2013 Not the Year for Mobile Wallets

Anyone predicting that 2013 is the year that mobile wallets take off is likely to be disappointed according to a report published Thursday.

ICM Research says that even though smartphone penetration has reached some 60% in the U.K., the mobile wallet, a payment mechanism that lives on your mobile device and replaces cash or credit cards, there is little appetite yet for such services.

The company cites three reasons:

  1. The market simply isn’t ready: lack of retailer support and while consumer awareness of contactless payments is high (80%), widely held consumer security concerns have not been addressed.
  2. Smartphone users aren’t that tech savvy: Smartphone penetration is growing yet many smartphone users aren’t tech savvy. M-Commerce is certainly popular, but relatively few transactions happen via the mobile handset.
  3. NFC isn’t keeping up:
    There simply aren’t enough NFC-enabled smartphones which means many people can’t yet make contactless payments by mobile even if they wanted to.

The mobile industry is awash with a bewildering array of rival products from network operators, card providers and other payment providers. A mobile wallet is a goldmine of consumer data, a trifecta of payments, retail and advertising and everyone wants a slice of that action.

Turkey’s largest network operator, Turkcell, has invested heavily in mobile payment technology and according to its Chief New Technology Business Officer Cenk Bayrakdar said that mobile wallets remained a powerful tool. “The mobile wallet is an exceptional channel for m-commerce platform simply because it knows so much about us and the mobile phone is always with us. It knows where we go during the day, it knows our income levels, our friends, our habits and our travel habits. So, the wallet can propose a lot more relevant offers than any other channel for us.”

Angel Dobardziev consulting director for Ovum, while supportive of the concept of m-wallets, admitted that adoption has been slow. “Until someone comes up with a simple and intuitive proposition consumers will show reluctance to adopt it. They need to see something compelling.”

One of the much talked-about driving technologies is Near Field Communication (NFC) devices. This is a short-range, secure, contactless wireless communication technology. While handset makers like Nokia have long included NFC, and Android now supports the technology, proponents were disappointed that Apple’s iPhone 5 did not embrace the technology.

Mr. Dobardziev said it was important to look at the broader picture, such as online payments, mobile payments as well as so-called on-premise payments. “A lot of the attention has been focussed on on-premise payments, using technology such as NFC. But that is just a very small segment of the broader payment space.”

“The need is there, it will happen, but NFC may not be the single, or fastest, route to get there.”

He suggested that other technologies, such as simple barcodes, can achieve much of what NFC offers. He also suggested that cloud-based wallets that allow multiple access from numerous devices and which could be used in a wide range of scenarios from on-premise payments through to paying for goods on a website, were an attractive alternative. “No one wants all their money stuck on one phone.”

But, cautioned Mr. Dobardziev, providers do have to have a compelling use case to persuade users to adopt their technology. “Cash is easy.”


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