A recent survey of 800 consumers conducted by Visa USA (San Francisco) illustrates the increasing allure of mobile phones in this country and consumers' desire to do more with them—including payments.
Among the findings, 77 percent of respondents said they would find it difficult to get through a day without their mobile phone. Furthermore, 61 percent of participants between 25 to 34 years of age said they were interested in making purchases with their mobile phone.
According to Michele Janes, director of the product innovation and coordination team at Visa, "These numbers indicate that mobile phones for U.S. consumers are becoming more a part of their everyday lives," Janes says. "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."
Banks would do well to be mindful of this. Other study figures revealed that more than 50 percent of respondents prefer to have more electronic payment options so they do not have to carry cash. The study also showed consumers are twice as likely to carry their mobile phone than cash; this number jumps to four times in the 18 to 34 age group.
These figures indicate a coming sea change in the world of payments, where electronic transactions are not just performed using cards or the Internet, but with the convenience and intimacy of one's cell phone. Janes says banks have not been slow to realize this. Now, the technology and the marketplace are finally on the same page, opening the door to future wireless payment initiatives. "Over the past six to 12 months, we've seen a drastic increase in interest among [card] issuers in mobile payments," she relates. "Several of our issuers are asking about this."
Although mobile payments has been talked about in the past, there have always been questions around who will control the consumer relationship—the financial institutions or the wireless carriers. Janes acknowledges that these arrangements can be tricky and are probably the most difficult part of launching a mobile payments initiative. "This is a very complex ecosystem we're building," she explains. "The technology is already there. It's the convergence of [financial services and wireless carriers] that will be very interesting."
In the end, though, she thinks the consumers will decide who will dominate the mobile payments relationship. "Studies continue to show that consumers trust their banks," Janes states. "You may use your wireless carrier to pay for downloading ring tones. But beyond these small transactions, consumers put their trust in their banks." Besides, she poses, do the wireless carriers really have the desire to become full-fledged financial services companies?
Mobile payments is about more than just processing transactions, she explains. What happens when a dispute arises? "The infrastructure is already in place in financial services to deal with these things. And given the amount of transactions and volume of payments that come through, we can perform advanced risk and fraud monitoring functions."
Visa completed a mobile payments pilot in Atlanta's Phillip's Arena with JPMorgan Chase, Cingular and Nokia. Things went along fairly smoothly between the partners, Janes claims, with each sticking to what they know best: Chase and Visa handled the payments side while Nokia and Cingular handled the wireless functions.
The Phillips pilot was designed around proximity payments at the point of purchase, not remote payments. This is the technology used for contactless card initiatives and is the same technology for mobile payments. "Proximity payments are growing fast and lay the framework for mobile payments because the technology is basically the same," Janes says. Merchants that implement contact less readers "won't have to change anything to accept phone payments."
The existing infrastructure will serve to enhance the appeal of mobile payments. In addition, says Janes, there are added security measures that can be engaged when using a cell phone. "You can lock a phone with a password or if a user loses his phone, the bank can automatically turn off the account access," she explains.
In addition, banks are provided with an opportunity to provide customers with value added services that complement the wireless payments, such as transaction tracking, payments alters and mobile coupons, Janes says.
Janes predicts many mobile payments pilots will be initiated in the next 12 months throughout the industry. "There are other opportunities coming down the pipeline," she relates. "Finding partners across financial services and the wireless industry is not a problem for us. Everyone is very eager to do this."
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