Mobile phones have increasingly become tools that consumers use for banking, payments, budgeting, and shopping. Given the rapid pace of developments in the area of mobile finance, the Federal Reserve Board began conducting annual surveys of consumers’ use of mobile financial services in 2011. This 78-page report, “Consumers and Mobile Financial Services” (March, 2015) examines trends in the adoption and use of mobile banking, payments, and shopping behavior and how the emergence of mobile financial services affects consumers’ interaction with financial institutions.
Research Report: Positioning for Payments in the New Mobile-Social Technology Era
We are at the beginning of a new technology cycle as consumer adoption of mobile and social media extends the reach of the web and integrates those media into the physical world.
Facebook is only eight years old, and yet its planned $5 billion IPO is the largest Internet IPO ever. As in every new technology cycle, network effects make room for new players and the creation—and destruction—of vast amounts of wealth.
The Gang of Four—Apple, Amazon, Facebook, and Google—is a group of network players entering the banking and payments environment. How will the strengths and weaknesses of the Gang of Four play against those of major financial institutions, payment networks, and wireless carriers? Surprisingly, PayPal rates on equal footing with the Gang of Four when it comes to innovation and emerges as a possible leader in the next tech cycle.
Research & Markets recently released a report entitled Positioning for Payments in the New Mobile-Social Technology Erathat focuses on the relationship of brands to consumer perceptions of trust, innovation, and privacy in order to identify opportunities and threats.
Primary Questions
- What is the newest technology cycle? Which brands are positioned to take advantage of the next cycle?
- What models are developing that will intersect with the financial services space?
- How will the strengths and weaknesses of the Gang of Four play against those of major financial institutions, payment networks, and wireless carriers?
- How well do consumers trust the Gang of Four compared with the major financial institution, payment network, and wireless carrier brands when it comes to their financial information?
- How do consumers rate the Gang of Four compared with the major financial institution, payment network and wireless carrier brands when it comes to protecting their private information?
- Which brands are viewed as most innovative?
- How do customers of the primary financial institutions rate their own institutions on the issues of trust, innovation, and privacy?
- How should brands position themselves to best compete in the new technology cycle?
Methodology
The report is based mainly on data collected online from a random-sample bank benchmark panel of 5,878 consumers in December 2011. The survey targeted respondents based on proportions of gender, ethnicity, age, and income representative of those of the overall U.S. online population. The margin of sampling error is ±1.28% at the 95% confidence level.
It is also based on a survey of 5,211 consumers conducted online in October 2011 on KnowledgePanel. This sample is representative of the U.S. census demographics distribution and is recruited from the Knowledge Networks panel. Data is weighted using 18+ U.S. Population Benchmarks for age, gender, race/ethnicity, education, census region, and metropolitan status from the September 2011 Current Population Survey (CPS) and household Internet access from the October 2010 CPS Supplement. The margin of sampling error is ±1.73% at the 95% confidence level.
Table of Contents
- Overview
- Methodology
- Executive Summary
- Platforms That Are Able to Gather the Biggest User Base Usually Gain the Most Power and Wealth in Each
- Technology Cycle
- Mobile + Social Defines the Newest Technology Cycle
- Wealth Is Created—and Destroyed—During Each New Technology Cycle
- Apple, Amazon, Google, and Facebook
- Platforms That Gather the Biggest User Base Usually Gain the Most Power and Wealth in Each Technology Cycle
- Mobile Platform
- Two Diverging Views of Mobile Success—Open (Google) vs Protected (Apple)
- Social Media Platform
- Mobile-Social Integration Opens Opportunity for Competitor to Move on Facebook
- Game-Changing Business Models Rapidly Emerge During Times of Technological Upheaval
- Tablets
- Alliances Can Use Mutual Strengths and Weaknesses Can Fill Gaps to Respond Faster and with Better Products
- Javelin TIP Model for Mobile Wallets
- Trust
- Apple Leads in Innovation—at Least for Now
- Innovation
- Privacy
- Don’t Count out the Financial Institution’s Primary Relationship with the Consumer
- No Brand Reaches the Gold Zone—Without an Alliance
- Appendix
- Related Research
- Companies Mentioned
– Amazon, American Express, Apple, AT&T, Bank of America, Chase, Citibank, Discover, Facebook, Google, MasterCard, Microsoft, PayPal, Research In Motion, Sprint, Twitter, U.S. Bank, Verizon, Visa, Wells Fargo, zvelo
More information: Research and Markets
Mobile Contactless Payments Summit: Oct. 17-18, 2011, Chicago, IL
Strategic Solutions Network (SSN) will welcome an estimated 400 executives from leading retailers, banks, carriers and technology companies to attend the Mobile Contactless Payments Summit October 17-18th, 2011 at the W Chicago City Center.
