Year in review 2011: Mobile commerce explodes into the mainstream

The trend: Mobile commerce transformed from possibility to reality in 2011--a growing number of consumers are regularly completing purchases, redeeming coupons and comparing prices via mobile device. The numbers speak for themselves: More than a million merchants now accept credit cards via Jack Dorsey-led startup Square's mobile payment application, and the firm now processes $11 million in total transactions each day, up from $4 million a day in late July. Almost 12 months after Starbucks launched mobile payment services across the U.S., customers have completed more than 26 million mobile transactions; at the same time, digital marketplace eBay is on pace to close more than $5 billion in mobile-enabled transactions by year's end, and the company's PayPal subsidiary is expected to handle more than $3.5 billion in mobile payments.

"Our perspective on mobile is that it's not incremental, it is another screen in the shopping experience," eBay president and CEO John Donahoe said during October's Open Mobile Summit event in San Francisco. "It's a consumer that is coming back more frequently and shopping more because now it can be done at any time of the day. We know it is driving consumer engagement and customer value."

But 2011 wasn't simply the year that consumers embraced mobile commerce--it was also the year that the various pieces of the m-commerce landscape (e.g., retail purchases, person-to-person payments, marketing, coupons) began to come together to create multi-faceted user experiences that could ultimately spell the demise of the conventional leather wallet. First to market: The Near Field Communications-based Google (NASDAQ:GOOG) Wallet, which enables consumers to make purchases and collect or redeem offers by tapping their Android smartphone at 300,000-plus MasterCard PayPass-enabled merchant terminals. In the months since the service launched, Google introduced support for SingleTap, which enables consumers to redeem coupons and/or earn rewards points with one tap of their smartphone. The digital giant also is partnering with the state of New Jersey to enable tap-and-pay rail and bus transit purchases at select locations.

Google Wallet's biggest threat, Isis, doesn't even begin consumer trials until early-to-mid 2012. But there's serious brand muscle behind the m-commerce network: Founded by Verizon Wireless (NYSE:VZ), AT&T (NYSE:T) and T-Mobile USA in late 2010, Isis welcomed financial services providers Visa, MasterCard, Discover and American Express to its ranks in July. In addition, six device manufacturers--HTC, LG, Motorola Mobility (NYSE:MMI), Research In Motion (NASDAQ:RIMM), Samsung Mobile and Sony Ericsson--have committed to introducing devices that support the Isis platform. Like Google Wallet, Isis is looking beyond contactless payment services to support retailer loyalty card programs, coupons and offers and related promotions. The battle between the two services is already shaping up as one of the biggest stories of 2012.

Why it was significant: Mobile payments for digital and physical goods, mobile money transfers and NFC-enabled contactless transactions will almost triple from $240 billion in 2011 to $670 billion in 2015, Juniper Research forecasts. The firm credits the accelerating adoption of mobile ticketing, NFC contactless payments, physical goods purchases and money transfers in both developed and emerging markets as the catalysts behind the expected growth, adding that the number of mobile money users will double by 2013.

The fight to control this lucrative future began in earnest in 2011. Beyond traditional mobile powerhouses like Google and the Isis triumvirate, the m-commerce segment also made room for desktop powers (e.g., eBay and PayPal), retailers with proprietary solutions (Starbucks) and innovative startups (Square). It's too early to call which companies and technologies will win out, but a massive payday awaits.