The Hype of Mobile Payments
14 April 2012
There is a growing trend of companies playing fast and loose with the "mobile" descriptor. When these folks talk "mobile" payments, sales, etal., readers/listeners are guided to the assumption that any statistics given are solely for smart phone transactions. Which is not true.
"There are a lot of people talking about mobile payments these days."
John Donahoe, 2012
"I do not think it means what you think it means."
Inigo Montoya, The Princess Bride (1987)
By example, eBay paid writer Richard Brewer-Hay stated, "eBay Inc. anticipates continued growth in mobile sales and payments in 2012 as shopping on smartphones and tablet devices." Qualifying "mobile sales and payments" are not only smart phones.
So what is a "mobile" or "mobile payment"?
A standard definition of mobile payment:
"Any payment where a mobile device is used in order to initiate, activate and/or confirm this payment can be considered as a mobile payment. This definition includes a wide palette of approaches, and points out the fact that mobile payments do not restrict themselves to payments via the mobile phone but virtually any mobile device such as a smartphone, PDA, tablet PC or even merchant-operated mobile terminals."
IEEE Symposium on Trends in Communications (SymptoTIC '04), 24-26 October 2004, Bratislava, Slovikia.
Or if you prefer United States based and short:
"Mobile Payment - Payment initiated from a mobile device."
Mobile Payments in the United States
Mapping Out the Road Ahead
Federal Reserve Bank of Boston, Federal Reserve Bank of Atlanta, BetterBuyDesign, March 25, 2011
Now a few are asking, 'smart phone, mobile, what's the big deal?'
It's a matter of choice to be completely factual, or choosing to be fast and loose with the details.
"we live in a mobile home. That's a cave that goes places. Only we never went anyplace." Alex Rogan
"A mobile cave that never went anywhere. Fascinating." Grig
The Last Starfighter (1984)
The Merriam-Webster definition of mobile is, "capable of moving or being moved".
By this definition, some companies are loosely telling the truth about "mobile". While that definition of "mobile" is an excellent means of inflating numbers, it is misleading.
Again by example, selected at random a link to point-of-sale (POS) mobile terminals:
These are POS devices that use cell phones for connectivity. As written for one device, "mobile payment processing through your 3G/3GS/4G iPhone".
Note they state "mobile payment processing", i.e. mobile payment.
By one standard definition, these are "merchant-operated mobile terminals".
Let's suppose you're small warehouse seller Acme Widgets. With these mobile devices, in 2011 you processed $1 million in credit card transactions. Acme Widgets could state factually, mobile payments in 2011 reached $1 million. Or state they processed $1 million in transactions through smart phones. Even though they processed zero customer initiated smart phone payments.
Anyone with similar portable, read mobile, POS systems can make the same claims. It's truthful, but nevertheless inflating the mobile payments numbers.
By the way, next time you're shopping at a brick-and-mortar, check out the wireless POS devices. Wireless systems are considered Merriam-Webster mobile. Like your wireless mobile laser printer.
You might ask, 'why bother massaging numbers, mobile payments are huge.'
"eBay's global mobile GMV reached $5 billion in 2011"
Richard Brewer-Hay, 11 January 2012
$6.0 trillion - 2011 total volume of transactions
While we believe in the future mobile payments will be huge, as a percentage of eCommerce and Commerce today, they are rather small.
The figures for eCommerce as a percentage of total Commerce:
This percentage tracks rather well with numbers from a handful of brick-and-mortar stores:
- "Online share of sales at big brick-and-mortal retailers
- 8.7% Sears
- 7.2% Macy's
- 2% Target
- 2% Walmart"
In the case of Walmart, "2011 online sales amounted to less than 2 percent of its $264 billion in U.S. revenue".
Let's shrink the pie further.
The figures for United States mobile payment/m-commerce:
- In the US, m-commerce revenues are expected to hit $6 billion by the end of 2011, growing to $31 billion by 2016, according to Forrester Research (June 2011).
- But m-commerce will only be 2 percent of e-commerce in 2011 and 7 percent of e-commerce in 2016.
- The average annual spend on mobile purchases was US$300.
Worldwide the numbers are:
Yes that would be United States eCommerce is 5.5% of Commerce. With m-commerce being 2% of that 5.5%.
What should you take away from this article? The next time you see someone waving a smart phone and saying $Blahblah "mobile", look for the specific dollar amount breakdowns attributed to smart phones and other devices by region.
Bet you won't see any.
"In 2011, PayPal's net total payment volume, or TPV, for transactions using mobile devices reached $4 billion"
eBay INC Form 10-K, 31 January 2012
"U.S. financial institutions have not offered mobile financial payments because of a perceived lack of a good business case, although the growth of mobile banking implementations and recent mobile payment trials signal this may be changing."
Federal Reserve Bank of Boston, Federal Reserve Bank of Atlanta, 25 March 2011