Mobile Payments Chicken-Egg Problem Goes to Committee

While the promise of mobile payments still remains very much at the IOU stage, the Electronic Transactions Association on Thursday announced the formation of the Mobile Payments Committee, a task force that includes representatives from the four main U.S. carriers — Verizon, AT&T, Sprint and T-Mobile — as well as Google, Isis, PayPal, Verifone and Intuit.

The purpose of the committee is to develop a cohesive business strategy for the mobile payments industry, and to help legislators and regulators determine a mobile payments policy, while educating consumers and merchants about the benefits of mobile payments.

In other words, the committee aims to solve all the problems that have kept mobile payments from catching on in the U.S.

“Mobile payments represent a game-changing business opportunity for our industry, and ETA’s mission is to help our member companies succeed in this business,” said ETA Chief Executive Officer Jason Oxman.

“Our industry must work collaboratively to ensure that the regulatory and business environment promotes innovation and cooperation,” he continued. “As the trade association of the payments industry, ETA is the hub of activity in mobile payments, and our Mobile Payments Committee will help ensure that consumers and merchants have access to an efficient, reliable and secure mobile payments system.”

ETA declined to provide further details.

Not Getting Carrier’d Away

So far, the promise of mobile payments is more promise than reality, and whether this committee will meet the challenge has yet to be seen. One only needs to remember the proverb “a camel is a horse designed by a committee,” to see where this could go.

“We have been trying to jump-start this mobile payments business for several years. Every once in a while another major announcement is made,” said telecommunications analyst Jeff Kagan. “Each carrier, major banks, and assorted businesses have all tried. Still, it has not really taken off except for a few cases.”

However, this isn’t because mobile payments don’t have merit for the consumer, the merchant and the carriers. In fact, their adoption is likely just a matter of time.

“The future is about mobile payments,” Kagan told the E-Commerce Times. “It is successful in other countries. The USA is actually behind other countries. So it will happen. It’s just a question of when.”

This time could be the charm, especially as the players are finally sitting down and working it out. Whether the result is a camel or a thoroughbred has yet to be seen, but something will likely come of it.

“The purpose of this venture is to create a common, cross-carrier approach to mobile payments,” said Mark Siegel, spokesperson for AT&T. “We think this approach will speed the adoption and growth of mobile payments, much as cross-carrier messaging spurred the growth of text messaging.”

Why the Mobile Disconnect?

If everyone wants mobile payments to happen, the big remaining issue is what’s stopping it? The reason is actually one of infrastructure and adoption. Here it isn’t an issue of the camel, but rather the chicken and the egg.

“The big thing is getting the merchants and the carriers to build the infrastructure,” said Chris Silva, industry analyst for mobile at Altimeter Group. “If I go to the local deli, they may not have the infrastructure in place yet, so I can’t use my phone to buy a cup of coffee in the morning.”

Therefore what needs to happen is a three-step process that includes getting the infrastructure in place, getting more handsets that can support payment solutions on the market, and finally getting consumers to reach for a handset instead of a wallet to pay for that cup of coffee.

Only when those things happen, Silva said, will mobile payments finally succeed.

“There is the realization that people want this and that it is something that people will use,” Silva added.

Wild West and the Dark Horse

For now, the mobile payment space is akin to the Wild West — without order. It is made worse by the fact that while many of the largest players have come together, one wild card remains.

“The dark horse is Square,” said Silva. “They’re looking to build their own mobile payment network. And it is still the Wild West on the consumer device side in terms of what devices will support mobile payments.”

Just as technology helped tame the real Wild West via the telegraph and railroad, technology will tame the mobile payments space via handsets that support NFC (Near Field Communication).

“Each player has tried to make this work in their own corner of the business,” said Kagan. “We have not taken a unified approach yet. Perhaps that is what is needed.”