Mobile payments is still a new business, with low user percentage and tons of upside. That potential is starting to emerge, as the number of people globally that use a mobile phone to make payments is expected to expand to 108.6 million by the end of this year, which would be an expansion of more than 54% from the end of 2009, according to Gartner. 

That figure represents more than 2% of all mobile users, with the fastest growth coming in developing markets in Asia, Eastern Europe, the Middle East and Africa. Mobile financial services have traditionally grown faster in developing regions because of the relative lack of legacy banking infrastructure.

In Asia Pacific, Gartner says mobile payment users will pass 62 million and represent 2.6% of all mobile owners. That’s more than twice the share of mobile pay users in North America, for example, where the expected mobile payment user base of 3.5 million customers will be 1.1% of all mobile users by the end of this year. 

“The immediate opportunities for banks are in developing markets as there is huge pent up demand,” says Sandy Shen, a research director at Gartner. “They can use mobile payment to reach the unbanked and underbanked population.” Shen also says money transfer and prepaid top-up are the two most demanded functions.

Gartner says SMS is still the dominant mobile payment technology because of its ubiquity and ease of use, though Web based app systems are gaining some ground in developing markets. It also says NFC technology hasn’t taken off, with banks not seeing the business case.

“The lack of NFC uptake won't have any immediate impact on the bank's business. But they need to watch for how the technology is being adopted in their markets, and what other players are doing with it,” Shen says, adding mobile carriers and device vendors can leverage NFC to enable contactless services such as ticketing, authentication, flight check-in/boarding, etc, and this can educate the market about contactless services. “Banks can capitalize on this and use NFC to their advantage not only to capture some of the cash payment but also as a differentiation in the initial stage.”

This story was reprinted with permission from Bank Technology News.

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