Using a smartphone to pay for purchases in lieu of a physical debit or credit card may become a $1 trillion (£636 billion) business by 2015, and some ancillary technologies for consumer engagement could help to make that happen.
Shopping for products on a smartphone is not new, but the field of mobile payments - in which mobile devices such as smartphones can either accept physical credit card payments or make such payments without a card in brick-and-mortar stores - has been growing. Experts now say the technology is largely in place, and that the biggest hurdles involve engaging with consumers and merchants.
"It's all finally happening. We have mobile payments now," said analyst Nick Holland with the Yankee Group, citing Square, Google Wallet and the Isis mobile payment system in the US available in Salt Lake City and Austin, Texas, as prime examples.
The industry is complex. 'Mobile payments' is often used as a catch-all term encompassing not only physical transactions made with the phone but also seamless billing services incorporated into mobile apps, and in-app store purchases such as buying songs on iTunes.
Yankee's Holland expects the total market for mobile transactions to reach $1 trillion per year by 2015. There are currently $7 trillion worth of transactions per year processed through Visa and MasterCard.
"It's a huge opportunity. We've only just skimmed the surface," he said during a panel discussion yesterday at Apps World in San Francisco, a conference and trade show for app developers.
Until there is widespread adoption, developers should make complementary mobile apps that don't process any transactions, but still fall under the mobile payments umbrella, speakers on the panel agreed. The idea is that consumers could make purchases with a physical debit or credit card, or cash, but they would have immediate access to smartphone apps that would improve the transaction. The physical wallet is not going the way of the dinosaur anytime soon, the panelists said.
The goal would be to offer something that makes the transaction faster, cheaper and more convenient. "Payments work really well already," Holland said. "The existing credit card transaction is not a friction point for the consumer. So you have to be providing the consumer something bigger and better."
Mobile comparison shopping
For example, apps could let consumers quickly perform price checks and do comparison shopping for a product at nearby stores. Yankee's Holland cited recent survey data showing that 56% of people with smartphones already do comparison shopping online, but there could be more apps built around this "top-level" opportunity for mobile payments, he said.
Others suggested an app that could synthesise a user's various credit and debit cards, and give them information on the fly about which billing cycle the person is currently in, which rewards are available for which card, and any other opportunities or discounts. Because people on average have three or four cards in their wallet at any time, the app would help the person decide which account to use for any given transaction, said Andres Wolberg-Stok, global mobile and tablet banking director at Citi.
"If that value could be brought to a service and revealed, that would transform that whole relationship people have with their multiple accounts," he said.
Other panelists discussed mobile apps that could improve the buying experience for merchants. For example, an app could ask for user feedback after a sale and then send that information back to the merchant, so the seller could learn more about what consumers want for future reference.
"There's an opportunity now to focus on what consumers and merchants want," said Aashir Shroff, VP of mobile banking and payments at Wells Fargo. He said the end result could be a more meaningful relationship between consumers and merchants, "so the payment just becomes the binding factor."