Visa Says Mobile Payments Won't Hit Mainstream for Two to Three Years - Will Google Now and Apple's Siri Prove Visa Wrong?

In a C/Net report today Visa claimed – or acknowledged – that mobile payments utilizing NFC-equipped terminals and smartphones will require at least two – three years before the public is likely to embrace the idea. Visa, who is a serious player in the space (among other credit card vendors), along with Google, soon Apple, and Isis (a wireless carrier-driven partnership between AT&T, Verizon, and T-Mobile USA) have been working to make mobile payments a reality for some time. But the process has been slow, and current results of their collective efforts strongly suggest that consumers are simply not ready to embrace mobile payments any time soon.

Using smartphones to make payments on the fly however, may not simply be a matter of consumers not ready to embrace it. It is more likely due to the fact that there simply aren’t enough NFC-enabled (Near Field Communications) phones out there and not nearly enough retailers moving to install the necessary NFC-based checkout hardware. There isn’t enough “convenience” spread out across enough large scale retail ecosystems yet to cause consumers to make the necessary across-the-board demands for change.

For retailers – whether large, small or independent – the rule currently remains in play that “if it ain’t broke, there’s no need to fix it.” Meanwhile, vendors such as Square make it easy enough for small and independent vendors to use their own smartphones to accept credit cards from virtually anyone (consumers remain perfectly happy with using credit cards), leaving little incentive for these vendors to add mobile payment capabilities based on NFC and smartphone swipes.

Consumers also remain skeptical relative to the security of such seemingly simple mobile transactions, and remain for the most part completely unaware of the complex underlying technologies that make smartphone-NFC transactions significantly more secure than handing over a credit card. No one worries when they swipe a card at the local supermarket or use a credit card to buy gas, or hand a credit card over to a Square customer/vendor – yet the smartphone-NFC transaction will prove more secure. We believe that significant convenience will dominate over security issues however – once that convenience becomes available.

Visa suggests that consumers are simply unaware of the available and emerging capabilities, and to some extent this is true. But the consumer remains unaware primarily because of lack of opportunity, not lack of desire for a more convenient means of making payments. This lack of opportunity in turn is driven by the retailers, who are not ready to commit in numbers that will make a difference. Japan and South Korea, for example, have enthusiastic mobile payments users – but that is only because these countries have many both more consumers with NFC-enabled phones and numerous retailers providing the necessary POS (Point of Sale) hardware.

Apple and Google - Critical Keys to Mobile Payments

There is a case to be made that to some degree the fact that Apple has yet to build NFC into the iPhone may be a key roadblock to adoption – there is a great deal of truth in believing that as Apple goes, so too goes the advanced consumer. The new iPhone that will launch this coming fall will very likely have NFC built in. This is hardly a surprise as Apple has already announced an iOS 6 feature it refers to as Passport that will no doubt make use of NFC to enable mobile payments (among a number of other things). Is there any doubt that Apple’s stores will then quickly become mobile payment centers of excellence? Of course they will. Microsoft, albeit through a far smaller number of stores, will follow suit.

Apple will also enable a great deal more functionality through Siri and as this functionality becomes real consumers will begin to develop much closer ties to and reliance on their iPhones. Siri will likely become a proactive partner in the mobile payment process – and will do such things as ask users if they would like to go ahead and make a mobile payment. That is an example of convenience that begins to emerge that consumers will quickly become aware of and that in turn will drive consumer demand – retailers will have no choice then but to comply.

Similarly, Google Wallet, which to date has not been adopted in anything other than trivial numbers, will get a boost from Google Now, which Google has built to better understand its users. In essence we’re talking about a learning engine that is smart enough to take certain leaps of logic to connect different ideas and proactively (or at the user’s request) suggest what a user should do. There is no reason a Galaxy Nexus or Galaxy S III running Google Now can’t ask users if they would like to make mobile payments.

There is no denying that mobile payments will begin to gain real momentum at the high end of the smartphone marketplace – but the trickle own effect, we predict, will happen quickly, inside of one – two years. Google and Apple – we will also drop Microsoft’s name here – will make it happen sooner than later.

We need to note here that Visa is certainly not holding back on marketing mobile payments. As the C/Net report points out, Visa is using the Olympics to make a major marketing statement of its own. The company has hooked up 140,000 NFC-enabled payment terminals in London, which includes 5,000 London taxis and 3,000 POS venues at the Olympics. In addition Visa is handing out several thousand Samsung Galaxy S IIIs to athletes and other high profile people to test out the mobile payment service.

Visa, however, is an infrastructure company for the most part – everything it does happens behind the scenes (excluding of course the obvious piece of end user plastic) – it isn’t what excites users. Apple, Google, Microsoft, Samsung and so on, on the other hand, interact directly with users – and that is what will make the difference between consumers remaining passive about mobile payments or quickly beginning to make demands for it. 2013 will be a very interesting year for mobile payments, and Visa will be more than pleased if its own adoption prediction turns out to be wrong.

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