Mobile Payment Future Belongs to the Young and Fast

May 20, 2011

There’s no doubt that mobile technology is taking off with more consumers using various devices to perform a greater number of functions by the day.

A few reasons are generally given for consumers not making even greater use of the technology. The first is generational: The young explore while older consumers stick with what they know, presumably desktop computing or, in the case of payments, cash or credit/debit cards. Another is experience: Consumers want to be able to have the same level of performance and access to information, etc. that they would have sitting at home in front of a PC.

New research conducted by MasterCard by Kelton Research, backs up some of the generation findings when it comes to using mobile devices to make purchases. While 62 percent of Americans who use a mobile phone are open to using them to make purchases, the numbers skew significantly based on age. Sixty-three percent of those between 18-34 are open to using their phone for this purpose while only 37 percent of those over 35 feel the same.

A previous survey conducted by MasterCard Advisors in 2010 found that the desire to use mobile phones for payments is growing among consumers under 30. In 2009, 15 percent used their mobile phone to buy something while that number jumped to 25 percent in 2010.

"Consumers are already living a mobile lifestyle so using their phones to make payments on a daily basis is a natural next step," said Mung Ki Woo, group executive, mobile at MasterCard Worldwide, in a press release.

Mr. Woo said 2011 marked "the beginning of the NFC (near field communications) mobile payments era, and consumers are eager to get their hands on the first commercial deployments in the U.S."

The MasterCard study found that consumers "identify" with their mobile phones. Fifty-four percent said the mobile phone they use says more about their personality than what they carry in their wallet.

"When credit and debit cards were first introduced, consumers welcomed the improvements they made to the speed, convenience and reliability of transactions," said Mr. Woo. "Now with the mobile wallet ready to revolutionize this experience again, consumers have even more to gain as their phones take on additional functionality and value in their lives."

Speed is a major issue when it comes to the mobile experience. Those new to the technology who are used to broadband connections on their computers can become frustrated with the wait time involved with data usage on mobile phones.

On last Sunday’s Fareed Zakaria GPS on CNN, Eric Schmidt, executive chairman of Google, said help was on the way with both speed and other elements of the mobile experience.

"Think about mobile phones a decade ago and you can see that it is 100 times faster today than it was 10 years ago. How quickly we forget the primitive world that we lived in 10 – 15 years ago," said Mr. Schmidt.

Discussion Questions: How quickly will American consumers adopt mobile payments? What do you think are the biggest impediments to adoption and where are the opportunities for retailers?

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16 Comments on "Mobile Payment Future Belongs to the Young and Fast"

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Steve Montgomery

Many of those under 35 grew up using smart phones. Those of us that are over 35 first cell phones were “bricks” with antennas attached. We were happy when they worked and the battery lasted for a few hours. I remember being told “you are what you were, when.” This seems to apply to technology too.

The under 35’s experience with cell phone could be compared to my generation and the one that followed with PCs. I learned to use one in the business environment. As for my children in our home, we use them very differently and I expect that will continue.

I anticipate the adoption rate will depend on the availability of NFC and the security issues that may arise. For example, I know few people that have lost their wallets, but many who have lost their phones. In fact, I found another phone on a plane earlier this week.

W. Frank Dell II

Yes, mobile payment is coming but as checks replaced cash at checkout and credit/debit cards have replaced checks, so will the cell phone replace cards. The major obstacle will be security. Just as internet card purchases and online banking was slow in being accepted due to security concerns, the same will be true with cell phones. How does the retailer know it is your phone? Retailers will need to invest in infrastructure to speed up the transaction. We will have a new round of fee negotiations between retailer and financial institutions. With banks currently charging a fee for anything, if there is a consumer charge, acceptance will not be worth an investment by retailers.

Bill Bittner
Bill Bittner
6 years 4 months ago

I don’t believe the challenge is whether people want to use their phone for payments as much as whether they want to use their phone to access Facebook or their bank account or send videos to YouTube.

There are a lot of “utility users” of cell phones who carry them for making phone calls and ease of contact. These folks would like the convenience of payments but not the extra hardware or subscription cost of features they seldom use. I think the challenge is to not to segment the market based on age, but on the features that make sense for different types of users.

I think the other concern of both cell phone and NFC solutions is people are afraid of accidental charges. I think it remains necessary to limit the amount that can be charged without additional identification information from the customer.

Anne Howe

Eric is right, all the technology was pretty primitive ten to fifteen years ago. The rate of change is so speedy that, for Boomers and older, I see a slow or no adoption rate in mobile payments. There’s just too much change, too fast, for many to keep up, and every time there’s a new software or hardware update, there is trouble getting up and running again. Even as a tech savvy Boomer, I’m always seeking advice from the tech native Gen Y folks around me.

But that said, I firmly believe that most Gen Y and younger folks WILL adopt mobile commerce. They understand that while it may be a little slow now, it will become faster in a hurry. The mobile wallet is a tool that will enable empowerment in Generation (Y) and become ubiquitous across most tech-enabled Americans in subsequent generations.

I can only hope my kids will hook me up so I can use it too! I’ll buy a tiny cute handbag that will need no plastic in it at all.

Ryan Mathews

Yup…and them old geezers will never use the ATM…or the Internet…or….

