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Mobile Payments Already Huge in Some Markets

Jason KohnBy Jason Kohn, Contributing Columnist

In fact, mobile payment systems are already enormously popular in some parts of the world, but you might be surprised at where. Leading the mobile payment revolution: Kenya.

I wrote last year about the M-Pesa mobile banking and payment system, launched by network operator Safaricom in Kenya and Vodacom in Tanzania. According to Lindsey Gilpin of TechRepublic, M-Pesa now serves 17 million Kenyans, and 25 percent of the country’s gross national product flows through the system. Worldwide, Gartner estimated mobile payments to surpass $235 billion in transaction value and 245 million users last year, led by emerging markets in Africa and India.

So mobile payments are maturing fast, just not in the North America. According to a 2013 report from the U.S. Federal Reserve, just 12 percent of U.S. consumers surveyed had made a mobile payment during the previous year. Sara Angles wrote about this surprising technology lag in BusinessNewsDaily last October. Citing a global study by SAP, she noted that “the United States reported the lowest consumer demand for mobile commerce, with just 53 percent of those surveyed expressing a desire to make a purchase via mobile.”

Just 15 percent of North American consumers said they were ready to buy more with mobile devices, compared to more than 80 percent in Asia Pacific, Latin America, and Africa.

So what’s the story? Why is the United States lagging so far behind?

A Fractured Marketplace

There are a number of factors. Brett Nuckles of BusinessNewsDaily identifies several of them, including lack of consumer awareness, security concerns, and lack of a clear and compelling benefit for consumers to use a smartphone instead of a credit card. As SAP’s Diarmuid Mallon  told Angles, mobile payment-attrib=soctech“In the U.S., hype around the technology has created a complicated, disparate landscape of mobile commerce solutions, and has, in turn, failed to educate consumers about the benefits of mobile services and slowed adoption.”

The U.S. mobile payments market is also still fragmented, with three large players vying for dominance: Google Wallet, Isis (a mobile wallet system jointly owned by Verizon, AT&T and T-Mobile), and Merchant Customer Exchange (MCX), which was recently launched by a consortium of major U.S. retailers including Wal-Mart and Target.

Mobile payment systems won’t become entrenched in the United States until retailers who must install and use them are confident they’re working with the right partner. And at present, the major players are still battling it out. GigaOm’s Kevin Fitchard details some of the sordid story, writing:

While Isis spent years getting its act together, it fended off competition from Google by simply banning Wallet from NFC transactions on their smartphones. Google finally got around it in its latest OS, KitKat, which allows mobile apps to bypass the secure element in Isis smartphones.

That spat, however, not only hindered Google Wallet’s traction, it probably set the already nascent smartphone payments industry a year or two back…

U.S. retailers are also unsure about which mobile payment technology will prevail. Isis and Google Wallet, for example, rely on Near Field Communication (NFC), a secure short-range wireless technology. MCX, as well as some retailer-specific systems like Starbucks’, are based on apps that generate barcodes, which are then scanned.

If it seems like there’s a big name missing from this list of market players, there is. Apple could make major waves in this space if it makes its own mobile payments push. And it should be noted that iPhones don’t support NFC. As Ben Zigterman writes at, “Retailers are unlikely to put their muscle behind a payment option that the most popular phone in the United States does not support. While Android may have higher marketshare than iOS, iPhone users are typically wealthier and more willing to spend money.”

Change is Coming

Eventually, these questions will be answered. In the meantime, many American businesses aren’t waiting around. Wendy’s just announced that 5,800 of its locations are now ready to accept mobile payments, and Burger King plans to launch mobile payment at 7,000 locations nationwide. At Starbucks, mobile payments now account for 14 percent of in-store transactions.

So maybe the tide is finally turning for mobile payments in the United States, and we’ll finally catch up with the rest of the mobile payment world. It may not be as exciting as a trip to Disney World, but it will be fascinating to watch how the North American market develops.

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  1. Hi! I know this is kind of off topic but I was wondering which blog platform are you using for this website? I'm getting fed up of Wordpress because I've had issues with hackers and I'm looking at options for another platform. I would be awesome if you could point me in the direction of a good platform.

  2. That is amazing that Kenya is the main player in the mobile payment market. In several industries I believe that the mobile market will grow rapidly due to its convenient capabilities.

  3. Jason, your stories about the rise of M-Pesa have been fascinating. But maybe we shouldn't be too surprised that a developing nation like Kenya, with its huge population of un-banked citizens, became a global leader in mobile-enabled finance. Greek philosopher Plato was credited with first using the proverb "necessity is the mother of invention" -- which clearly can be applied to this market development scenario. Kenyans had a compelling need to make payments or transfer money with their mobile phone and Safaricom had the savvy leadership that could think beyond the more typical notion of what it means to be a mobile network service provider. In contrast, I remember back when a few forward-looking people in North American mobile service providers suggested that it would be a good idea to provide SMS interconnection services so that subscribers of one carrier could send a text message to a subscriber on another carrier. Did you know that in the early days of global SMS market development that North America had less that one percent of the worldwide text message traffic? Here's the eye-opening editorial that I wrote a decade ago Some U.S. telco executives had serious concerns about the potential impact of texting use on their voice revenues, and as a result the SMS market developed very slowly in America. Today, texting is a huge cash-cow for U.S. mobile network operators. Enough said.

    • Absolutely David! It shouldn't surprise that many of the most interesting tech innovations are happening in developing economies. Smart people using the tools at hand in new ways to solve pressing problems is a recipe for groundbreaking ideas. You'd think that a lot of the things we've covered here--mobile payments, mobile micro-insurance, mobile health services that rely on basic cell phones--could be put to good use in many communities in the US and Europe.