Consumers are ready to use their mobile phones for banking and payments, but the market may be slow to develop unless the card networks can encourage more merchants to accept contactless transactions, according to research published this week.
Taken together, two reports are likely to prove disappointing to bankers who had hoped that investment in mobile banking applications would translate into returns through mobile payments.
The Dove Consulting unit of Hitachi Consulting said in a report Tuesday that it had found people were aware of mobile banking services, though only a few had used the technology to check account balances or review transactions.
Consumers said they liked the idea of using their mobile phones at the point of sale to make purchases, especially if the devices could transact on multiple accounts, said Chris Allen, a director at Dove Consulting and the head of its payments strategy team. Consumers said, "I can make those payments off my phone and not have to carry 15 cards around."
Two-thirds of consumers said that, of three mobile options, they were most interested in using mobile banking, and 30% chose mobile payments at the point of sale, Mr. Allen said. The results came from focus groups in several cities, he said in a study sponsored by PSCU Financial Services Inc., a St. Petersburg, Fla., credit union service organization that is the nation's largest.
Relatively few were enthusiastic about using the third option, making person-to-person payments through text messaging, he said.
But consumer interest is only half the issue. The independent research and advisory firm Aite Group LLC in Boston said in a report Wednesday that it estimates only one merchant in 200 is able to accept a contactless payment, and it projected that only 2.5% of merchants would be able to do so by 2014.
Aite senior analyst Nick Holland said that a slow rollout would inhibit the adoption of contactless and mobile payments.
Big card networks such as MasterCard Inc., Visa U.S.A. Inc., and American Express Co. have subsidized the installation of contactless terminals at some merchant sites — mostly gas stations, fast-food restaurants, and drug stores — but typically only with flagship merchants, Mr. Holland said.
"Beyond that, there are no concessions being made," such as lower interchange rates for contactless cards, he said.
As a result, merchants must invest in additional equipment, only to find their profits consumed by card processing fees that are disproportionately burdensome on the low-dollar transactions where card companies hope to displace cash, Mr. Holland said. "It needs to be compelling at the merchant level," he said, "and it's just not there."
A MasterCard spokeswoman said the company has mobile payment trials and rollouts under way in 23 countries.
Just this week, U.S. Bancorp and MasterCard announced a contactless trial in Spokane, and the card company has mobile payments trials under way in global markets as diverse as Turkey and Mongolia, she said. "We've gotten some pretty steady traction," she commented.
The Aite report said that in the United States, contactless credit cards account for less than 1% of all credit cards issued to customers, and barely 3% of all debit cards have contactless capabilities.
As a result, merchants have little incentive to invest in the contactless terminals that would enable payments through a mobile phone, Mr. Holland said.
"There's a big disconnect between mobile banking and mobile payments," he said. "Mobile banking is extremely easy to do. Mobile payments are extremely difficult to do" because of the number of intermediaries who must be involved, including not only mobile operators who might seek to be compensated but also the manufacturers of the equipment.
Mr. Allen agreed that contactless payments would only see wide acceptance when big-box merchants, such as Wal-Mart Stores Inc. or Target Corp., install the scanners broadly.
"The business case has to be there. It either speeds up the throughput at the register or it saves them some cost," Mr. Allen said. "When it comes to return on investment, they haven't seen it yet, or otherwise they would have done it."
