PARIS — Retailers' slow rate of deploying technology will challenge the adoption of new mobile payments systems.
Industry executives predict that in 2011 several system trials will be expanded, potentially moving into commercial availability. But consumer use of the services could be limited by the pool of merchants equipped to accept the payments, experts said this week at the Cartes & Identification conference in Paris.
Retailers that already have contactless card terminals will be compatible with many of the systems being tested in the U.S., though the number of such merchants is relatively small.
For example, about 83 million cards worldwide are equipped with MasterCard Inc.'s PayPass contactless technology, which lets people tap their payment card instead of swiping it, according to James Anderson, the vice president of mobile for the Purchase, N.Y., payments network.
However, only about 265,000 merchant sites worldwide can accept its contactless cards, he said.
"We push on both sides of the market," Anderson said during a panel discussion here Thursday. "We're always looking for increased terminalization and also increased [contactless card] issuance."
Selling consumers on mobile payments is only one of several steps needed to advance the technology, analysts have said. There must also be merchant participation to drive adoption.
MasterCard and Visa Inc. executives have said setting up retailers with readers that can handle contactless cards and contactless payment stickers are one way to prime the market.
"We made a conscious decision to start with cards in order to drive the terminal deployments," Anderson said. "We think there's a whole education experience the consumer has to go through before they get to paying with their phone, with [the technology] embedded in their phone."
The major payments networks made a push to set up merchants with contactless readers several years ago; it has primarily been large national retailers that have deployed them.
Some retailers, such as Best Buy Co. Inc., have even disabled certain contactless card payments because they can require higher interchange fees than some magnetic-stripe transactions. This, combined with little marketing by the banks that issue the payment networks' cards, has resulted in slow adoption of the technology.
Anderson said retailers are "very excited about mobile" payments, which may prompt those that have resisted installing contactless terminals to do so.
Overall, Anderson and other panelists said they are confident that mobile payments, particularly those based on near-field communication technology, will gain traction next year based on recent developments.
In the U.S., Visa is testing a system with Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and U.S. Bancorp using microSD memory cards that can be inserted in certain cell phones. The system works with merchant terminals that already accept Visa's payWave contactless cards.
MasterCard has said it is planning a first-quarter trial using similar technology with a large U.S. issuer.
In November, AT&T Inc., T-Mobile USA and Verizon Wireless announced they are developing a mobile payments system called Isis that is to route transactions over Discover Financial Services' network. The system is to rely on phones with embedded NFC chips.
Several countries, including France and Korea, have made progress on mobile payments systems, moving into commercial availability in some markets.
"All of the different pieces of this giant jigsaw puzzle are finally" coming together, said Mung-Ki Woo, the vice president of electronic payments and transactions at Orange, the wireless carrier that is part of France Telecom SA and offers mobile payments services in several countries.
Getting banks on board, at least in the U.S., is also a challenge.
Banks, especially large ones, are often slow to deploy technology because of the potential risks.
"Taking a new technology and bringing it into the banking industry happens about every one or one and a half decades," Anderson said.