Come on! Convenience is convenience.

What’s the biggest obstacle? I’d say it’s time.

Younger people tend to pioneer new uses of technologies but, so far in many cases, their parents and grandparents have proved fairly fast followers.

Anything that makes life easier has a transgenerational appeal; it’s just that old folks tend to move a little slower–but, don’t worry, we’ll get there.

Richard J. George, Ph.D.
Perhaps the biggest impediment among older Americans is the lack of Smartphone ownership. I have recently completed a national survey of Mature Baby Boomers (MBB) (55 – 64) and Mature Millennials (MM) (25 -34) on a variety of food retailing and foodservice issues, including their use of technology. In my survey, only 28% of MBBs own Smartphones versus 66% of MMs. When it comes to Smartphone usage the differences between the generations was statistically different and meaningful. There were no tasks in which more than 10% of Mature Baby Boomers used their smart phones to address. On the other hand, over 25% of Mature Millennials used their Smartphones for the following tasks: view restaurant menus, check specials, make reservations, and receive discounts/specials information. One in six MM uses their Smartphone to order a meal while one in ten uses this technology to pay for their meal. In summary, for every task using either the Internet or Smartphone, Mature Millennials used the technology significantly more so than did their older counterparts. MMs were born into this technology. MBBs will come along slowly. The key is to get the technology, i.e., Smartphones into their hands. Usage will follow.
Ralph Jacobson

I am totally with Ryan Matthews on this one. I see more folks beyond my years (51) diving into technology with at least the vigor of their grandchildren. My best friend’s 78-year-young mother is all over her new Droid, and cannot wait to get rid of her wallet and use her phone for everything, including commerce, ID, etc. Virtually anything in her wallet today can be improved by a mobile telephone.

Dan Berthiaume
Dan Berthiaume
6 years 4 months ago

I think the main impediment is generational–older consumers who didn’t grow up in a connected world and remember mobile phones that looked like large walkie-talkies are not going to easily adapt to doing everything via smartphone. Retailers need to make the mobile option available, and as time passes a larger and larger percentage of their customers will use it.

Dan Frechtling

Others have done a superb job dimensionalizing demand. We agree we have the mobile hardware. Now what? For mobile phones to become wallets as the MasterCard study suggests, we’ll need a common set of technical standards.

Today there are competing organizations setting direction for Near Field Communications (NFC, which enables contactless payment). Both mobile and payment providers are vying for leadership.

Amex, MasterCard and Visa formed EMVco. Barclaycard has its own UK pilot. Google backed the NFC forum. In Asia, KDDI, Softbank Mobile and SK Telecom joined forces. 800 mobile carriers are part of the GSMA, which is weighing in. Apple wants a closed system anchored by iTunes. And so on.

Mobile carriers and financial services companies will have to collaborate to avoid chaos. Or we might have VHS, Beta, DVD and Blu-ray hitting the market at the same time.

Camille P. Schuster, PhD.

Security of wireless networks and security of the devices is an issue regarding acceptance. Speed and ease of application use are also factors. Providing technology that addresses these issues is balanced against the desire to use mobile devices for additional services. Some people (regardless of generation) will adopt the new technology even if the other issues are not well addressed faster, some will wait until there is a better balance, some will need strong assurances of security, and some will not make the switch unless forced.

Herb Sorensen

There are lots of efforts thinking of ways and experimenting with ways to drive sales in the store with smart phones. Almost certainly, “pay as you shop” will be the app that will drive in-store use of smartphones. This will be the gateway app.

Cathy Hotka

I had dinner last evening with a table-full of retailers who want to support mobile payments, but who say that the technology isn’t there yet. But when it is, watch for quick and happy adoption. The combination of consumer devices and handheld POS means that stores can free up selling floor space where the large cashwrap used to be….

Larry Negrich

Security, the perception of potential accidental charges, and ease-of-use would seem to be the barriers that will most slow consumer adoption of mobile payments. If mobile payments follows the same pattern as Internet payments did then the first two of these (security, payment uncertainty) will dissolve and adoption will come down to ease-of-use. The payment players would be wise to quickly establish standards and protocols that will enable consistency in the transaction process across retail. (This assumes that the consumer and retail will both have the software/hardware required to execute these transactions.)

Mark Burr
6 years 4 months ago

It will happen sooner than we think. The biggest impediment is user confidence in the security of the network transaction.

Joel Warady
Joel Warady
6 years 4 months ago

This will start to be the norm within the next 15 years, if not sooner.

Checks are currently non-existent in Finland, and the UK is talking about banning the use of personal checks within the next few years. The sooner the governments get involved in helping streamline the system, and forcing the adoption of standardized technology, the sooner people will adopt the new technologies.

That being said, my 83 year-old mother has never owned an ATM card, and has never received cash from a machine. Sometimes, it does take a full generation before the technology adoption is complete.

Evan Schuman
Evan Schuman
6 years 3 months ago

When the incentives are in place (it won’t take much more than a few times getting 20 percent off all purchases made on your mobile device), people of all ages will try it. And if it works flawlessly (more or less) and is indeed faster and easier, they’ll keep on doing it long after the incentives have stopped.

The reality is that all consumers will ultimately move to mobile, but a few short-term incentives will rapidly accelerate acceptance.


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