Mobile payments in 2013: Will it be user-driven or vendor-driven?
In the early 1900s, the burgeoning automotive industry created a sort-of gold rush, with a variety of players chasing a piece of this new market. With that, explained Yankee Group principal analyst of mobile money, Nick Holland, some players would fail, some would be acquired or vanish into the ether, and a select few would succeed.
The current state of mobile payments is also a gold rush, Holland said, and the product that scales the best for all, not necessarily the best technology, is the one that will succeed.
Indeed, mobile payments are already a multibillion-dollar industry.
Forrester Research issued new data predicting that U.S. mobile payments will climb to $90 billion by 2017, a 48% compound annual growth rate (CAGR) from the $12.8 billion spent in 2012. Last year Gartner predicted that worldwide mobile payment transaction values would surpass $171.5 billion in 2012, and Juniper Research predicted global Near Field Communications retail transactions alone will grow to $110 billion by 2017.
The way the mobile payment ecosystem is currently set up has most of the major players in one of two camps: vendor-driven or user-driven initiatives. The vendor-driven approach includes companies such as Square and PayPal, which offer devices to attach to a vendor's phone to process credit and debit cards. On the other side there are the user-driven mobile payment services like Isis and Google (NASDAQ:GOOG) Wallet, which incorporate mobile payments as a part of an ecosystem. With these, a business isn't forcing you to use this technology, rather it's another option to pay for items.
"One is when the phone becomes a surrogate for the card, and one is when the phone becomes a surrogate for the terminal," Holland said.
It's difficult to predict whether mobile payments will become the norm. The situation is further stymied by the fragmented nature of the ecosystem and the number of players vying for a piece of the market. Thus, it makes much more sense to compare the players to others within their own camp, and to look at whether that camp at large will succeed.
|Click here for a discussion of vendor-driven mobile payments (Square, PayPal)||Click here for a discussion of user-driven mobile payments (Isis, Google Wallet)|