Obstacles to Mobile Payment Implementation

Mobile payments are set to revolutionize how consumers pay for goods and services at retail locations. These payment methods will also revolutionize how merchants can accept payments. In July of 2011, Juniper Research predicted that the dollar total of mobile payments would nearly triple between 2012 and 2015. However, 2012 is well underway and very few merchants have made a move to adopt mobile payment technology. 

A few large retailers are experimenting with mobile payments but have not committed to a standard. Coming close is Office Depot, who has teamed with PayPal Mobile to allow customers to pay with their telephone number instead of a traditional credit card or debit card. Even though this is not technically a mobile payment, it is a step in that direction. 

The lack of merchants who have installed mobile payment systems comes down to two factors: cost and support. Many merchants are wary of investing in mobile payment terminals because they view it as an out-of-pocket expense with few obvious benefits as no standard has yet been set. Making an investment in mobile payment terminals that may become obsolete in the next year or two does not make sense to merchants whose customers seem quite satisfied with the traditional plastic card/magnetic strip system.

The large credit card companies are working to solve the problem of standardization by pushing for a system known as EMV. EMV is a system for chip-based contact and contactless payments sponsored by EMVCo, which is operated jointly by Visa, MasterCard, American Express and JCB. MasterCard and Visa are spearheading efforts to create a roadmap and timeline for the implementation of the EMV standard, and credit card issuers, merchant account providers and merchants are beginning to fall in line.

The successful implementation of mobile payments will also depend on the cooperation of mobile phone manufacturers and consumers. To date, limited mobile phones on the U.S. market come with an NFC chip preinstalled. And, it’s estimated that NFC acceptance is present on only one percent of merchant countertops today. It is unlikely that consumers will choose a phone they do not particularly like just because it has an NFC chip. Phone manufacturers are expected to begin resolving this problem by 2013, but once the new phones are available, it will still be up to consumers to use them. This may prove difficult because while the major credit card companies are pushing for chip-based payments, they are not pushing specifically for mobile payments.