The 3rd Mobile Contactless Payment Innovations Summit is part of the Alternative Payment Systems Innovations (APSI) series of conferences featuring the top visionaries in the mobile space who will examine the disruptive nature, promises and challenges of the rapidly evolving mobile payments industry.
“We have developed the agenda to focus on the most advanced and value-added developments within mobile payments. This has resulted in over threefold audience growth since our Inaugural event last October,” comments SSN CEO, Aron Barkan. “This illustrates that contactless payments is not just a trend, but will soon become a ubiquitous and universally adopted global solution.”
Conference organizers note that senior executives should incorporate a sophisticated mobile payments strategy into their overall business plan. The World Payments Report 2011 projects that mobile payments will grow globally from 4.6 billion to 15.3 billion transactions between 2010 and 2013 – at a rate of 48.8 percent per year.
Additionally, a new study from Juniper Research has determined that the total value of mobile payments for digital and physical goods, money transfers and NFC (Near Field Communications) transactions will reach $670 billion by 2015, up 178% from the $240 billion estimated for 2011.
The two-day conference features best practice case studies, keynote presentations, panel discussion and networking sessions delivered by executives from leading companies such as Paypal, Google, Walgreens, Best Buy, Groupon, MasterCard, Bank of America, Nokia, The Home Depot, Polo Ralph Lauren, Jamba Juice, Discover Network, RadioShack, National Retail Federation, Barclaycard US, Citigroup, Verizon, National Restaurant Association, American Express and others.
For more information: Payment Innovations
Google Launches Mobile Wallet
In May Google announced its mobile wallet, which uses NFC for tap and pay, in collaboration with Citi, MasterCard, Sprint and First Data.
According to a recent blog post, Google is releasing the first version of the app to Sprint, so Google Wallet will be available on Sprint Nexus S 4G phones.
With the app, customers can pay with a Citi MasterCard credit card and the Google Prepaid Card, which can be funded with any of credit cards.
Osama Bedier, Vice President of Payments wrote in a recent blog post that “Visa, Discover and American Express have made available their NFC specifications that could enable their cards to be added to future versions of Google Wallet.
Source: Official Google Blog
MasterCard Demonstrates Google Wallet for Mobile Payments
MasterCard demonstrated the Google Wallet application, which is scheduled to launch soon. Running on Sprint’s Nexus S 4G — with a planned expansion to multiple devices — users can connect a Citi MasterCard account to the service, and tap-to-pay at any retail location outfitted with a PayPass station.
The transactions take place as instantaneously as you’d expect, with spending alerts notated automatically in-app, as well as via text message. Currently, the Google Wallet service is Android-only, and that’s probably a direct result of the AT&T, Verizon and T-Mobile backed mobile payment rival, ISIS. [Read more…]
Bank of Montreal Launches “Tap and Pay”
BMO Bank of Montreal today launched its Mobile PayPass Tag, a technology that allows BMO personal credit card customers to make purchases through a sticker affixed to their mobile phone and receive an instant email verification of each transaction.
By making the PayPass technology available for use on mobile devices, consumers no longer need to carry cash or coin, or even a purse or wallet, with them to make small-dollar-value purchases. They can just tap their mobile phone over the PayPass reader at the point of sale and the transaction is instantly processed to their BMO credit card account. For purchases under $50, no Personal Identification Number (PIN), swipe or signature is required.
