Research Shows Mobile Payments Will Become Critical Hub in Bank/Consumer Relationship - Brief Article

Information Superhighways Newsletter, July, 2001

Mobile payments, the ability to make payments for goods or services via a mobile device, will begin to show significant adoption globally as wireless industry hurdles are overcome and consumer demand rises. New research from TowerGroup shows that by 2005 the number of US mobile payments users is expected to rise to 3.5 million and that mobile payments will become a critical hub in the bank/consumer relationship. Financial institutions can reap significant rewards in the years to come by making inroads into in-payments now. Highlights of the research include the following:

- Mobile payments, which TowerGroup defines as a subset of mobile or m-commerce, are payments conducted via an end-user's mobile telecommunications network. A mobile payment may be charged to a user's debit/credit card, drafted from a user's bank account, charged directly to a user's telephone bill, or deducted from a pre-stored value on a user's mobile device.

- Progress to date in the development of mobile transaction capabilities such as payments has been sluggish, encumbered by such issues as security, connectivity, and device limitations. These limitations have been more pronounced in the US, where mobile infrastructure and consumer device adoption still significantly lag Europe and Asia.

- Over the next 18 months these obstacles will begin to be relegated to a backseat position. This will generate an opportunity for financial services institutions to leverage their strong consumer relationships and satisfy a growing demand for payments-related mobile services.

- By 2005, TowerGroup expects the number of mobile payments users in Europe and Asia to rise to 26.2 million and 28.8 million respectively.

- The US will not boast comparable levels, with mobile payments still seriously hampered by the market effects of standards and network fragmentation. There were only 38,000 users of mobile payment services in 2000 -- mainly early adopters in beta test groups. TowerGroup expects that by 2005 the number of US mobile payments users to rise to 3.5 million.

- The challenge for US banks will be to position themselves to participate in wireless payments without making irrevocable commitments in a market that is still in very early stages -- and therefore unpredictable.