A recent survey of 800 U.S. consumers conducted by Visa USA (San Francisco) illustrates the increasing allure of mobile phones and consumers' desire to do more with them. Seventy-seven percent of respondents said they would find it difficult to get through a day without their mobile phone. Further, 61 percent of participants between the ages of 25 and 34 said they were interested in making purchases with their mobile phones.
"Mobile phones for U.S. consumers are becoming more a part of their everyday lives," observes Michele Janes, director of the product innovation and coordination team at Visa, who points out that consumers are twice as likely to carry their mobile phones than cash, with the 18-to-34-year-old age group four times more likely to carry mobile phones. "The new technology lets them do more with their phones. For banks, I think this means consumers will start demanding more applications designed for their phones."
The survey results, Janes says, indicate a coming sea change in the world of payments, one for which banks are preparing. "Over the past six to 12 months, we've seen a drastic increase in interest among [card] issuers in mobile payments," she relates.
Although the concept of mobile payments is not new, in the past, there always have been questions around who would control the consumer relationship -- the banks or the wireless carriers. "The technology is already there," Janes explains. "It's the convergence of [financial services and wireless carriers] that will be very interesting."
In the end, Janes says, consumers will decide who will dominate the mobile payments relationship. "You may use your wireless carrier to pay for downloading ring tones, but beyond these small transactions, consumers put their trust in their banks," she says. Besides, Janes poses, do wireless carriers really have the desire to become full-fledged financial services companies? "The infrastructure is already in place in financial services," she says. "We can perform advanced risk and fraud monitoring functions," for example.
Visa recently completed a mobile payments pilot in Atlanta's Phillip's Arena with JPMorgan Chase, Cingular and Nokia and, according to Janes, each partner stuck to its area of expertise. The pilot was designed around proximity payments at the point of purchase -- the technology used for contactless card initiatives -- not remote payments. "Proximity payments are growing fast and lay the framework for mobile payments because the technology is basically the same," Janes explains. Merchants that implement contactless readers "won't have to change anything to accept phone payments," she points out.
The existing infrastructure will serve to enhance the appeal of mobile payments, Janes notes. In addition, she says, there are added security measures that can be engaged when using a cell phone. "You can lock a phone with a password," she explains. "Or, if a user loses his phone, the bank can automatically turn off the account access."
Janes predicts many new mobile payments pilots will be initiated in the next 12 months. "Finding partners across financial services and the wireless industry is not a problem," she relates. "Everyone is very eager to do this."
Mobile Payments by the Numbers
Source: Visa USA survey of 800 U.S. consumers