Hard currency or cash is an inconvenience for the vast majority of businesses. It takes too many man hours to use when compared to other forms of payment. Retailers, financial institutions and governments around the world have been looking for a better alternative for years. Different forms of payments such as credit and debits cards have made a considerable dent on cash usage, but it is still around. Mobile technology is seen as the latest effort by commerce to dramatically reduce cash as the preferred method of payment. A report by IDC Financial Insights revealed mobile payment will increase to $1 trillion by 2017, and while it is only a small fraction, the hope is it will be the preferred method of payment as smart mobile devices achieve higher penetration rates around the world.
One trillion dollars sounds like a lot of money, but it only represents 2.5 percent of the potential global commerce that can be applied using mobile payments. The full transition to mobile payments requires the implementation of several technologies involving retailers, financial institutions, telecoms and mobile device manufacturers. The transitions is taking place in phases around the world, developing countries surprising leading the way in adopting mobile payment systems faster than their developed counterparts.
The report indicates most of the mobile payments will be made to consume digital content, and some physical goods through ecommerce with mobile Web browsers. A key highlight of the report is the growth of proximity payment systems using mobile devices. Near field communication or NFC will become the second largest form of mobile payment spending, accounting for half of the payments. Person-to-person or P2P, which is used to transfer funds between individuals will see some growth, but standardization for this technology is limiting its full potential.
The forecast comes with some warnings about the certainty of the numbers. It will depend largely on how financial institutions, telecoms and retailers will come together to form a standard they can all agree on. If history is an indicator it is more likely they will go their own way before they come together. Although a global system might be out the question, regional systems such as Asia, Europe, the Americas and individual countries can implement their own systems achieving higher adoption rates.
The benefit of using mobile payment systems for financial institutions is very obvious, because each transaction will carry with it a fee. The less cash is circulating around the world, the more money can be generated for these institutions and companies that provide the service. The consumer on the other hand will be the loser, because it means he has to pay money to use his money. Just like yearly credit card fees, mobile payment system will more likely than not also charge fees.
Cash has been part of our society for millennia, and some will argue it will never go away, but history is full of examples of alternate forms of financial transactions, and it is only a matter of time before cash becomes part of that history.