U.S. consumers largely view mobile payments as "a lot of craziness going on," rather than as a secure and viable alternative to plastic cards, says Vantiv Inc.'s mobile-pay expert.
"But the upside to all of this craziness is that there is now tangible evidence of the technology being available," says Ben Love, vice president of mobile strategy at Vantiv. "No one player is completely dominating mobile payments, so the field is wide open."
While banks worry about losing their place in the payments ecosystem and merchants worry about losing customers to third-party mobile payment providers, the worst thing either could do is "wait and see," Love says.
"There is no textbook about how to establish mobile payments," Love says. "You have to build your own knowledge."
It's going to take some time, maybe about a five-year cycle, before many consumers are fully ready to be willing adopters, Love said during Vantiv's Sept. 19 "Payments Go Mobile" webinar, based on research the Cincinnati-based payment processor completed with Mercator Advisory Group.
Ken Paterson, head of research operations at Mercator Advisory Group, joined Love in presenting data from the February, 2012 survey of 1,200 consumers and interviews with industry executives.
Even though the research reveals mobile payment adoption is not moving as fast as the hype around it might indicate, it was clear a "dramatic change" in how consumers will pay for products is slowly taking place, Love says.
Only a third of the consumers surveyed said they would eventually use a mobile phone to make a payment, but they may be underestimating how quickly mobile payments can advance, Paterson says.
"Right now, mobile payment developers are competing with consumption," Paterson says. "Consumers are already using cards and they are very comfortable with that and, with so much going on in mobile pay, it is causing people to sit back and wait."
The survey revealed that 51% of consumers were aware of mobile payments, 23% said they were interested in the technology, but only 1% said they were using it.
"Mobile pay is reaching a critical mass with concept awareness, which means the products are on the verge of growing," Paterson says. "But the current low use is because the payments infrastructure is not fully set up to accept mobile."
Most terminals in the U.S. are not equipped with Near Field Communication readers, a key technology for communicating with NFC chips in smartphones, he says.
Of consumers 35 or younger, 71% say using a smartphone for payments will be common in five years, though only 56% say they would conduct transactions in that manner.
Moreover, 66% of consumers who earn more than $100,000 a year predict paying by phone will be common in five years, with 43% saying they would use the technology.
Security concerns remain a significant barrier to mobile pay acceptance, Love says. Of those surveyed, 63% worry about the safety of mobile wallet payments, while 54% fear the security of a mobile phone payment at the point-of-sale.
As security standards become clearer, mobile-pay developers must embrace all of the security methods available such as encryption, tokenization, chip-based security and others, Love says.
In general, consumers simply aren't comfortable yet in viewing their phones as a payments device. Seventy-seven percent said losing their phone was a major concern, while 53% were concerned about the phone's battery life when attempting to make payments.
Even more so, consumers see no need to use a phone to make POS payments, with only 27% feeling it would be more convenient, 23% saying it would be reliable and only 17% feeling it would be secure.
Mobile-wallet developers could grease the consumer wheels by offering incentives to try mobile payments because advancement of the technology requires a "compelling value proposition" that doesn't exist with plastic cards, Love says.
"More functions that use mobility and location-awareness, such as offering a coupon from a store as you walk by it, will help in overcoming some barriers," Love says.
In particular, more banks need to take mobile banking to its next level by offering services such as overdraft alerts to a smartphone in real time, as well as introducing eWallets and mobile check deposit, Love adds.
"When you ask consumers where they would go for a mobile wallet, they will say 'my bank,'" Love says.
The best approach for banks or retail businesses is to make small investments in mobile payment development to "keep moving forward" and getting more consumers engaged.
"You don't have to shoot big cannon balls and see what sticks," he adds. "Just fire little bullets, because it is critical to not be left behind."