Mobile Market Now Primed For Digital Money

The concept of digital money has been with us for quite sometime. The idea of getting rid of cash (or at least reducing its use) has been at the fore front of discussions within the retail and payment industries, as well as with governments. In a recently published study of the global digital money market, ARCchart predicts that the number of consumers paying for goods and services using NFC-enabled mobile phones will reach 588 million by 2015.

The idea of digital payments is simple but requires complex technologies to come into play. It also requires strong commitment from industry participants, governments, and consumers to make it happen. Only over the last few years has the use of card-based proximity payments (for example Paypass and PayWaves from Visa and MasterCard) begun to be noticed across the transportation and retail sectors in the developed world.

Focal Points:

• The limitations of credit/debit card-based contactless payment methods have during that short period of time become clear and the industry recognizes that the only viable alternative is to move payments into the mobile world. This has led to the development of projects based on Near Field Communications (NFC), which is regarded as the most suitable way of transforming mobile devices into a payment platform.
• The number of credit and debit cards in use around the world is expected to total 6.4 billion this year, but just 6% of these will be contactless. By contrast, the number of mobile subscribers currently sits at 5.5 billion and is set to reach 7.1 billion by the end of 2015. Furthermore, the distribution of mobile phones is more evenly shared between the poor and rich, and in most of the developing world phones often represent the only means of access to financial services through the use of mobile banking - M-Pesa in Kenya being a good example.
• The main challenge for industry participants is to develop an ecosystem which meets the needs of all participants. Previous attempts based on traditional telecoms and financial models have failed. This is what is hampering growth of the market.
• The embryonic nature of the mobile NFC market offers tremendous opportunities for companies to develop solutions that go far beyond transactions. Demand for smartphones is rising and NFC is forecast to be deployed in an increasing number of devices over the next 5 years - ARCchart's digital money research report forecasts that the number of NFC-enabled mobile users will reach 588 million by 2015. This leaves the field wide open for developers to bring to market solutions that meet the needs of the individual.

Experton Group believes that 2011 will be the year when industry stakeholders finally acknowledge the challenges that need to be overcome to fully commercialize NFC, and the companies best positioned to succeed will be those able to deliver contactless applications which enrich the transaction experience and are easy to use. The pace of evolution will differ from region to region based on the diverse need of users. For instance, a European user will not have the same need as one based in Africa. To that end, the market will see the emergence of new entrants from the Internet markets such as Google and Apple which will compete with existing mobile operators and financial institutions.