Software And Smart Phones Will Drive Mobile Payments, Report Says

Not every cog is in place yet, but payments from remote devices, especially so-called smart phones, are poised to grow from an estimated $389 million next year to $8.6 billion in 2014, according to a new report from Mercator Advisory Group. The report reviews the payments implications of new mobile phone and Internet-access devices such as Apple Inc.'s iPhone and the Blackberry Storm from Research in Motion, and especially the explosive growth of software programs designed for them. Third-party developers such as those that sell programs on Apple's App Store for the iPhone and big companies such as Google Inc. (which is working with Visa Inc.) are propelling the smart phone to the frontiers of mobile commerce. Banks and software specialists have been designing programs for mobile banking and bill payments for some years now, but smart phones with their bigger screens and more user-friendly Web browsers than those on conventional cell phones mean new opportunities for one-time payments. Most payments on smart phones currently come from small-value software downloads, but Mercator expects retailers and other merchants will want in on the action. “It's going to be very interesting to watch how retailers deploy this stuff,” says report author George Peabody, director of the emerging technologies advisory service at Maynard, Mass.-based Mercator. “In essence it's a trivial experience to download this stuff. It's a mobile mall.” This software-driven expansion is weakening the hold of mobile network operators on payments through cell phones and other mobile devices, according to Mercator. And as others have noted, software applications are creating new possibilities for small-value payments from mobile devices that many observers until recently thought would use near-field communication, or NFC, a technology that enables a transaction to occur between a chip-equipped mobile device that communicates via radio waves with a payment terminal (Digital Transactions News, Dec. 9). Mercator notes that the number of users of the mobile Web, currently estimated at 40 million, could rise by 50% next year, and that 75% of mobile subscribers use data services, notably short-message service, or SMS, for text messages. “This channel is getting wider and richer faster than anticipated,” the report says. Peabody says he made his estimates about payments volume, which he calls conservative, based on a number of factors, including sales of smart phones, the average value of downloads, and the estimated number of annual downloads per user.