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    Gartner: Mobile payments growth is slower than expected

    More than 140 million people will use mobile payments services of one type or another this year, but Gartner believes mass market adoption of NFC payments is still at least four years away.

    Gartner

    GARTNER: 'Favourable conditions are no guarantee of success'

    More than 141.1 million people will use mobile payments services in 2011, up 38.2% from 102.1 million people a year ago, according to a new report from Gartner. The value of payments made via mobile devices has also increased by 75.9% over the last year, from US$48.9bn in 2010 to $86.1bn in 2011.

    Despite these increases in mobile payments users and the value of payments sent via mobile devices, however, Gartner says the mobile payment market is growing more slowly than expected.

    “In developing markets, despite favourable conditions for mobile payment, growth is not as strong as was anticipated,” says Sandy Shen, research director at Gartner. “Many service providers are yet to adapt their strategies to local requirements, and success models from Kenya and the Philippines are unlikely to be translated to other markets. While developing markets have favourable conditions for mobile payments, such as high penetration of mobile devices and low banking penetration, this is no guarantee of success unless service providers adapt their strategies to local market requirements.”

    “Companies are trumpeting the prospects of NFC without realizing the complexity of the service model.”

    In developed markets, “companies are trumpeting the prospects of near field communication (NFC) without realizing the complexity of the service model. We believe mass market adoption of NFC payments is at least four years away,” Shen adds. “The biggest hurdle is the need to change user behavior by convincing consumers to pay with mobile phones instead of cash and cards.”

    “Thanks to the success of mobile application stores, such as Apple’s App Store, and the efforts in driving mobile sales by major retailers, such as Amazon and eBay, merchandise purchases far outweigh other use cases in developed markets, which include North America and Western Europe. We predict that in 2011, merchandise purchases will account for 90 percent and 77 percent of all transactions in North America and Western Europe, respectively.”

    Money transfers and prepaid top-ups will continue to drive transaction volumes in developing markets, Gartner predicts. In Eastern Europe, the Middle East and Africa, these two services will account for 54% and 32% of all transactions in 2011.

    • ed

      “While developing markets have favourable conditions for mobile payments, such as high penetration of mobile devices and low banking penetration, this is no guarantee of success unless service providers adapt their strategies to local market requirements”

      I believe this is the key statement that American-based ventures are failing to understand about NFC. There is only a certain urban demographic that fits the “high penetration of mobile devices” and “low banking penetration” in the USA. This same demographic already using NFC for public transportation here in America and already know how to “top off” and be mindful of their balance.

      With that said, my field research has led me to conclude that mobile phones will be the secondary, not primary driver of NFC. I believe and strongly believe NFC-enabled cards (or even RFID enabled phone charms) will drive NFC initially and NFC mobile phones will be accepted afterwards in developed markets.

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