Mobile Payments Grow, But Slower than Expected

A new report finds that the mobile payment market isn't growing as quickly globally.

July 25, 2011

STAMFORD, Conn. ?" Worldwide mobile payment users will surpass 141.1 million in 2011, a 38.2 percent increase from 2010, when mobile payment users reached 102.1 million, according to Gartner, Inc. Worldwide mobile payment volume is forecast to total $86.1 billion, up 75.9 percent from the 2010 volume of $48.9 billion.

Despite these strong growth projections, Gartner analysts said the mobile payment market is growing slower than expected. "In developing markets, despite favorable conditions for mobile payment, growth is not as strong as was anticipated. Many service providers are yet to adapt their strategies to local requirements, and success models from Kenya and the Philippines are unlikely to be translated to other markets," said Sandy Shen, research director at Gartner, in a press release. "While developing markets have favorable conditions for mobile payments, such as high penetration of mobile devices and low banking penetration, this is no guarantee of success, unless service providers adapt their strategies to local market requirements.

"In developed markets, companies are trumpeting the prospects of Near Field Communication (NFC) without realizing the complexity of the service model. We believe mass market adoption of NFC payments is at least four years away," said Shen. "The biggest hurdle is the need to change user behavior by convincing consumers to pay with mobile phones instead of cash and cards."

Gartner expects Short Message Service (SMS) and Unstructured Supplementary Service Data (USSD) to remain the dominant access technologies in developing markets due to the constraints of mobile phones. Wireless Application Protocol (WAP) will remain the preferred mobile access technology in developed markets, where the mobile Internet is commonly available and activated on the phone. Mobile app downloads and mobile commerce are the main drivers of WAP payments, and WAP will account for almost 90 percent of all mobile transactions in North America and about 70 percent in Western Europe in 2011.

NACS explores the implications of mobile payments in "The High Tech Payments Battle," in the May issue of NACS Magazine.

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