IMGCAP(1)]
Person-to-person funds transfers and mobile payments at the point of sale are still a ways off in the United States. But mobile banking has a role to play for consumers, according to speakers at SourceMedia's ATM, Debit & Prepaid Forum in Chandler, Ariz. (SourceMedia publishes Prepaid Trends.)
In the United States, 262.7 million consumers subscribed to wireless services as of the end of June, according to estimates from CTIA - The Wireless Association, a nonprofit organization representing wireless communications companies. This translates into a large number of potential mobile-banking and payments customers, according to speakers at the conference. But technical hurdles, security concerns and lack of merchant acceptance mean mobile banking will remain a niche product for the near future.
Mobile banking in the United States and other countries with developed payments infrastructure will be important for providing information about transactions, Elizabeth Buse, global head of product for Visa Inc., said in a keynote address Monday.
When Google Inc.'s Android phone launches later this month, Visa will have three applications available for the phone.
One will offer alerts, another will offer consumers the opportunity to sign up for merchant offers, and the third will be a locator service that will enable consumers to find the closest merchant making an offer and the closest Visa-enabled ATM to wherever they happen to be, Buse said.
This is an example of how in the U.S. mobile banking "will be mostly a value-added channel to provide information about a payment instead of replacing the payment itself," Buse said.
Mobile banking will be an important for prepaid both in the near future and long term, Paul Tomasofsky, president of Two Sparrows Consulting LLC, an electronic payments consulting firm based in Montvale, N.J. In the near term, it will provide such services as balance inquiries, activation notices and marketing services, Tomasofsky says.
Once mobile payments are more widely accepted, Tomasofsky, who is also the chief operating officer of the Network Branded Prepaid Card Association, predicts that gift cards will be loaded onto mobile-phone chips, and companies will encourage stored-value gifts on phones because it it cheaper than selling cards.
"It costs money to put cards on J-hooks," Tomasofsky says, so loading funds onto a mobile phone "cuts your expenses substantially."
Getting payments applications onto consumers' mobile phones is difficult because most of the major wireless-communications carriers operate on different, closed software systems, Jeff McLaughlin, executive vice president of mobile strategies for Monitise Americas, said during a mobile financial services workshop Oct. 5. Although text messages can be sent to virtually all phones, the text message system is not secure enough for mobile payments, McLaughlin said.
But the arrival of the Android phone later this month may help change all of that because the phone runs on an open system for which anyone can design applications.
"Once those phones start spreading across carriers, it will be interesting to see what happens," McLaughlin says.
Globally, the role of mobile banking and payments will be determined by how advanced a country's payments system is, Buse said. In such advanced countries as the U.S., Canada and Australia, replacing the current infrastructure will take time and mobile banking likely will be a value-added informational service, she said.
In countries such as Japan, where some electronics payments technology exists, but it is not as widespread, mobile payments, where the phone is used at the point of sale, will serve to complement cards, she said.
In countries like Senegal, where 4 million consumers have mobile phones, but not many have bank accounts, mobile payments will leapfrog past more developed countries and likely become more widely accepted than cards or other forms of electronic payments, Buse said.
Though mobile banking likely will come in the form of text messaging information such as balances to customers first, that does not mean payments companies are idle when it comes to mobile payments.
For example, the San Francisco Bay Area Rapid Transit District worked with First Data Corp. of Greenwood Village, Colo., and VivoTech Inc. of Santa Clara, Calif., to test contactless payments from mobile phones for transit rides and fast food purchases. According to a release on Monday, 80% of 230 consumers who tested the Near Field Communication phones said using the phones to ride transit was easy. Vivotech said that the participants took about 9,000 trips during the trial, which ran from Jan. 28 to May 30, and topped up their balances more than 800 times.
Additionally, Monitise Americas, a joint mobile banking company launched by Monitise PLC and Metavante Corp., plans to begin offering person-to-person mobile payments in the first quarter of next year, Lisa Stanton, Monitise Americas CEO, said in an interview at the ATM, Debit & Prepaid Forum Monday.
Initially, consumers will be able to transfer funds only to other consumers who use mobile-banking and payments services from banks on the Monitise system, Stanton says. The transfers will be from account to account, she says.
Monitise has about 40 banks and credit unions signed up to use its products and expects to add more by the end of the month, Stanton says. She says banks would set the fees for the service.
As mobile banking and payments grow, the number of consumers using it will encourage other financial institutions to offer similar services, Stanton says.
"Ubiquity is what is important" to increasing the use of mobile banking and payments, Stanton says.
The information that mobile banking can provide for prepaid cards might help lead to that ubiquity, Stanton says.
Mobile alerts can quickly provide balance and transaction information through the use of text messages to prepaid cardholders, which can help them budget and decide about making purchases, she says.
These messages can help gift card holders keep track of balances and could become part of government benefit programs where recipients receive benefits on prepaid cards, she says.
Even so, Red Gillen, an analyst with Boston-based consulting firm Celent LLC, says he is skeptical that mobile payments will catch on any time soon with consumers because merchants do not accept mobile payments, and there is not a compelling advantage to mobile payments over other kinds of payments.
"What is it about a virtual card embedded in your mobile phone that will liberate you to spend more," Gillen said. "You have a card in your wallet-it works."
