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Will you be paying by credit, debit, or smartphone?


Analysts at research firm eMarketer say they are expecting “proximity payments” (i.e. using your smartphone as a payment method at point of sale) to total US$640 million in 2012. While this might still be far from industry-changing, it reflects a growth of 280% over last year.

That rate of growth will continue in 2013, but, of course as the base gets larger, so mobile point of sale monies (MPOS) will be worth US$2.1 billion in 2013.

There is a journey to follow over the next few years …

Largely, these first phases of proximity payments are experimental for many early adopters of the technology. They probably will be making low-ticket item purchases — and not likely in any formulaic or regular way.

This year, eMarketer estimates about 8 million people will have tried the method of payment. But it’s a start — and the start of a steep, upward trend.

By the time we get to 2014, it is reasoned that people will start feeling a lot more comfortable with paying for real-world goods with their smartphones and will find a definite, trusted, and large infrastructure in place to support it all.

eMarketer says that the tipping point will come when consumers begin using the method of payment for routine and larger items such as groceries, petroleum, and dining out.

And while it is difficult to estimate exactly how big proximity payments might reach if people really do replace their credit cards with mobile device payment methods, eMarketer sees the market growing to a staggering US$24.4 billion in sales in 2015 and US$62.2 billion by 2016.

What is peculiar, perhaps, is that the research firm is projecting the share of smartphone users employing proximity payments at just 26%. So, it could actually be much higher.

Growth is reliant on a number of factors, including greater ease of use and the widespread acceptance among vendors. But the industry will also need to provide some convincing added value for consumers to see this as a great jump beyond simply swiping their credit card.

eMarketer points out that it has built into its model the expected emergence of near field communication (NFC) “contactless methods of payment.” Banks, for instance, such as Barclays here in the UK, are only now starting a test of NFC-based payment systems.

Meanwhile, companies like PayPal and others have established varying ways of using smartphones to make (or receive) payments. Pizza chain Pizza Express, for example, now accepts payment for dining out via their app using PayPal.

The researchers point out there is a real risk of clutter. Both consumers and vendors may have no clear market leader or standard to adopt for quite some time, as the stakes are so high and no one company or technology is going to concede ground easily. 

Interesting times ahead but one thing is certain: The concept of people (our readers) making payments via mobile phones is now a reality and one that will increase substantially in the medium period ahead.

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