Mobile payments are unlikely to replace cash

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Mobile payments are unlikely to replace cash

Cliff Saran

The concept of mobile phones replacing cash is far from a reality and end users are unlikely to demand this form of electronic cash, analysts will announce at the GigaWorld conference in Paris this week.

Martha Bennett, an analyst at Forrester Research, which now owns Giga Information Group, believes there are serious business and technical barriers to mobile payment systems. She said operators were making the cost of mobile payments prohibitive.

"Mobile phone payment systems have a chance if they are cheaper and more convenient than traditional cash or card payment methods," she said. "But merchants are hit by a double whammy as they have to pay both the standard credit card transaction fee and an operator fee."

In February, Paybox, the biggest mobile payment provider in Europe, pulled out of the UK market, citing a lack of co-operation between banks and mobile operators.

Along with operator charges, Bennett felt the phones themselves were not reliable enough to replace cash or credit/debit cards. She said phones tend to crash; they only work when there is a signal and have a limited battery life, all of which prevent them from being used to make payments reliably.

She also pointed out that consumers are more careless with their phones than with their wallets.

Payment technology has moved forward since the industry began touting mobile payment systems.

For example, major retail chains, such Tesco and Marks & Spencer, are running “chip and pin” trials in Northampton, by which consumers pay for goods directly by using a payment card and their Pin.

Bennett said such schemes alleviate the need for mobile payment. Another example is train tickets. "If consumers can buy train tickets from a machine which accepts card payments, why invest in something else?"

Even the London congestion charge SMS payment system is not strictly a mobile payment service according to Bennett, as it requires users to pre-register their payment details.


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