Even though Apple is a big leader in the area of smart phones, they are really only a small part of the massive confluence that is wireless finance, a world that includes players as varied as merchants, banks, credit card companies and processors, various smart phone on a variety of operating systems and NFC (Near Field Communication) payment terminals.
While Japan and South Korea forge ahead with contactless payment systems, in the US there is an entrenched network of banking that is already providing ready credit card, debit card and ATM support for consumers. These already established options have lessened the demand for NFC-enabled smart phones to use for making payments. Polls have shown that Americans have little interest in mobile payments or NFC smart phones (mobile payments is a catch-all phrase for any kind of payment or purchase made through a mobile device, like contactless payments or transactions through text messaging).
IDC market research firm commented on the minimal growth in Mpayments over the last decade, even though initial predictions had been quite high. In a report, they noted as of yet, less than 20 percent of consumers had made a payment by means of a mobile device – 494 people of the 2560 that responded to their survey. Out of those 494, a mere 38 had paid with a mobile device equipped with NFC.
Apple has been planning the release of a new iPhone with an NFC chip that would work with a mobile wallet app. The phone, which may be released this fall, would allow users to purchase easily from merchants or transit (think subways and buses). Once the app was enabled on the phone, the user would enter their PIN, then pass the phone close to a payment terminal for automatic transfer of funds. The funds would be drawn from a pre-established account, possibly a credit card, or as a debit option.
Google Wallet was launched last September, and is available on Sprint NFC-ready Androids. Even though there are already more than 100,000 payment terminals across the US, there has only been modest use of the project.
Analysts suggest that an NFC-ready iPhone release could be the impetus people need to start adapting the Mpayment concept, but the Google Wallet hasn’t had the effect of advancing its use as yet. For mass acceptance, payment terminals need to be everywhere, and merchants just aren’t there yet.
Even though Apple ships over 30 million iPhones each quarter, it won’t be until 2016 that iPhones enabled with NFC and mobile wallet apps reach the critical mass of users needed to make it successful.
In a recent study from Juniper Research, the numbers for 2012 are dreary: only 2% of those with NFC ready mobile devices in the US and Western Europe are expected to buy goods via Mpayments. The numbers increase slightly over the next four years, with a predicted 25% in 2016.
Analysts predict that while the release of an NFC ready iPhone will increase penetration into the user market, there is still a long way to go with growing the infrastructure in banks, credit and debit card networks, merchants and other payment processors.
Experts also expect that the popular iTunes app won’t be used for billing with the NFC iPhones; instead, it’s believed that Apple will have users connect directly to the established bank accounts or credit cards to avoid any of the higher risks that come with NFC purchases.
It’s even suggested by some that Apple may be developing their own system of working with mobile payments, where Apple itself acts as a “quasi-bank.” The goal is to come up with some sort of framework where costs to merchants can be reduced, as currently, merchants have fees of as much as 3% on credit card, debit card, and smartphone payments. Merchants are loathe to switch to new technology if they continue to be hit with these high fees.
Even thought there hasn’t been much interest for NFC and mobile payment on the consumer side, Isis (a group formed by three wireless carriers) is developing plans for this summer to enable mobile payments with NFC phones. This has increased the interest over what Apples upcoming plans are with the iPhone.
Still, most are unimpressed with the apathetic forward movement seen in the US. There doesn’t seem to be anything driving consumers or retailers to move in the direction of mobile payments, as at the moment, it doesn’t offer any benefit over payment options currently available. Until something comes along to shake it up, it is expected that growth will continue to be sluggish.
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