Tech Leaders See Smartphones Replacing Credit Cards, Cash

By 2020, the majority of U.S. consumers will use smartphones to pay for goods and services, concluded a new study from the Pew Internet & American Life Project and Elon University.

The survey is unusual in that Pew queried tech stakeholders and leaders about the subject, as opposed to a random sample of the general population. Executives from such companies as Microsoft and Google were included in the mix, as well as professors and other thought leaders.

Whether that makes the study more or less predictive remains to be seen. What is clear, however, is that these industry insiders fully believe that smartphones will be a major form of transmitting payments within eight years.

Some sixty-five percent said that most consumers will have accepted the smartphone as a mobile payment device and will be comfortable using it to pay for items the way they use a debit card now.

Barriers to Adoption

Any hesitation to predict a rosy mobile payments future was generally due to outside factors rather than to doubts about the technology or consumers’ acceptance of it, Aaron Smith of the Pew Internet & American Life Project told the E-Commerce Times.

For example, financial services companies may not be so eager to move to this form factor.

“What a number of folks we spoke with argued is that incumbent financial service providers have a good thing going with the existing system of credit and debit cards, and there may be some reluctance by providers to move away from that nice revenue stream,” Smith said.

The respondents felt the necessary infrastructure would need to be ubiquitous, according to Smith. “If someone is going to feel comfortable leaving the house without a purse or wallet — just carrying a smartphone — he or she has to feel certain that everyplace will accept it for payment.”

A Chicken/Egg Issue

That’s an understandable cause for concern, said Kolja Reiss, managing director of Mopay.

“It’s the chicken/egg problem: merchants don’t adopt because consumers don’t use mobile payments, and consumers don’t adopt because merchants don’t support mobile payments,” he told the E-Commerce Times.

“The biggest barrier right now is that we still lack a solution in the marketplace which attracts merchants and consumers alike and drives adoption,” Reiss said.

Financial institutions aren’t likely to resist entering this space, however, in his view.

“Credit card companies and financial institutions don’t look at mobile payments as a threat,” Reiss said.

Rather, they realize that a mobile payment system could open up an opportunity for other players, such as Google — companies that could potentially end up being competitors.

“Accordingly, most credit card companies and financial institutions are actively engaging in internal and external discussions about launching a mobile payments solution,” Reiss said.

No Standards

“Mobile payment is one of those technologies that theoretically makes sense, but has run into implementation issues for quite some time now,” Azita Arvani of the Arvani Group told the E-commerce Times. “Will we be able to remove the obstacles by 2020? Maybe — but it will be a slow, uphill road.”

A major problem is that there are no de facto standard systems in mobile payments yet, she said.

Approaches vary dramatically from vendor to vendor, with some embracing near field communications and other preferring proprietary systems.

“Merchants, as well as consumers and various other stakeholders, are left to decide which camp they should belong to,” Arvani pointed out. “This fragmentation slows progress down.

Real-Life Case Study

Many of the questions as to how to approach these challenges will likely be answered — but most likely not in the Western part of the world, Arvani said.

The fastest progress in all of these areas is being made in developing regions, she said, where many consumers simply don’t have access to banks and credit cards.