A new ABI Research survey shows interest in using cell phones to make payments, but concerns about security and costs.
Posted Jan 9, 2008
U.S. consumers are intrigued by the idea of using a cellphone to make in-store payments, although few are familiar with the underlying technology, according to a new report from ABI Research. The "contactless payment" approach involves near-field communications technology that allows a user to complete a transaction by waving a phone at a sensor, rather than swiping a magnetic-stripe card. As a handful of trial contactless payment systems have gone online, the convenience factor has drawn interest, but consumers remain wary of security issues and don't necessarily want such systems linked to their existing credit cards, according to ABI.
Contactless payment "is something all the major players in the wireless and credit-card industr[ies] are looking at," says ABI principal analyst Jonathan Collins, and the results of the survey provide insight into what consumers are looking for in the service. The Web-based survey involved more than 1,000 people in the U.S. ranging in age from 14 to 59, the majority of whom had never heard of near-field communications technology -- on a five-point scale, "familiarity" scored a two. Once respondents had heard about the possibilities, however, more of them expressed an interest; for those respondents, "interest" scored a three out of five, according to the report.
One notable finding in the survey was that people did not appear interested in having a phone-based payment system connected to an existing credit or debit card. Up to this point, most trial programs for contactless payment have been based on the idea that consumers would want multiple payment options -- or, as Collins puts it, "the same number of cards on your phone as you have in your wallet." The report's findings reveal, however, that respondents predominantly preferred having a single, separate account for making purchases, one unique to a given phone.
That reflects a desire for simplified management, so that payments made with a phone don't get mixed up with existing bills, Collins says. Since contactless payment isn't a service that consumers will request from their credit card companies, "there is a capacity for new entrants, separate brands, and products geared toward these payments," according to Collins. That could include options from existing companies geared specifically to phones, or the emergence of entirely new players that specialize in mobile payments.
The security of such systems is at the forefront of consumers' minds, Collins says: "That's understandable -- we're talking about people's money and how they manage it." That sentiment sends a message to companies pursuing the technology to make security a top priority. The survey results also contain evidence of concern on the part of consumers about the payment structure for such services -- i.e., whether certain locations would require a fee, or if cellphone companies would charge extra for the capability. Most trials so far have been free and have not yet experimented with pricing, Collins says, but with a handful of ongoing trials, the survey provides food for thought.
"You're going to see the first small deployment rollouts in the second half of this year," Collins predicts, citing issues such as revenue-sharing and technological architecture that need to be worked out. An ABI research study last year estimated that worldwide demand for contactless hardware, software, and related services will reach more than $1 billion by 2012, up from just $260 million in 2007.
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