Through MasterCard’s inControl platform, BMO’s Mobile PayPass Tag users can easily monitor their spending by opting to receive email notifications that report the merchant and exact location of each PayPass purchase they make with their tag. The tag and email notification services are free to BMO MasterCard cardholders. PayPass technology is already embedded in more than seven million of BMO’s MasterCard credit cards. The PayPass tag for mobile devices simply makes using PayPass that much easier — you don’t even have to pull your card out of your wallet.
“We know that Canadians’ use of cash for smaller-value purchases is based on their desire to get in and out quickly when buying day-to-day items like gas, a quick lunch or a coffee,” said David Heatherly, VP, Payment Products, BMO Bank of Montreal. “PayPass is part of the movement toward a ‘cashless’ society. It’s faster and more convenient than cash or debit, which requires a swipe and PIN.”
Along with speed and convenience, PayPass tag users have the same zero-liability purchase protection and anti-fraud capabilities available on all BMO MasterCard products. And they can collect the same rewards that they earn on their BMO MasterCard credit card, which means PayPass users earn rewards on their total spend and collect more rewards faster.
Merchant Acceptance of PayPass Technology Growing Quickly
“Canadians tell us they prefer simplified, electronic payment methods. Given the prevalence of smartphones, and a quickly expanding network of PayPass merchants, we think mobile PayPass is poised to take off as a popular payment method for Canadians,” said Scott Lapstra, Vice President, Emerging Payments, MasterCard Canada.
According to Mr. Lapstra, PayPass transactions account for nearly 10 per cent of all MasterCard credit card transactions in Canada, with the average PayPass transaction at just over $40 – and close to 50 per cent of those transactions being for purchases of $25 or less.
Research Report: 2011 Contactless Near Field Communication (NFC) Mobile Payments
Javelin Strategy and Research has release a new report entitled “2011 Contactless Near Field Communication (NFC) Mobile Payments: Framing Mobile Payments on the Foundation of Mobile Banking.”
Mobile payments have been the source of much excitement for over half a decade, with the latest focus being on near field communication (NFC) payments, which uses short-range wireless technologies to allow a consumer to tap or wave a supporting mobile phone to complete an in-store payment.
Late 2010 experienced a flurry of NFC-related mobile payments announcements, detailing pilot initiatives from numerous financial institutions (FIs), payment networks, mobile phone carriers, technology giants, and third-party developers.
Despite this activity, mobile contactless/NFC is a payment option that is battling limited availability of contactless-ready merchant terminals and mobile technology, as well as low consumer demand. In order to ensure the greatest opportunity for success, FIs should integrate NFC mobile payments with their existing mobile banking platform. Javelin data shows that mobile bankers are the prime financial demographic to jumpstart mobile payments, and FIs should promote the service accordingly.
Primary Questions
- What is the current state of the contactless payment market, and how has it changed from recent years?
- What are the key drivers preventing consumer adoption of contactless payments?
- How should FIs integrate mobile contactless pilots within their existing financial infrastructure, and who should the target demographic be?
- What are some of the current NFC programs in market today?
- What is the demographic makeup of today’s contactless payment population, and how can that information be utilized to boost mobile NFC adoption?
- How can FIs establish the value proposition of NFC among merchants, in an effort to increase merchant acceptance of the service?
Report Index
- Overview
- Primary Questions
- Methodology
- Executive Summary
- The State of U.S. Contactless and Mobile Commerce
- The Consumer Roadmap to Mobile Payments
- Mobile Banking as the Springboard for Mobile Contactless Payments
- Demographic Trends – Who Are the Likely Mobile Contactless Users of Today?
