Mobile Payments Won't Save Consumers Money, Says Consumer Reports

In many cases, consumers using their mobile devices to pay for purchases will not find they are saving money, Consumer Reports argues. In most cases, retailers won't be saving money, either.

Most of the new electronic payment options are tied to credit and debit cards, so whatever costs consumers or retailers normally incur when using their plastic will find the same charges are incurred in a "pay by mobile phone" context as well.

Google Wallet merchant transaction fees are the same as those charged on plastic payments, and the same is expected to be true for Visa's digital wallet. Square and PayPal Mobile charge merchants even more than the average big bank fee, 2.75 and 2.9 percent of the transaction amount, respectively.

Among payment processors Consumer Reports looked at, only Obopay charges consumers (not merchants) an explicit flat 50-cent fee for payments over $10. You can transfer funds to your Obopay account from a bank account at no cost, but if you link a transaction to a debit or credit card, you'll pay a 1.5 percent fee. So on a $100 payment, fees can run from 50 cents to $2.

That should raise an immediate question: what's the value to end users of paying by mobile phone instead of credit or debit card? The answer will be obvious in a few cases, but more obscure in most cases. Paying for public transportation is one of the scenarios where the ability to simply waive a phone near a terminal will provide value by saving consumers the time spent waiting in line to buy tickets or recharge current fare cards.

In other cases one might argue consumers can save a bit of time checking out by "swiping a phone" instead of a card. But many will find that a minor value, if a value at all. That's one reason interest in "wallet" approaches that use the mobile to store credentials and target offers of value to users seems to be growing. Getting a discount or other incentive provides the "value."

Consumer Reports Finds Hidden Costs in Mobile Payment Services