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Customer Experience and Design

Mobile Payments and the Importance of Critical Mass

I hear a lot of bloggers and pundits speak of the increasingly important target market for mobile payments.  After all, the media coverage and social conversation around the topic of mobile payments has reached a fever pitch, and some wonder whether it’s worth all the hype.

For example, I was reading the article “What’s missing in remote mobile payments?” late last week.  The author starts us off by defining the mobile market:

  • 3/4 of the world’s population have access to a mobile phone
  • Only 3% of people use mobile phones to receive money
  • 2% use mobile phones to pay their bills

So Why All the Hype?

The question remains if the market is strong enough to support all of the investment we see growing exponentially in the mobile payment space.  Would the majority if those making payments even venture to use their mobile phones for these transactions?  Is the target market big enough to support the investment?

My question is this: did we ask the same about credit cards?  Even now only a smidge over 50% of the US population has a credit card.  That number decreases still when you take into account the world population.  However, there are countless enterprising businesses out there that were able to build profitable models in the credit card industry.

Mobile Payments Aimed at Prime Targets 

As I mentioned in my post last week “Holding on to Banking Customers in the Mobile Wallet Age“, of the largest consumer groups demonstrating an interest in mobile payments, and a willingness to leave traditional banks as a result, are young  and affluent consumers.  These two groups are incredibly important to the banking industry.   The threat is real.  While we are seeing 2-3% survey figures now, it is projected that 50% of today’s smart phone owners will be using their phones as mobile wallets as a preferred method of payment. These smart phones are more equipped to utilize user preferences, location, and rapid adoption of technology to organize real-time incentives, loyalty programs, and search and shop features that these customer groups find the most useful. They also provide customers with a systematic way to track and manage the terms and conditions of the offers they receive from each of their payment options.

Ultimately, I’m keenly interested in what happens in the mobile payment industry.  I’d venture to say that many interests and organizations will saturate the market here in this early phase.  Ultimately a handful of winners that are able to capture the critical mass will prevail.

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