- Mobile Contactless Payments: The Proverbial Chicken and the Egg Dilemma
- Appendix
- Related Research
- Companies Mentioned
Table of Figures
Figure 1: Mobile Payments Ecosystem
Figure 2: Percent of Consumers Who Indicate That They Are Open to Using a Contactless-Enabled Card or Device, 2007-2010
Figure 3: Key Drivers Preventing Contactless Adoption, by All Consumers
Figure 4: Consumer Adoption Roadmap to Mobile Payments
Figure 5: Likelihood of Storing Credit or Debit Card Information on Mobile Phone to Complete a Mobile Payment, by Mobile Bankers and All Consumers
Figure 6: Factors That Drive Contactless Use, by Mobile Bankers and All Likely or Current Contactless Users
Figure 7: Last Time Made Purchase Using Mobile Device, by Mobile Bankers and All Mobile Phone Owners
Figure 8: Frequency of Mobile Purchasing in the Past Month, by Mobile Bankers and All Mobile Phone Owners
Figure 9: Average Mobile Purchase Amount, by Mobile Bankers and All Mobile Phone Owners
Figure 10: Desirability of Mobile Phone Functionality, by Frequent Mobile Bankers, Mobile Bankers (Past 90 Days), and All Mobile Phone Users
Figure 11: Likelihood of Using Mobile Contactless, by Gender, Generation, and All Consumers
Figure 12: Likelihood of Using Mobile Contactless, by Ethnicity and All Consumers
Figure 13: Likelihood of Using Mobile Contactless, by Smartphone Owners, Standard Mobile Phone Owners, and All Consumers
Figure 14: Likelihood of Responding to Mobile Marketing Coupons or Promotions, by All Mobile Contactless Users and All Mobile Phone Owners
Figure 15: Percent of Consumers Who Have Used Particular Contactless Payment Devices, 2009-2010
Figure 16: Likelihood of Using a Contactless-Enabled Card or Device, by Mobile Bankers and All Consumers
Figure 17: Average Times Per Month Consumers Use a Particular Payment Option Per Month for In-Store Purchases
Figure 18: Likelihood of Using Mobile Contactless, by Income and All Consumers
Figure 19: Likelihood of Using Mobile Contactless, by iPhone Owners, BlackBerry Owners, and Android Owners
More information: 2011 Contactless Near Field Communication (NFC) Mobile Payments
How ISIS Consortium Screwed Itself Out of Mobile Payments Market
There has been a huge scrum amongst the smartphone players to capture the market for phone-based purchases. In a very surprising move, the major US-based carriers simply gave up. Isis, the mobile payment system sponsored by Verizon, AT&T and TMobile, announced that it had signed deals with Visa, MasterCard, American Express and Discover to its touch and go payment systems.
Why are US carriers not going after this incredibly lucrative market?
There’s actually a very simple reason. Payment providers require trust, and the US carriers decidedly do not have their customers’ trust.
Read more, via VentureBeat.
MNO’s Collaborate to Establish Hungarian Mobile Wallet Association
Hugary’s Magyar Telekom, Telenor and Vodafone have joined with three market leading operators–MasterCard, OTP Bank and SuperShop–to establish the Hungarian Mobile Wallet Association. The aim of the Association is to design and articulate recommendations for mobile NFC service standards in Hungary, and to submit proposals towards the successful implementation of the service.
Designed to operate over very short distances, Near Field Communication is a wireless switching technology, which facilitates contactless communication and exchange of data between two or even several devices over a secure channel.
The use of contactless bank cards (e.g. PayPass) through the mobile phone constitutes only one pillar of the service. Equally important are other features such as loyalty cards, coupons, travel and entrance tickets, etc. Services that are based on NFC technology are capable of ensuring new and highly attractive customer experiences through their speed, ease of use, innovative features and the possibilities provided by the large and interactive screen of the mobile phone.
This united move of Hungary’s MNOs may help establish Hungary among the first countries where mobile NFC services are launched in Europe.
Source: Hungarian Mobile Wallet Association
Mobile Banking Markets and Opportunities Report Announced by Research and Markets
Research and Markets has announced the release of a new report, entitled “M-Banking Markets and Opportunities.”
