Despite the heightened activity around mobile payments, there are still too many unresolved questions for it to have mainstream success this year, an analyst said.
While the "mobile hype factor" will remain high with numerous pilots taking place, "we don't expect any real winners to emerge this year," Tien-tsin Huang, an analyst with J.P. Morgan Securities, wrote Friday in a research note on Visa Inc.
Visa, as well as MasterCard Inc., is in a good position to stake out its turf in new mobile payments systems given the credit card network's expansive relationships with banks and merchants, Huang wrote. For mobile payments to take off, he said he believes a system must be "interoperable" with the existing infrastructure.
Visa and MasterCard already are working on pilots in the U.S. through a relationship with DeviceFidelity Inc., a technology company that provides memory cards with built-in payment functionality. Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and U.S. Bancorp have said they are working with Visa on pilots. B of A is also working with MasterCard.
The major challenge hindering mobile payments is a lack of merchant terminals that can handle near-field communication payments, experts say. NFC chips allow devices to transmit information, such as payment data, when they are nearby. Of the 8 million U.S. merchants that accept Visa and MasterCard cards, fewer than 150,000 are "NFC ready," Huang wrote, adding that it would require an investment of at least $5 billion "for this payment form to take off."
