How Mobile Will Affect Plastic Card Use Is Still Unclear

LAS VEGAS–Will mobile phones replace plastic payments cards?

Industry observers asked and attempted to answer that question when Near Field Communication-based mobile payments launched in countries such as Japan and South Korea.

But thanks to Google Inc., Isis, Starbucks Corp. and PayPal Inc., the mainstream media and consumers are beginning to ask the same question about mobile payments in the United States.

The answer, at least according to panelists here at SourceMedia Inc.’s annual ATM, Debit & Prepaid Forum, remains unclear because the U.S. mobile-payments market is just emerging. SourceMedia publishes PaymentsSource.

Panelist Bastian Knoppers, senior vice president of card personalization at Fidelity National Information Services Inc., or FIS, defended the honor of cards, while Soren Bested, managing director of Monitise Americas, defended mobile payments.

Any payment form must meet certain criteria to succeed, Knoppers said. Consumers have to trust the issuer, and the form factor must have a strong business case, the interoperability consumers are accustomed to with cards, cash and checks, and be reliable and dependable, he said.

Indeed, consumers are wary of storing payment card credentials inside a phone, research has shown (see story). Moreover, the business-model issue, such as who owns the consumer account and how transaction fees are shared amongst different players, still remains unclear, and contactless card readers are not abundant among merchants. And what happens when a consumer attempts to complete a mobile payment and the battery dies? Knoppers asked.

Knoppers also jokingly suggested that mobile payments could be dangerous, showing the audience a slide depicting a sticker at the gas pump warning consumers to turn off battery-powered devices before refueling. The next slide showed a car on fire after it exploded.

Bested was not as extreme in his defense but did provide some recent research from France-based Cap Gemini S.A. showing a 49% increase worldwide in mobile payments last year from 2009. He also noted that ABI Research Inc. predicts that 85% of U.S. point-of-sale terminals will accept contactless payment by 2016 and that some research has predicted there will be 100 million NFC phones worldwide by the end of the year.

Mobile is just beginning to meet Knopper’s criteria for success, Bested said.

Perhaps most important is that consumers are beginning to see the value. “We’re getting to the point where there is something in it for the consumers,” Bested said. “We are seeing the convergence of loyalty and coupons in payments.”

U.S. Bancorp, which is piloting a number of different mobile and contactless-payment initiatives, remains unsure how things will play out, noted Kevin Morrison, the bank’s senior vice president of retail payment solutions and prepaid business manager.

“U.S. Bank believes the race [between mobile and cards] is still too unrefined at this point,” Morrison said during the panel discussion.

The bank’s mobile-payment pilot, however, “was very close to how we envisioned commercial mobile payments,” Morrison said (see story).

U.S. Bank is refining its mobile-payments offering before launching it to a wider audience, he added.

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