Will 2012 Be a 'Breakthrough' Year for Mobile Payments?

Mobile industry consultant Chetan Sharma conducted a 2012 predictions survey among "executives, developers, and insiders (n=150) from leading mobile companies and startups from across the value chain." The complete findings are available here. Many of them are interesting, but in total they indicate to me that most insiders have no great clarity on the direction of the market.

What's most interesting to me about the survey is the discussion of mobile payments. Respondents thought that mobile payments will be the "breakthrough category" of 2012. But they also believe that banks and credit card companies will dominate the emerging segment:

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While it's logical to assume that banks would control mobile payments -- they control the infrastructure -- I don't agree that the "financial guys" will define the segment. For the most part the credit card companies and operaters are not going to be able to deliver a compelling user experience -- especially the operators. 

Visa, Amex and MasterCard will be the "Intel inside" of mobile payments but the user-experience front end will be delivered by someone else in my opinion (like Square). Some consumer surveys indicate that, right now, credit card issuers are more trusted than others in the emerging ecosystem (other surveys show the opposite). Credit card issuers and banks are a known quantity; they're familiar to consumers.

However mobile payments are still mostly hypothetical for most people because few have had any practical experience with it. Once various "solutions" appear and people engage with them the landscape of survey responses will likely change to favor those with the best user experience (and/or most favorable terms on the merchant side). 

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Source: Retrevo (Q4 2011)

Square contradicts the "banks will dominate" assumption. The company is an amazing success already, largely because it created an elegant user experience for both merchants and consumers. This is not something that would have been done by a credit card company or bank. Ultimately a credit card company, financial entity, Intuit or eBay will buy Square, however. 

In the next few years, there will probably be a few mobile payments entry points for consumers on top of a couple of payments infrastructure ecosystems. Unless there are common standards, however, there won't be many consumer-facing players.

I don't think this means that Visa or Amex will dominate, though they will have to be involved. I also don't think that PayPal will win in the segment. I would have bet on Google in the past but the operators (at least Verizon) seem inclined to block the company's mobile wallet. Amazon and Apple are dark horses but still have considerable potential because of their installed bases of credit card accounts. 

As with the example of Square I think there's still room for startups in mobile payments, provided they don't ask users and merchants to change behavior or adopt new proprietary systems. However unlike some of the larger or more established companies they must overcome the "cold start problem" (building usage among consumers and merchants simultaneously). 

In my view this year is still about developing the ecosystem and infrastructure and not a "breakthough" year for payments. That will come in 2013 or 2014 in terms of mainstream consumer adoption.