Electronic Commerce: Payment Players Face Growing Wireless Threat

By Stoneman, Bill | American Banker, March 14, 2001 | Go to article overview

Electronic Commerce: Payment Players Face Growing Wireless Threat


Stoneman, Bill, American Banker


Wireless bill payment will not push cash, checks, credit, or debit cards aside in the United States anytime soon, but American bankers should take note of its popularity overseas, a recent Celent Communications report says.

Almost five million people around the world have used cellular phones, pagers, and personal digital assistants to pay for goods and services, Celent says in "Wireless Payments: Money into Thin Air." The majority of users are in Asia, most of the rest are in Europe, and by 2004 the number of people making payments from mobile devices -- mostly cell phones -- will top 60 million, the report says.

"The role of banks in wireless payments is a clear extension of the payments processing that these financial institutions have long offered," Celent, a financial services technology research company in Cambridge, Mass., says. "Most types of wireless payments are settled through traditional means, including debit and credit cards, or through direct debits of current accounts."

Though the threat is not huge, Celent said banks may see some of their payment-processing business siphoned off by the cell phone networks.

Telephone companies are well situated to take payments from phone users and forward them to merchants, said Scott Geddes, vice president for mobile commerce with Brokat AG, a German company that is selling the ability to take payments to phone companies. Mr. Geddes added, however, that phone companies will probably be uncomfortable handling large transactions, as they obviously have less experience than banks in managing credit risk.

Rather than provide direct competition, mobile phone network operators will probably collaborate with banks to provide wireless payments to their mutual customers, the Celent report says. Even so, waiting on the sidelines until market demand develops could be costly. For example, bilateral agreements could give significant advantages to the banks that sign up first, said Murdo Munro, a MasterCard International vice president who leads the Purchase, N.Y., company's mobile commerce initiative.

The challenge for banks, therefore, seems to be positioning themselves to participate in wireless payments without making irreversible commitments. For one thing, it's not clear whether wireless payments really will catch on with consumers beyond the early adopters. Celent said growth will be driven by an increasing availability of systems that facilitate wireless payments, improved security of mobile payments, and convenience. …

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