Yesterday, Darcy Travlos of Forbes published an article in the 'Intelligent Investing' column in which she deliver valuable and relevant insights to the Mobile Payments discussion. Here's why:

The main obstacle to mobile payments adoption in the United States is the "security" issue. Travlos begins her article with a reference to the Harris Interactive and Billing Revolution Study which notes a significant drop in consumer security concerns. According to the study:

93% of U.S. adults (93%) own a cell phone, and nearly half of these adults (45%) think it's at least somewhat safe to make a purchase through their cell phone with 26% saying they think it's fairly or very safe to do so.

Read more...

Travlos adds context to this data by comparing it to data collected only 18 months ago:

Within two years, the iPhone debut and rapid consumer adoption of applications has introduced a brand new way to sell goods and services. Back in December 2007, Harris Interactive conducted a survey and found that 63% of cellphone users were "very concerned" about transaction security on a mobile phone. Within 18 months, sentiments had changed. This past summer, Harris Interactive and Billing Revolution released a new study and found that now 45% were very comfortable with mobile transactions.

Read more...

"...what's past is prologue." 

- William Shakespeare, and to a lesser extent, Visa Mobile

The last significant "leapfrog" event happened with cellular phone networks, and (as Visa suggests) it is happening again with mobile payments.  

Back in the early days of Cellular phones, the networks ran on a technology called AMPS (Analog Mobile Phone Service).  Tens of billions of dollars were spent bringing AMPS networks in major markets in developed countries worldwide.  

 

Then, a more efficient and less expensive technology was developed. Billions of additional dollars were spent in developed countries upgrading the outdated AMPS networks and paying for rights to use the airwaves (known as "spectrum licensing fees"). Then another, more efficient and higher quality technology was developed.  Then another, and another. 

During all of this redundant spending on the building and rebuilding of cellular networks in the developed world, most of the third world build no networks at all, largely because investors considered the technology unproven and patiently waited.  By the time the third world finally started building mobile phone networks, most of the industry agreed that GSM was the standard of choice. The term "Cellular" was being phased out faster than the outdated networks that the term represented.

[Map Source]

The result? As recently as 2005, the average mobile phone user in Africa had a mobile device and mobile service that was more advanced than the average mobile phone user in America.  

Is the same thing happening in mobile payments?  Absolutely.  Take a look at the work of MIT researcher Nathan Eagle. In an article by Janko Roettgers, Eagle's work is described:

According to Eagle, local incumbent Safaricom had started a minute-sharing service for its prepaid cell phone plans a few years back. The idea was to enable users to send minutes to family members in rural areas, who weren’t otherwise able to buy prepaid phone cards. However, Kenyans quickly came up with other uses. “Lots and lots of people were using it as a surrogate for currency,” Eagle said. “[You] could literally pay for taxi cab rides using cell phone credit.”

Safaricom realized a huge opportunity and started a mobile payment service called M-PESA. To call M-PESA a success would be an understatement, according to Eagle. “Within about a year, (Safaricom) became the biggest bank in East Africa.” Today you can use your phone to pay for cab rides and electricity, to get money out of ATMs without owning an ATM card or even having a traditional bank account.

Will your mobile phone service replace your checking account? Ask Mr. Eagle (or Mr. Shakespeare).

The industry emerging to support mobile payments (among other things) is called Near Field Communication and it will enable the mobile payments industry to be user friendly.

A recent analysis from Juniper Research of the NFC opportunity forecasts that:

...the application of NFC as a mobile retail marketing tool via coupons and smart posters will support the growth of NFC mobile payment transaction values from $8bn in 2009 to $30bn within three years. Such is the excitement about the potential of NFC, vendors are developing and launching a variety of interim solutions such as stickers and SD cards to get NFC to market faster on existing phones rather than new NFC enabled phones.

NFC report author Howard Wilcox stated: "Many people focus on the use of NFC for payments but in fact it is poised to revolutionise the way many people shop too. The ability to tap smart posters and receive coupons and product information also presents new channels to market for merchants. Whilst vendors see widespread availability of NFC phones in future, the jury is out as whether interim solutions will attract users or actually have a detrimental effect.” Further findings from the NFC research include:

• First NFC devices will be shipped commercially later in 2009 and the market will ramp up from 2011.

• NFC/Felica payments are already established in Japan but by 2014 North America and Western Europe will be experiencing high growth.

• By 2012, NFC global gross transaction value will exceed $30bn.

This technology can handle a wide array of products and services that are already popular with the US consumer such as app downloads, secure internet web pages, and many other smartphone functions. It is also an ideal platform to make your cell phone into a credit card with an integrated product.

Credit and debit card processors need to comply with Payment Card Industry (PCI) security standards. These are the standards that usually keep your personal data secure, except in the case of breach or fraud. So far, Cisco has products like adaptive wireless IPS (wIPS) solution that will monitor systems 24/7 to handle a component of PCI compliance, but the product that can provide possibly be expanded to an end-to-end PCI compliant mobile network, which seems to have eluded Cisco to date. Watch the Starent acquisition over time to see if it evolves; we will.

http://www.cisco.com/web/about/ac49/ac0/ac1/ac259/starent.html

With the launch of its MobilePASS product, TSYS has taken a step toward socializing the payments system.

What is a merchant? A store? A restaurant? A web site? Of course. What about a homeowner running a tag sale? A delivery person? A lemonade stand? It's possible, and not altogether impractical anymore.

MobilePass is a free app that requires usage fees. (So far, the exact usage fees are not published, but I will update this post when more is known.) What is known is this: TSYS clearly has the cost-conscious merchant in mind. Interchange rates are always lower when the card is presented to the merchant. TSYS' solution is the PayMate Pro 200 - an optional Bluetooth® magnetic stripe reader and thermal printer.

The value here is twofold: (1) MobilePASS works on cell phone, giving the US consumer another way to use the cell phone as a payments device, and; (2) allows an entirely new category of traditionally 'cash-only' transactions to move to electronic payments.

Read more at Reuters:
http://www.reuters.com/article/pressRelease/idUS106063+13-Oct-2009+BW20091013

Read More at Mobile Banker:
http://www.americanbanker.com/issues/174_197/tsys_debuts_acceptance_system_fo...

https://payments.amazon.com/sdui/sdui/business?sn=devfps/mps