Industry analysts have long predicted that the masses will soon begin paying with their smartphones.

Yet year after year goes by, and credit cards continue to dominate payments. In fact, surveys indicate that much of the public remains unaware that the technology already exists to accept mobile payments.

So what’s the holdup?

Analysts maintain that mobile’s day is coming, and the pieces appear to be falling into place faster than ever before. But it’s not going to happen all at once.

“It feels like the rollout will be inevitable, but it appears it will be a longer-term rollout because it’s determined on consumer demand,” says Duayne Haskett, senior vice president of third-party acquiring at Priority Payment Systems, an ISO based in Alpharetta, Ga.

Experts see mobile as a two-sided proposition, meaning widespread adoption has to take place among both consumers and merchants. For both sides to take off, each group has to believe there’s something in it for them, such as lower costs and better customer analysis for merchants, or coupons and other incentives for consumers.

Although different from paying with a smartphone, it’s worth noting that mobile has made major headway on the acceptance side, with retailers welcoming the arrival of Square and other external devices that attach to smartphones to swipe credit cards, says industry consultant Todd Ablowitz.

“I don’t think it should be ignored that people are more comfortable than ever before with their mobile phone being close to a payment,” says Ablowitz, president of Denver-based Double Diamond Group LLC.

But many barriers prevent widespread adoption, and it appears that mobile has a ways to go. “I still say that if you can’t see what it’s going to look like, the solution is still a long way away,” Ablowitz says.

It’s going to take a lot for mobile to go mainstream, if for no other reason than the mainstream consists of a broad spectrum of technology users, says Randy Vanderhoof, executive director of the Princeton Junction, N.J.-based Smart Card Alliance. “That’s a pretty big universe of people with different approaches to technology,” he says.

Some differences are generational. Mobile devices are used primarily by young and tech-savvy consumers, and not the older generation that generates most payment transactions.

A lot of consumers didn’t grow up in the digital age, so they’re not as ready to make payments with their smartphones.

“Some of the consumer population doesn’t even have smartphones yet, or are just obtaining them,” Haskett notes.

On the consumer side, surveys indicate a lack of awareness about mobile payments. And not all of those who have heard of it are open to it.

Still, Vanderhoof believes surveys can provide false or misleading information about preferences that consumers have yet to form. “It’s very difficult to trust surveys that ask people if they would try a technology that they know very little about and perhaps have never used before,” he says.

Take the iPhone, for example. If consumers would have been asked whether they wanted the iPhone before the device caught on, their answers might have been different from what they would be today.

“Until they actually saw it and used it did people become attracted to it. I think mobile payments will become the same way,” Vanderhoof says.

Part of the reason why the mobile payment has stalled has to do with technology barriers for adoption. Aite Group analyst Nathalie Reinelt, who wrote the May report “Money Goes Mobile,” says those barriers relate to the NFC secure element.

“I think that’s quite a bit why mobile wallets didn’t really jump the way everyone thought they would, not because it wasn’t a good technology,” Reinelt says.

Google Wallet had a lot of brand recognition when it came out, but interest died down once consumers discovered it was available only on Android phones. Three major mobile carriers, AT&T, T-Mobile and Verizon, declined Google Wallet because they were collaborating on a joint venture to develop the Isis Mobile Wallet.

The lack of NFC-based terminals presented another roadblock. Even if users did download the Google Wallet app, there weren’t enough retailers accepting it for the public to want to keep using it. “If they can’t consistently shop a certain way, they’ll try it out a few times and abandon it,” Reinelt says.

That’s all starting to change, following the release of the Android 4.4, known as KitKat, last fall. The new Android software introduced a technology known as Host Card Emulation, or HCE. Through HCE, Android applications can talk to contactless payment terminals. By routing data securely through the cloud, the applications can bypass the secure element on the hardware.

Tech observers believe HCE could drive NFC adoption because it takes the mobile carriers out of the equation, and players such as Google Wallet won’t have to depend on those carriers.


(An expanded version of this article appeared in the July-August print edition ofISO&Agent.)

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