Mobile payment is a service at an early stage with an expected 32.9 million users worldwide in 2008, growing to 103.9 million users in 2011, according to Gartner, Inc. Short Message Service (SMS) is the dominant mobile payment technology today, driven by mobile money transfers, and it will remain the dominant technology through 2011.
Gartner defines mobile payment as paying for a product or service using mobile technologies, such as SMS, Wireless Application Protocol (WAP), Unstructured Supplementary Service Data (USSD) and Near Field Communications (NFC). It excludes telebanking by using a mobile phone to call the service center, as well as mobile ticketing where the ticket value has been prepaid and stored on the phone. The payment is made via the phone, although not necessarily over a wireless network, as in the case of NFC. Examples include merchandise purchase, payment for parking or transit, paying monthly bills and paying for money transfers.
"Mobile payment could bring revenue opportunities for carriers and, potentially, banks if deployed properly," said Sandy Shen, research director at Gartner. "The business case is more obvious for mobile carriers than banks; however, banks can justify the investment if they look at mobile as an extension of their existing channels and bundle payments with additional banking services."
"The service is easier to justify in emerging markets, where many people are unbanked or underbanked, and there are few payment options," Ms. Shen said. "In developed markets, mobile payment is likely to start as a loyalty scheme, as an extension of existing services. However, banks should be aware of alternative services from nonbanking institutions, such as PayPal and Obopay, that can compete on lower fees and faster transactions and that are more proactive on the mobile front. These could threaten the lucrative card business should momentum build up."
Asia/Pacific has the most mobile payment users with a projected 28 million users in 2008, accounting for 85 percent of the worldwide total. Western Europe is expected to have 499,000 users in 2008, and North America is projected to have 1 million users.
"Asia leads the world in the uptake of mobile payment and will continue to do so for the foreseeable future," Ms. Shen said. "There are three main reasons for this, the first being the early launch of such services in the region, led by the Philippines and Japan. Secondly, there are some significant developing markets in the region, such as China and India, with large numbers of mobile users and insufficient banking and payment infrastructure. Thirdly, Asia is ahead of the world in mobile service development due to the receptive attitude of the end user, who is more willing to try new services."
North America and Western Europe will see slower uptake of mobile payment because of the more established nature of the payment infrastructure in those regions and a higher sensitivity to security. However, Gartner expects that the arrival of advanced mobile payment technologies, such as NFC, has the potential to speed up service adoption as consumers associate the "cool factor" and convenience with contactless mobile payments.
Additional information is available in the Gartner report "Dataquest Insight: Mobile Payment, 2006-2011" The report is available on Gartner's Web site at http://www.gartner.com/DisplayDocument?ref=g_search&id=608108&subref=simplesearch.
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