Monday, January 7, 2013

Why 2013 Won't be "Year of Mobile Payments"

Without in any way implying that mobile payments will fail, 2013 will not be, as pundits often are fond of proclaiming, be the "year of mobile payments." The reason is simply that mobile payments requires changing significant business processes throughout a complicate ecosystem, and those changes always take time. 

Consumer demand is not so much the problem. It's all the other changes that have to happen, ranging from replacing store terminals and software to creating a critical mass of end user devices and awareness, as well as providing a clear value proposition.  

At the same time, expectations have been "dampened" by the continuing slow uptake of near field communications. But none of that should be surprising,  in a historical sense. 

Juniper Research has revised its forecasts for the global near field communications market, significantly scaling back its growth estimates for the North American and Western European markets. In some ways, that might be considered a "good" thing, to the extent that it follows a common pattern of technology adoption.

The most significant change to the Juniper Research forecast is the amount of transaction activity NFC devices will drive, as the new forecast reduced the number of NFC devices in use only slightly.

By 2017, global NFC retail transaction values are now expected to reach $110 billion in 2017, significantly below the $180 billion previously forecast. 

Such revisions are not unusual in the predictions business, especially not for a brand new market that depends on many changes in the ecosystem. That tends to mean excessive enthusiasm early on, with an under-appreciation of what is going to change later.

What is "good" about deflated hopes is that such periods seem "always" to happen, and are just a milestone on the way to eventual adoption on a fairly wide scale. So the argument is that dashed initial hopes mean the market is moving in the way one should expect: high hopes, disillusionment, and finally adoption.

Such hype cycles might be viewed as a typical part of the technology adoption cycle for any important new technology.

New technologies historically take some time to reach 10 percent, then 50 percent, then virtually ubiquitous adoption. To be sure, there has been a tendency for new technologies based on digital and electronic technology to be adopted faster. But a decade period to reach perhaps 10 to 20 percent adoption is hardly unusual.

That is not much of an issue for point solutions like computers that can be used without lots of additional change in infrastructure. That is not true for highly-complex ecosystems such as payments, though.

ATM card adoption provides one example, where "decades" is a reasonable way of describing adoption of some new technologies, even those that arguably are quite useful. 

Debit cards provide another example. It can take two decades for adoption to reach half of U.S. households, for example. 

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