NEW YORK (MainStreet) — How would you like to pay for your next purchase: cash, credit or cell phone? The answer, for many consumers, may soon be the last of these three options.
Cell phones have come to dominate American life in recent years, with virtually all adults in the country claiming to own at least one mobile phone. As their popularity has expanded, the functions they serve have expanded as well. Today, cell phone users don’t just make calls and send text messages, they also check e-mails, surf the Web, manage bank accounts and purchase goods.
Major banks like Chase and Bank of America (Stock Quote: BAC) have built smartphone apps to make it easy for customers to check balances, transfer funds and pay bills on the go. The rise of Web browsers on mobile devices like cell phones and tablets has made it possible for consumers to do their shopping online without having to use a desktop computer. Meanwhile, consumers with e-readers can simply enter in billing information once and can then buy as many books as they can afford.One study from the Aite Group, a research and advisory firm, predicts that the total amount of mobile payments in 2010 will hit $16 billion. If that sounds like a lot, it’s nothing compared to the potential for mobile sales in the future. The same report predicts that U.S. consumers will make $214 billion worth of transactions on mobile devices in 2015.
While the idea of using a mobile device for business transactions may seem unusual to many Americans, it is already considered old news in countries like Japan and South Korea, which have been using their cell phones as quasi credit cards for more than five years.
Part of the reason it has taken so long for the U.S. to follow suit is that shoppers are worried about the safety of this payment method.
“Consumers in the U.S. tend to be a bit more concerned with security issues,” said Robert Vamosi, a risk and fraud analyst at Javelin Strategy and Research, which analyzes the financial services and payments industries. “We want to know a new technology is secure before we move on to it.”But whatever discomfort consumers did have began to fade after smartphones like the iPhone became popular around 2007 and 2008. Suddenly, tens of thousands of consumers began offering up their credit card information in order to purchase smartphone applications, and even to make purchases within those applications.
“The iPhone flipped the whole industry on its head, and now the U.S. is starting to take the lead,” said John Fletcher, an analyst at SNL Kagan who monitors trends in the wireless industry.
Now, several major companies are planning to take mobile payments to a whole new level in the U.S. by allowing customers to make mobile payments in stores.