Wireless Carriers Are Poised to Seize Mobile P2P, Report Says

Banks face a new threat in electronic payments, according to a report just out from Javelin Strategy and Research: the ability of telecommunications companies to take the driver's seat in mobile person-to-person payments. This risk comes to the fore as the number of so-called smart phones explodes and consumers show more receptivity to using mobile phones to pay one another, according to the report. “We see evidence today that telcos are going into mobile payments, one way or another,” James Van Dyke, president and founder of Pleasanton, Calif.-based Javelin, tells Digital Transactions News. “They're not waiting for the banks.” According to the report, entitled “Mobile Person-to-Person Payments: Mounting Telco Activity in a Mobile Channel Segment That Financial Institutions Can't Afford to Lose,” it's not that banks won't be involved in mobile P2P payments. After all, the funds consumers send or receive are likely to come from or be sent to a bank or credit-union account. The questions involve who controls the relationship that enables such transfers, and who gets the revenues and profits. U.S. financial institutions are at risk of being providers of “dumb accounts” that merely hold the funds that get moved around through services developed and controlled by the telcos, according to Van Dyke. The report is based on several Javelin surveys of 2,000-plus consumers since 2007 as well as profiles of mobile-payments vendors, from relatively unknown tech companies to worldwide providers such as PayPal Inc. Javelin points to the new Zoompass service from the three leading Canadian wireless phone companies as a clear example of telcos taking the lead in mobile P2P to the potential detriment of banks. Thanks to agreements among the carriers, Zoompass enables potentially 95% of Canadians with a cell phone to easily send money domestically (Digital Transactions News, June 15). “The service was launched in June 2009 to much fanfare in the wireless-carrier community, and with much consternation among financial institutions,” the report says. “As mobile payments and indeed mobile financial services have been described as 'the banks' to lose,' they seem to be doing just that in Canada. Though it is too early for the carriers to claim victory, this is certainly more than a shot across the bow of the financial-institution community.” While Zoompass is a carrier-oriented mobile P2P service, the report also profiles others, such as one from Western Union, that can work with both telcos and banks, or services from CashEdge, Monitise, M-Com, and MasterCard that are clearly in the banks' camp. But while there is no lack of bank-oriented mobile P2P services, the still-decentralized nature of the U.S. banking industry could give the more-concentrated telco industry an edge in getting new services to potentially tens of millions of customers up and running quickly, according to Javelin. The top four wireless carriers?Verizon, AT&T, Sprint, and T-Mobile–collectively have 244 million customers, the report says. And with their large screens and hefty memory capacity, smart phones such as the BlackBerry from Research in Motion Ltd., the iPhone from Apple Inc., and the new Pre from Palm Inc. are lending impetus to new mobile P2P services. The percentage of the U.S. consumer population with a smart phone has nearly doubled in the past year, from 9% to 17%, Javelin estimates. Meanwhile, according to Javelin consumer surveys, 13% of U.S. consumers said in a September 2008 poll that they were “likely” or “very likely” to use mobile P2P services, up from 9% in 2007. Javelin estimates that 26 million Americans currently are willing to give mobile P2P payments a try.