Remote mobile payment for both physical and digital goods should substantially grow in popularity during the next several years, according to [pdf] a new whitepaper from Juniper Research.
“Checkout the Mobile Payment Opportunity” defines mobile payment as “payment for goods or services with a mobile device such as a phone, Personal Digital Assistant (PDA), or other such device.” Focusing on remote mobile payment (as opposed to physically using a mobile device as a POS in a store), Juniper finds substantial opportunity for remote mobile payment for both physical and digital goods.
Common Remote Mobile Payment Schemes
Juniper defines several common remote mobile payment schemes:
- Direct-to-bill (D2B): Generally offered by mobile phone providers, D2B essentially lets mobile phone users debit mobile purchases to their phone bill, using it as a credit card.
- Premium Rate SMS (PRSMS): Retailers and content providers offer digital products and services via an SMS text message which the customer pays to receive. PRSMS is commonly used to charge consumers for downloading digital products such as ringtones and wallpaper.
- Mobile Web/WAP Billing: Online payment for the mobile web is a payment method that enables retailers to bill goods or services from a mobile web or a web site. This is very similar to payment on standard e-commerce sites and usually allows consumers to pay via a variety of payment mechanisms that may not be unique to m-commerce, usually credit or debit card. Richer content such as gaming, music, and video is better paid for via the mobile web simply because of the ability to have previews before purchase, and because of the assurance of delivery.
- SMS/Java/SIM Toolkit: SMS payments, excluding those under the banner of PRSMS, are when the mobile payment is initiated using SMS and the funds are transferred from a registered account or a mobile wallet. The registered account could be debit or credit based or be based on a SVA (Stored Value Account). Scheme operators include PayPal Mobile (owned by eBay), and SmartPay in China. Java applications and SIM toolkits can also deliver this functionality.
- Person-to-person (P2P) Payment: P2P payments are when funds are transferred between mobile phone users and then the funds are redeemed for airtime, goods or cash at selected merchants. P2P is seen as a social money payment mechanism in the developed world: for instance, to allow a group of friends to share payment for dinner at a restaurant or for parents to send funds to a child at college to pay for school books etc. In the developing world P2P has considerable potential to act as a major payment method as often there is a lack of traditional payment and banking infrastructure in these economies.
- Smartphone Apps: Mostly paid for by credit card, applications that perform a wide variety of functions are being offered by an increasing variety of companies on smartphone platforms including Android, Blackberry, iPhone and Windows.
Remote Mobile Digital Payments Expected to Exceed $2.5B in ’14
The worldwide market for remote mobile payment of digital goods, already expected to reach a healthy estimated $1.65 billion by the end of this year, is forecast to reach more than $2.5 billion by 2014.
The proportion each global market contributes to the total is expected to remain roughly the same during the next four years, with the Americas accounting for about 12%, Europe accounting for about 20%, Europe accounting for about 30%, and the rest of the world accounting for the remainder of the market in 2014.
Mobile Device Popularity Surges
One driver for increased mobile remote digital payments is that the popularity of smartphones, 3G devices and other advanced mobile applications surged in the US during 2009, according to comScore mobiLens data.
Between December 2008 and December 2009, the percentage of US mobile phone subscribers with unlimited data plans increased from 16% to 21%, with several phones now requiring an unlimited data plan subscription at the time of purchase. During the same period, smartphone ownership increased from 11% to 17%, while 3G phone ownership increased from 32% to 43%.