Mobile phone payments set to increase

The use of mobile phones as a payment alternative to cash, checks or credit cards looks set to increase significantly. In order to assess the mobile payments market, KPMG conducted a global online survey of 970 companies between the period of September 2010 and February 2011.

Mobile payments are evolving rapidly and changing the way consumers and businesses operate. As technology and telecommunications companies roll out mobile payment applications and services, mobile strategies are beginning to transform existing business models in a number of sectors such as banking and retail.

The nature of mobile payments' transformative effect depends significantly on a country's state of economic development and the existing payments infrastructure.

In emerging economies, mobile payments will accelerate the pace, scale and reach of commerce by enabling electronic transactions and displacing cash.

In developed economies, mobile payments will transform the chain of commerce beyond payments, but in order to do so, will have to reach a level of convenience and availability on par with today's alternatives.

In every market providers will need to overcome potential security concerns. Mobile payment business opportunities are complex due to an abundance of new and existing players from multiple industries, but the stakes are high: billions of dollars in transactions.

This survey reveals that the payments model is evolving and mobile is enabling a business transformation for services firms, telecom providers, technology vendors and retailers across the globe.

Companies across these industries share a common outlook regarding many aspects of mobile payments. Specifically:

Mobile payments will matter

The majority of companies surveyed 58 percent have a mobile payments strategy in place today, and half of those are already offering a mobile payments service.

Telecom providers are the most likely to have a strategy in place, followed closely by financial service companies.

Mobile payments are preparing to go mainstream Nearly one in five respondents say that mobile payments are very important today. But the majority 54 percent believes that, while mobile payments will be reasonably important in the future, today they are in their infancy.

Most companies we surveyed assess that it will take two to four years for mobile payments to move into the mainstream in their primary region of business. KPMG believes that exploding smartphone growth, new applications, and economic opportunities will grow mobile payments at a much faster rate than our respondents anticipate.

Mobile payments will take multiple forms. We asked respondents to assess five forms of mobile payments m-wallet, m-banking, contactless card systems, online payment systems and carrier billing.

Respondents identified m-banking and online payments systems (such as PayPal, Boku, Obopay) as either mainstream today or likely to gain traction.

While KPMG believes that these forms of mobile payments will all gain some traction, our view is that m-wallets is one of the most exciting and promising payment opportunities. M-wallets provides the momentum to move beyond payments to participate in the entire chain of mobile commerce from brand awareness to consideration, followed by after-sales loyalty and care.

Convenience and availability will drive success. Whether assessing the supply or demand side for mobile payments, respondents agreed that these two factors are the key advantages.

Respondents recognize that convenience and availability are critical requirements in changing consumer behaviour.

Security is the prime impediment. No surprise, certainly, that security is critical where customers' money is at stake.

However, we believe that convenience, availability and ease of use are fundamental to the success of an activity as basic and widely adopted as payment.

Consumers will not adopt new payment solutions each time they encounter a new merchant.

Companies participating in the mobile payments ecosystem may overestimate their ability to make mobile payments as convenient, ubiquitous and easy to use as current solutions. In doing so, they risk failing to deliver on the promise of mobile payments.

The mobile payments ecosystem will be rich and dynamic. Irrespective of which industry the respondent's business is in, they believe that many other industries will play an important role.

Financial services firms and credit card companies will be the most influential, followed closely by telecom operators.

While companies deem technology companies and retailers less influential, new business models driven by these sectors are changing the game at a fast pace.