AT&T: Mobile payments, past the hype

Booz, Allen, Hamilton principal Willy Dommen and AT&T's Spencer White kicked off the Mobile Payments World (a co-located event here at CTIA Wireless) with measured enthusiasm for the market, which they both believe will join online banking as a substitution for incumbent financial transaction processes. Here's a quick run down of their respective presentations this morning:

MFS worth $2.6 billion by 2012

Dommen estimated that the market could reach $2.6 billion within five years if mobile financial services (MFS) become a substitute for 25 percent of existing ways of doing transactions. Dommen characterized businesses that should be interested in MFS as those with low margins, where speed is important, that collect a significant amount of cash payments and where the transactions are mostly low value.

White, director of AT&T Mobility's mobile financial services noted that MFS has been hyped up in the past, but has yet to gain any traction in the market. That said, White points to the wide availability of data services, the increased functionality of handsets and the growing dominance of online banking as signs that the market has changed dramatically in favor of MFS. White said 37 million households used online banking in 2005 and that figure is expected to double in 2009. At Bank of America online transactions exceeded ATM, teller and phone transactions combined. "Mobile banking is a logical extension of online banking," White said. AT&T/Cingular has been tracking this space for more than two years, and in the past six months there has been a considerable spike in enthusiasm for MFS from all segments of the value chain, White said.

Credit card saturation and fast food issues

Two of the segments driving adoption of mobile financial services are the credit card companies and the fast food industry, which stands to benefit greatly from MFS. White explained that since the credit card industry is fairly saturated in the U.S., as noted by the many incentives these companies now offer, card issuers are looking for opportunities for growth, including the mobile platform. "Checks are going the way of the dodo bird," White quipped. "And fairly quickly."

Dommen said MFS will be "huge" for the fast food industry, where there is a clear business case, because these businesses want to push more customers through, but they also want to get the cash out of the system. This industry won't admit how big of a problem revenue leakage is, but MFS will remove a lot of that. In fact, any barriers to uptake because of the transactional fees, would probably be eclipsed by the recouped revenue leakage, Dommen said. This also holds true for taxi services, tolls and others.

Shedding seconds with MFS

One core value proposition of mobile financial services for the consumer is speed. White cited a study from MasterCard that found the average cash transaction takes 33 seconds, the average credit card transaction takes 22.7 seconds and the average contactless payment transaction takes a mere 12.7 seconds.

Banks vs. carrier: Urban myth?

Both White and Dommen addressed the tension that exists between those in the financial services industry and wireless carriers: Dommen said it was getting better and White called it an "urban myth." White explained that banks are mostly concerned with security issues while the mobile industry is focused on access and around the clock availability. Banks are closed on holidays, White noted, so that kind of availability is a moot point. "Both sides need to think about what's right for the customer and work back from there," White said. -Brian