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This article appears in the January 29, 2009, edition of ISO&Agent Weekly.
As consumer and merchant adoption of mobile payments grows, so do opportunities for ISOs to earn revenue.
ISOs interested in creating additional revenue streams around mobile payments can generate revenue by selling ancillary mobile-payments products and by preparing merchants for mobile-payment acceptance with updated point-of-sale terminals, state mobile-payment insiders.
Before revenue-generating possibilities arise from mobile payments, however, vendors must launch a national rollout of the technology and consumers must embrace it, one ISO says.
"Until the consumer leaves the piece of plastic behind, [mobile payments are] not going to get off the ground," says Sam Caine, president of Card Payment Services Inc., a Frisco, Texas-based ISO and processor.
Once consumers and merchants accept mobile payments, the possibilities grow for ISOs to sell mobile applications that complement mobile-payment technology, such as electronic coupons and rewards programs, according to Randy Vanderhoof, executive director of the Smart Card Alliance, a Princeton Junction, N.J.-based nonprofit association for the smart card-technology industry.
Mobile devices have high data-storage capabilities to store advanced merchant applications, such as electronic coupons and rewards programs, says Vanderhoof. "We are going to be seeing more types of alternative offerings becoming available on the market, which is all going to be a revenue opportunity for those ISOs that have the capabilities to offer them," he says.
Mobile payments likely will include multiple ancillary products that ISOs can sell, agrees Reetika Grewal, director of product marketing for ClairMail Inc., a Novato, Calif.-based company that enables customers to access their account information with any mobile device using short-messaging-service, or SMS, text messaging. ISOs potentially can sell loyalty and rewards programs or mobile-marketing services, she says.
Preparing Merchants
Preparing merchants for widespread mobile-payments acceptance is another potential money-making avenue. Most merchants are unable to accept mobile payments because there is "no national infrastructure" in place to accept them, says Paul Grill, a partner with First Annapolis Consulting, a Linthicum, Md.-based consultancy.
ISOs "should be talking to merchant customers about what the future holds and encouraging them to upgrade their investment now" so their clients are prepared to accept mobile payments, says Vanderhoof. In the process, ISOs can earn additional revenue from terminal sales and lease contracts.
Though eventually consumers will conduct a portion of their transactions using mobile devices, mobile payments will not be a "meaningful" portion of electronic transactions for a long time, notes Grill.
Mobile Use Spreading
The spread of mobile financial services is preparing consumers, many of whom have not embraced noncard-related payment methods such as contactless payments, to accept and use mobile payments for purchases at the point of sale, according to observers.
Getting consumers comfortable with using their mobile devices for banking is a "necessary evolution" to reach mobile payments, according to Lisa Stanton, CEO of Monitise Americas LLC, a Providence, R.I.-based provider of mobile-banking and mobile-payment services.
"We want to get everybody comfortable with thinking about doing something financial with their mobile device," says Stanton. "The short next step is mobile payments." With mobile banking, consumers use their mobile devices to transfer funds between accounts or check balances.
Mobile banking lays the groundwork for more-sophisticated transactions, says Grewal. "You can't just jump to mobile payments and expect people to understand the benefits of it. Mobile banking is the first step," she says.
Interest In Contactless
As consumer interest in mobile financial services and eventually mobile payments increases, interest in contactless payments also may increase, says Stanton. Part of the challenge of contactless-payment adoption has been convincing consumers that tapping a contactless-enabled device instead of swiping a magnetic stripe card is more convenient, she says. If consumers have access to more information or applications, such as account-balance information before payment, coupons or instant merchant-rewards programs, adoption may increase, she says.
"If you enrich the experience, consumers will adopt," says Stanton. "The challenge has been convincing the consumer that they cared whether they tap or swipe," she says. "We think mobile is the missing piece of contactless."
However, consumer data-security concerns surrounding contactless-payment transactions may be an obstacle for mobile payments as well, says Wayne Keddy, CEO of Granite Payment Alliance, a Roseville, Calif.-based ISO.
Consumer adoption is necessary for the success of mobile payments, yet consumers may be leery of using the payment technology because of data-security concerns, says Keddy. Merchant data breaches and the loss of consumer card data to fraudsters have increased consumer security concerns, "so how do you assure the public that if they use their cell phone to create a transaction that they are not going to be hacked into?" Keddy asks.
