Citi, the first major bank to evaluate mobile transfers, has determined that even the people most likely to consider their phones a useful way to send money are still years away from embracing the technology.
The banking company began testing mobile person-to-person transfers in 2008, but quietly shuttered the program in December, concluding that consumers are only now starting to understand the capabilities of their increasingly sophisticated phones.
"The market just isn't ready for it yet," Jeff Semenchuk, a managing director and head of Citi growth ventures, said. "U.S. consumers are now just getting comfortable with using their mobile phone for a lot of things."
For mobile transfers, "the demand is not yet explicit."
Citi is still committed to the concept, and is even an investor in the company that pioneered mobile transfer technology, Obopay Inc. It has also been an early mover in other forms of mobile payments. It has run extensive tests of handsets with built-in contactless payment components that can be used to make purchases at the point of sale — something Semenchuk said is on a "parallel but, I would say, converging" path with P-to-P payments. Citi also has a joint venture, Mobile Money Ventures, with the South Korean wireless carrier SK Telecom Co. Ltd. that could help it gain a foothold in mobile payments overseas.
But, Citi learned, a "massive national scale" will not be reached "overnight," Semenchuk said. "We all wished for that. It didn't happen. That's not necessarily a disappointment because we learned a lot."
Numerous financial companies are offering or developing mobile transfer services, but Aaron McPherson, a research manager for payments at the Framingham, Mass., research firm IDC Financial Insights, agrees that few people are clamoring for such capabilities.
"I realize these are new services," he said, "and maybe next year we'll see a much bigger number, but as yet, we do not have any data that I'm aware of that will give us confidence that this is going to be a volume application."
Semenchuk would not say how many users were attracted to its test of Obopay's transfer technology, or how much money was moved, but he did say it was a statistically significant number.
Semenchuk said that the program provided an important glimpse into what are likely to be the most compelling payment scenarios when the U.S. is more eager for mobile payments.
One key finding: The oft-repeated concept that mobile phones are the ideal way to split a dinner check? That ain't it.
Instead, "the one that really came out and we saw a lot of usage around was parents giving their kids allowance via Obopay," Semenchuk said.
"Up to half" of trial users used Obopay for this purpose, he said; people dividing a restaurant tab were a much smaller minority.
Citi also learned that payments are not, in the minds of consumers, a stand-alone product, he said. The allowance scenario worked because the funds wound up in an account tied to a prepaid card, for example, and consumers who want mobile account access want to do more than just make payments.
Another hurdle was Citi's requirement that at least one of the users have an existing Citi account, which Semenchuk said limited its appeal. For mobile payments to take off, "lots of banks need to participate," he said.
Semenchuk would not predict when Citi would again test such a service, but was certain that it's "when" rather than "if."
