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You are here: Home / Sales & Marketing / Venture Pushes Mobile Payments
Wireless Carriers Seek To Boost Mobile Payments
Wireless Carriers Seek To Boost Mobile Payments
By Adam Dickter / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
Using your smartphone to pay for purchases, already common in parts of Europe and in Japan, could soon be a regular occurrence in the United States. With as many Americans carrying phones as credit cards, three top wireless carriers are working with a major card service to promote the practice.

Paper, Plastic or iPhone?

Bloomberg news cited three people with direct knowledge of the plan by AT&T, Verizon Wireless, and Deutsche Telekom, a division of T-Mobile, to work with Discover Financial Group -- the fourth-largest credit-card agency -- and Barclays Plc to make contactless mobile payments common. The joint venture will test the market in Atlanta and three other cities yet to be named and is currently shopping for a CEO.

Although Americans increasingly use feature phones or smartphones with mobile applications for everything from downloading music to getting directions, playing games or watching movies, the idea of turning an iPhone or a Droid smartphone into an electronic credit card might meet some resistance.

"Folks already perform banking transactions online, so doing it via your smartphone should not be a big leap -- but the key will be addressing security concerns," said J.D. Power and Associates wireless analyst Kirk Parsons. "Also, making sure it's easy to navigate and perform the functions as advertised will be paramount in order to boost potential adoption."

The success of such a system depends on the willingness of merchants to set up the infrastructure for such payments, but the motivation could come from smaller transaction fees than credit-card companies charge.

As to the impact on the smartphone market, Parsons said, "I do not think this new service will necessarily boost smartphone sales; it's just another service you can perform on the device."

North America and Western Europe Lag

A study by Gartner Research released in June estimates that more than 108.6 million people worldwide will use mobile payments this year, up 54.5 percent from 2009, when there were 70.2 million users. It also expects that 2.1 percent of all mobile users will adopt payments.

"We continue to see strong growth in developing markets in Asia, Eastern Europe, the Middle East, and Africa for mobile payments, while adoption in North America and Western Europe lags behind due to the plentiful choices of payment instruments that consumers have," said Sandy Shen, a Gartner research director based in China.

In North America, mobile-payment usage is expected to grow from 1.9 million users last year to 3.5 million this year. By contrast, usage in Asia and the Pacific, where credit cards are far less ubiquitous, will explode from more than 41 million users to more than 62 million, according to Gartner.

"Developing markets have found the right formula for mobile money services -- functions that users want and an ecosystem that can sustain the service," Gartner said. "The answer for developed markets, however, remains elusive."

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