Game of Darts: Timing Mobile Wallet Adoption Gets Wonky

January 23, 2013

mobile_wallet_adoptionReady to ditch your fake leather wallet and use your smartphone to pay when you’re out painting the town red? Not so fast.

Karen Webster, founder of, wrote at yearend 2012 that the ability to use smartphones for the majority of our transactions is likely “a decade at least” away.

That forecast might strike some as gloomy given the fast-moving and headline-grabbing payments space. Webster puts it this way:

Innovation in payments is a long journey from idea to ignition and adoption given the complexities associated with igniting innovation in payments… The two stakeholders who must ultimately adopt new payments innovations — merchants and consumers — have to be convinced that moving away from what they know and feel comfortable with is worth the effort… Getting to ignition — when there is a critical mass of consumers and merchants — just takes time.

Irving Wladawsky-Berger wrote in The Wall Street Journal last Friday that what sped adoptions of previous innovations was standards. Once everyone agreed that email addresses should be formatted as somebody@something.whatever, it became easy to reach other users at other institutions and email usage took off. Of course, standards mean some ventures will end up within the eventual standards and some will not. John Stewart and Jim Daly  described in the January issue of Digital Transactions  the inevitability of a mobile payments shakeout taking in place in “a year or two” — or perhaps five — as a result of these eventual standards.

The worldwide value of proximity mobile payments — that is, with the smartphone at the point of sale, rather than using the phone to place an order on — did not reach $1 billion in 2012, according to IDC Financial Insights, in a graph that appeared in Digital Transactions.

In a new report, Forrester Research puts mobile proximity payments at 4% of the mobile payments market, but expects that number to reach 45% by 2017.

Wladawsky-Berger goes on to describe how disruption takes place at the edges of markets and (if it’s good) works its way inward. Therefore, it’s the advances made in payments in the developing world and among the US’s underbanked population that should get our attention. Webster points out that payments innovation seems to be happening on top of existing card infrastructure, rather than beside it — or in a different sphere altogether. This means the changes are not that radical in terms of benefits for users and merchants, despite how tech companies producing payments apps for smartphones might feel.

Everyone agrees widespread usage of mobile wallets is inevitable — but from there all bets are off. The optimists say by 2014 mobile wallet will gain “ubiquity,” but Karen Webster prefers the 2020′s. Splitting the difference puts us around Forrester’s estimate of 2017. Mark your calendars.

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6 Responses to Game of Darts: Timing Mobile Wallet Adoption Gets Wonky

  1. Greg Cote on January 23, 2013 at 11:42 am

    I agree with Karen. Most of the technology developments that I have seen over my career have taken 10 years. Single Chip Systems, an early RFID company, landed its first customer in 1992. Walmart adopts RFID in 2003. Pacific Monolithics demonstrates the first Wifi card in 1991. Cisco buys Linksys in 2003. Geocities is founded in 1994 and later sells to Yahoo for $3.6B. Facebook hits 100M users in 2006. The time frame has more to do with the speed at which a large number of human beings try and then adopt something new than how cool the technology is. We only move so fast.

  2. Jeffry Pilcher | The Financial Brand on January 23, 2013 at 11:45 am

    It’s a real “chicken-and-egg” situation.

  3. Peter Vogel, CEO - Plink on January 24, 2013 at 12:25 pm

    I think it’s important to note that there is NOT a demand from consumers right now for mobile proximity payments. The current payment model (swiping credit cards) is NOT broken. It’s fast, easy, convenient, safe, and everyone already has credit cards. The mobile wallet providers will have to provide consumers extra utility or else adoption will fail much as it has for the tap-to-pay providers – Mastercard’s PayPass or Visa’s payWave. Consumers have not embraced these tap-to-pay models because there is almost zero utility. How much time does a tap vs. a swipe save? Almost none? What’s the added benefit to the consumer if they tap vs. swipe? Nothing. Why change your behavior for zero added speed or benefit?

    What will make the mobile wallet succeed (and I do believe consumer adoption will happen in the next 5 years) is value-added services – coupons, loyalty, personalized offers, etc… Consumers will only adopt the mobile wallet as a payment solution when there is a clear utility to doing so. Being able to make a payment is NOT a utility – that already exists. The winner in the space will be whoever provides consumers with the best rewards for using their products, whether that is discounts or some sport of loyalty program.

  4. [...] out in the crowded space. If mobile wallet adoption takes as long as some say — perhaps five or ten years — the round of mobile-wallet acquisitions by players such as Fiserv and FIS could take just [...]

  5. [...] manner. But technology is pervasive, and public ignorance is not expected to last long. As Phillip Ryan of Bank Innovation points out, “Forrester Research puts mobile proximity payments at 4% of the mobile payments [...]

  6. [...] [From Game of Darts: Timing Mobile Wallet Adoption Gets Wonky | Bank Innovation] [...]

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