Game of Darts: Timing Mobile Wallet Adoption Gets Wonky

Ready 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 PYMTS.com, 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 Amazon.com — 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.