indeed significant hurdles to move consumers to mobile payments, but, unlike contactless payment and other non-traditional payment efforts of late, mobile payments really do offer consumers a lot of major reasons to change.

Discounts are important but given that they are already paying for these products, that can be replaced by any strong incentives. Convenience, speed and better service are all top reasons, too.

The speed of adoption will overwhelmingly be dictated by how quickly--and how aggressively--the major retail chains opt to push it. As a practical matter, it's going to take between 12-24 months before the IT and marketing issues are settled enough for the major chains to really push it.

Will it take another two years for massive adoption? That's really not an unreasonable time frame, so Gartner's 4-year target could be quite correct. I'd say 3-4 years, but it really depends on one's definition of "mass market adoption." When the acceptance rate tops 35 percent, it will feel so common as to be fully accepted, but some might wait for 55 percent of more before declaring that we've hit "mass market adoption." The difference between 3 and 4 years might be little more than that.

Getting back to price incentives, I think those will be crucial for an early short period, say perhaps for the first year or so of deployment. But once consumers have used it a half-dozen times--assuming IT has done its job and the experiences is painless and intuitive--huge price incentives may no longer be essential.

Evan Schuman, Editor, StorefrontBacktalk.com

This article is correct in recognizing the slow adoption rate of payment by a digital wallet. We do not have the large credit card companies embracing this, AND we do not have the equipment in place at the local retail level to empower retailers to offer this. Without this equipment at the retail level, nothing will happen. This transition is not 4 years away, but more like 10 years....

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Kai Clarke, President, Kowa Optimed, Inc.

So the only ones not (as) excited by this are the people who will actually be using it? Explain to me again why punching numbers into a phone is superior to swiping a card at a terminal, and maybe I'll have a reason to argue that they should be.

'notcom'

The hurdles are clearly stated in this article: behavior, security and infrastructure. Of all three, the latter is probably paramount right now. Sure, mobile payments apps SOUND nice, but if the merchants and payment processors aren't ready to make transactions smooth, they may not get a second chance once they are.

'Jini'

Hurdles? There are many. I dare say a premiere hurdle will be if there has to be interaction with a store clerk. There shouldn't; but then again one can never be that certain.

I do think changing the culture of the older generation will also be a prime hurdle to overcome. Yes, we are used to credit and debit cards along with that once popular cash we used to have until Congress decided they would rather have it. Translating the use of an app to the senior generations will require time and commitment on someone's part. Sorry, I am busy that day.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

I'm intrigued by the idea of a smart wallet that carries more than just ATM and payment information. Think of all the other items in your wallet: drivers license, photos, AAA card, frequent shopper cards, proof-of-insurance, emergency information, club cards, etc. What if all of these (photos, of course, currently can) could be stored on your smart phone and accepted by the appropriate receivers - law enforcement and everywhere else a physical card is now required?

Perhaps mobile payments can come in the back door, following general acceptance of the wallet contents listed above.

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M. Jericho Banks PhD, President, CEO, Forensic Marketing LLC

The consumer is not intransigent on this issue. They are thinking about their money on this proposition.

Currently, based on the July, 2011 Consumer Intentions & Actions (CIA) Survey, 36% of the U.S. population maintains they have a SmartPhone. Just as that figure has been growing, so to do the ways in which the Consumer makes use of their Phone -- e.g. -- 15.7% of the population conducts a search on their SmartPhone, 14.2% of the population Downloads to their SmartPhone, etc.

In order to accelerate usage of Mobile Pay, Intuit likely needs the alliance with payment systems, or the acceptors of those payment systems. The consumer does not want to pay the premium for this services at this stage, anymore than they are seeking ways to pay extra fees at any other financial institution.

As Omar Green of Intuit points out, the industry -- manufacturers, retailers, payment systems, and concerns who are seeking more mobile payment users -- are going to have to find ways to show the consumer the benefit to them -- managing their money, cost-savings, convenience, etc. Get the consumer in the center of the equation, and each of the industry members have a solid upside. Give them something easier, smarter, faster, cheaper ... they'll get their attention.

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Roger Saunders, Managing Director, Prosper Business Development

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