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If it seems like the mobile world has been talking nonstop about the potential for mobile payments all year, it’s because we have been. There are simply too many corners of the technology and financial worlds that want to see it happen, and even if consumers and retailers are skeptical, the credit card industry is convinced that it’s going to happen.
“It is clear to me that mobile and commerce are on a collision course,” said Dan Schulman of American Express in his Wednesday morning keynote address at CTIA Enterprise and Applications. Many have made the same point during a year in which mobile payments has been designated as The Next Big Thing, but few groups probably want it to happen more than credit-card companies, who would love to find a way for people to use their services for more and more of their transactions.
“We’re moving to a world beyond cash,” said Ed McLaughlin, Chief Emerging Payments Officer at Mastercard. “I do think this is execution against an inevitable.”
The motivation is simple. Mobile phones are so widespread in both the developed and developing worlds as to be in almost constant usage, and are often in one’s hand when waiting in line to purchase goods or services. If phone makers, wireless carriers, and payments companies are able to figure out how to turn those phones into credit cards, they stand to capture a bigger piece of the transaction pie that currently goes to cash or regular credit cards.
McLaughlin thinks that Mastercard’s work with PayPass is a natural jumping-off point for mobile payments, and Google (NSDQ: GOOG) is actually building Google Wallet on top of that service. After all, PayPass already uses the NFC (near-field communications) technology that many phone makers are starting to include in their devices.
But it’s never a good sign when companies promote products like PayPass but decline to provide hard numbers as to how many people are actually using the product. Laura Chambers of PayPal told attendees at GigaOm Mobilize last month that NFC payment processing was used extremely infrequently, and McLaughlin and Mastercard were unable or unwilling to produce any numbers to refute that notion.
It just illustrates how far credit-card companies have to go to get people to think of “tap-to-pay” as an alternative to swiping even when the chips are built into their cards. But such services are used more widely outside of the U.S., and Schulman thinks that the greatest opportunity for mobile payments might actually come from people who have yet to embrace credit cards, or even banks.
There are an awful lot of people around the world who are still treating cash as not just king, but as the only vehicle for their financial transactions, Schulman said. Yet many of those people have mobile phones, a legacy of how quickly mobile networks have sprung up where wireline networks never reached. There’s an overlap there that could allow people to gain security from not having to have so much cash in their possession while signing up for accounts that could allow them to also participate in e-commerce for the first time.
It’s an assumption that’s all too easy to make in the modern mobile world, the notion that something needs to take off in the U.S. first before reaching the rest of the world. Many have already forgotten (or simply never knew) how far ahead of the U.S. that Europe and Japan were in mobile technology before the introduction of the Treo and then the iPhone.
So while the obstacles to mobile payments may seem daunting in the U.S., the credit-card industry is quietly making things happen elsewhere. (Mastercard announced a mobile-payments deal in Dubai this week with Research in Motion (NSDQ: RIMM) and Etisalat, a wireless carrier in the Middle East.) Those regions will be the proving grounds for the question of whether consumers are ready to combine their phones with their wallets.
It’s a possibility the credit-card industry can’t afford to ignore.