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Mobile Payment Boasts Rosy Future, But Some Obstacles Remain in Play

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It's going to take a mix of customer reward programs and greater security efforts to drive mobile payment systems forward, but the outlook is rosy, with one research firm predicting mobile payments will account for $130 billion of worldwide consumer spending in just five years.

That spend point, predicted in a recent Strategy Analytics report, is equal to 254 million users making five mobile payments per month averaging about $9 each. Mobile payment vendors and service providers will have to do some work to hit that high note, however, as consumers are still a bit distrustful of the new spending approach and aren't likely to change from today's debit cards without some sort of incentive.

"The company or companies that are able to demonstrate the value of mobile payments to both retailers and consumers, beyond a simple like-for-like alternative for physical payment cards, will be able to drive mobile payments," analyst Nitesh Patel, author of the report, told Tech Times in an email interview.

The path to gaining mobile payment customers lies within loyalty and rewards programs. For example, Starbucks is driving customers to its mobile payment service by introducing rewards. Yet unlike some other mobile pay systems, Starbucks' app can only be used in its stores and no others, even though it taps near-field communication (NFC) technology like Apple Pay and Google Wallet, both of which can be used with whatever retail partner is using their payment system.

The Starbucks approach may change, though, if NFC point of sales systems eventually become ubiquitous. Right now, however, emerging payments systems, such as CurrentC from the Merchant Customer Exchange (MCX), do not use NFC. The reason is to avoid charging MCX merchants the charges tied to credit card fees. Apple Pay, for example, still allows the use of credit cards, which presents additional costs for merchants.

"MCX, through its CurrentC wallet, may be able to deliver this aforementioned combination effectively to drive mobile payments among its loyal customers -- e.g., those that have the apps of its members on its devices. While neither Starbucks or MCX is going the NFC route today, this is likely to change over time as NFC POS becomes ubiquitous," says Patel.

Beside the technology adaptions to come, retail merchants seeking mobile payments from customers are likely going to have to make it worthwhile for consumers.

"If mobile operators, Apple or Google wants to drive mobile payment adoption they should look to integrating offers and loyalty into their platforms and position to be 'retailer friendly,' " explains Patel.

That's because many customers will likely not switch to mobile payments when the payment system they currently use, such as a plastic card, works fine. Then there's also the dark cloud of mistrust by consumers surrounding mobile payments.

"Security will continue to remain a key barrier to mobile payments -- especially with people concerned that stolen phones can be used to make payments," Patel says, noting some solutions to the fear factor are already in play. One is the introduction of a biometric (fingerprint) security layer on the iPhone 6, for example. "That should certainly help to allay some consumer security fears."

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