Mobile banking refers to a client-server system that is specifically designed for mobile devices, allowing banking customers to use handheld devices to access their accounts, pay bills, authorize fund transfers, or perform other activities. Like many other m-commerce services, mobile banking services can be challenging and no single company has all the expertise required to develop and deliver compelling services on its own. This report evaluates the mobile banking ecosystem and mobile banking solutions including mobile payments, provides a SWOT analysis for Visa and competitors, analyzes solutions for Visa’s weak points, discusses mobile banking implementation, and evaluates the market, applications, and methods. [Read more…]
Younger Generation Will Drive Demand for Mobile Payments
Increasingly, technology is changing what we consider possible, from unlocking a car from inside the house to recording a movie remotely. With this evolution, the mobile phone has become the most important technology accessory, with younger generations fueling this movement.
Consumers are now poised for the next step – using their smartphones as mobile wallets, according to a new survey by MasterCard Worldwide. The study, conducted by Kelton Research, shows 62 percent of Americans who use a mobile phone would be open to using their device to make purchases wherever their errands may take them.
“Consumers are already living a mobile lifestyle so using their phones to make payments on a daily basis is a natural next step,” said Mung-Ki Woo, group executive, mobile at MasterCard Worldwide. “2011 is the beginning of the NFC mobile payments era, and consumers are eager to get their hands on the first commercial deployments in the U.S.”
Defined as a mobile generation with its pulse on digital trends, 18-34 year-olds are particularly ready to take their transactions to the next level:
- According to the study, 63 percent of 18-34 year olds would be at ease using mobile phones to make purchases versus those age 35 or older (37 percent).
- Consumers ages 18-34 (65 percent) feel more naked without their phones than their wallets, compared to 34 percent of those in the 35 and older group.
In a separate 2010 survey conducted by MasterCard Advisors, respondents under 30 years of age showed this demand has also been building for the past few years. This group is increasingly hungry for mobile payment options and access to their funds:
- Between 2009 and 2010, respondents showed a 67% increase (15% in 2009 to 25% in 2010) in the number of purchases made with their mobile phones.
- In this time period, this audience also increased their daily mobile phone access to their bank’s online banking service by 79% (14% in 2009 to 25% in 2010).
Perception is Important
This growing willingness to use a mobile phone for payments supports the role mobile phones play as a reflection of personality, and consumers’ desire not to carry a traditional wallet. According to the study, consumers value mobile phones not just for the functions they can perform, but for what they say about them too. Over half (54 percent) of respondents think that someone’s phone is more telling of their personality than their wallet.
“When credit and debit cards were first introduced, consumers welcomed the improvements they made to the speed, convenience and reliability of transactions,” said Woo. “Now with the mobile wallet ready to revolutionize this experience again, consumers have even more to gain as their phones take on additional functionality and value in their lives.”
Gender Divides How Consumers Evaluate Mobile Payments
As the mobile wallet goes mainstream, gender will play a role in how it’s perceived and used. While men see their phones as functional necessities, women take a more personal approach to their mobile devices. According to the survey, men tend to be more willing to use their phones for payment transactions, and they perceive the transactions in a positive way:
- More men than women (51 percent vs. 40 percent) who have a mobile phone would be at ease using it to make purchases.
- More men than women (49 percent vs. 45 percent) would be impressed by someone who paid a bill with a mobile application than with a credit card.
While women are slightly more conservative about mobile phone purchasing decisions, they highly value the content stored on their phones:
- Women more so than men (50 percent vs. 36 percent) feel more exposed without their mobile device than their wallets.
- Of women, 45 percent (vs. 34 percent of men) would rather have their phones than their wallets surgically attached so they’d always remember them when leaving the home.
Trust and Privacy are Critical to Consumer Comfort
Despite reliance on mobile devices and general consumer readiness for mobile payments, the survey revealed that overall safety is a significant comfort factor in the decision to pay by phone. Nearly two in three respondents (62%) said they need confirmation that their personal information is safe in order to be comfortable making a transaction, underscoring trust and privacy as paramount factors in changing payment behaviors.
Survey Methodology
The MasterCard Mobile Survey was conducted by Kelton Research between April 15th and April 22nd 2011 via email invitation and an online survey. Quotas are set to ensure reliable and accurate representation of the total U.S. population ages 18 and over.
Source: Business Wire