The Adoption of Mobile Payments in America

Introduction
As an essential factor of the development of commerce, transaction methods have been innovated constantly from the earliest bartering mode to advanced electronic modes. Among those, mobile payments are one of the most efficient and promising patterns, matching the requirements of the rapid progress of business fields. With cell phones equipped with the Near-field Communications (NFC) chip, users are capable of completing transactions by simply waving them in front of a NFC-enabled reader (Crowe, Rysman & Stavins, 2010). Generally, in global markets, the value of this type of trade reached approximately $250 billion in 2012 and was forecasted to expand 68% annually. In particular, this carrier has been heavily adopted in Japan and several European countries for years. However, according to a recent survey, the adoption of this technology in the United States has been hindered (Fonte, 2013). The sales of this approach only has less than half of one percent of the market, and the majority of payments are implemented by credit and debit cards. It is confusing that, as the economic center worldwide, America has not dominated the leading position of mobile payments acceptance. Therefore, this report focuses on analyzing the obstacles in the process of spreading and proposing practical solutions.

Barriers
The obstacles of the popularization mainly originate from the aspects of markets, consumers, and retailers.
Referring to appropriate markets, this payment method requires highly concentrated banking circumstances that are cash-intensive and technologically advanced, such as those found in Japan (Crowe, Rysman & Stavins, 2010). Although American markets fulfill the demands above, they focus on utilizing current mature payment methods. Those already offered considerable convenience that could be provided by mobile transactions, especially debit and credit cards. Additionally, the majority of mobile payments promoters are start-ups without enough capital; therefore, the strength of their influence is so slight that cannot encourage consumers and retailers to alter their transaction preferences.
Customers are reluctant to forsake their familiar payment methods and choose a mobile carrier. Because the designers of this type of transaction are focusing on spreading this approach rapidly and earning revenue instead of pursuing the value proposition for users currently, consumers are not satisfied with the present degree of convenience and efficiency (Hayashi, 2012). Furthermore, this method can be implemented only by the mobile devices equipped with a Near-field Communication (NFC) chip, which are not widespread among the U.S. consumers. In these regards, this method is not so attractive to inspire consumers changing their payment habits currently.
For merchants, the procedures of adoption are complicated and costly. In order to process mobile deals, they need to install NFC facilities and purchase a reader which costs around 200 dollars (Crowe, Rysman& Stavins, 2010). On the other hand, it cannot be guaranteed that after they finish all the preparation for mobile payments, customers will be willing to use this carrier. It is obvious that retailers will definitely tend to avoid the risk of wasting investments. As a result, they will be willing to invest in mobile carriers until this method is commonly accepted by consumers.

Benefits of mobile payments As can be seen from the descriptions above, it is difficult to overcome the obstacles. Therefore, is it necessary for the U.S. to consider comprehensively whether promoting the adoption of mobile payments is worthwhile or not. The answer is absolutely positive because this method is capable of providing an efficient, convenient, and secure payment experience to consumers, promoting the development of startups aimed to discover the business niche of mobile payments. The number of mobile phone users has increased dramatically in recent years, and the majority of them cannot tolerate being separated from their phones. Due to the development of this method, they can go shopping simply with a cell phone, which will reduce their physical burden. More importantly, they will benefit from value-added applications which are bundled to mobile payments. For instance, customers can compare prices among different retailers, tally expenditures on financial management programs, and search for comments on the Internet or certain applications when they are choosing products (Crowe, Rysman& Stavins, 2010). These unique advantages can never be achieved by other payment methods. The acceptance of mobile payments will promote not only the non-banking payment industry but also the economy. It is obvious that the participation of mobile payments will encourage other terminals to improve their performances, which is beneficial for this industry to develop rapidly in a noble direction (Hammermaster, 2012). Not to mention, because of the popularization, the employment will increase, benefiting the growth of the economy in America

Recommendations of promotion
Approximately half of card faults are due to the antiquated system of credit cards which rely on signatures, fixed card numbers and magnetic strips. It is possible to falsely use credit cards only if the card information is accessible. In order to avoid this security problem, the U.S. credit card companies announced that the old-fashioned swipe and sign credit cards will be updated by October 2015, which means using credit cards to purchase will not be more reliable until that time. Therefore, the mobile payment companies should seize brilliant opportunities to spread this method ahead the promotion of advanced credit cards.
The destiny of mobile trades is controlled by customers; furthermore, other participants such as developers and traders can only follow the preferences of consumers. Instead of just focusing on spreading this approach rapidly and earning revenue, the companies should publicize the value proposition for users. In order to increase the popularization, the companies should improve their service in the aspects of cost, security, and convenience. Primarily, the expenditures could be decreased by reducing the direct fees of transactions and the costs on technical infrastructures such as a new smart phone with a Near-field Communication (NFC) chip. Secondly, the safety of customers’ account and authorization must be guaranteed(Kreyer, Pousttchi& Turowski, 2003). Ultimately, the designers should improve the experience of users by making the payment processes easier and more comfortable.
Simultaneously, the Federal Reserve should make the following efforts to assist those companies. At the first step, the Federal Reserve needs to conduct quantitative surveys and market researches to evaluate the potential development space of mobile payments in America. Secondly, certain agencies ought to be established to institute regulatory guidelines and supervise secure issues. Finally, the coordination standards are crucial to be facilitated to assure efficiency and soundness of this transaction system (Crowe, Rysman& Stavins, 2010).

Conclusion
Due to the dominant position of e-commerce in business markets, the adoption of mobile payments will be the significant tendency in the future (Kreyer, Pousttchi & Turowski, 2003). Moreover, numerous studies indicate that lots of consumers are willing to process transactions by mobile phones (Carton, et al., 2012). As a powerful reinforcement, Apple has been involved in this movement by providing Apple Pay. Meanwhile, PayPal decided to stop the cooperation with eBay in 2015, tending to develop mobile payment businesses. Apparently, this method may dominate the payment field in the future.

References

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Fonte, F. (2013). Overview of mobile payments in the United States. Banking & Finanical Services Policy Report, 32(8), 1-14. Reievtred from Business Source Premier database.

Hayashi, F. (2012). Mobile payments: What’s in it for consumers? Economic Review, 12(1), 35-66. Retrieved from Business Source Premier database.

Hammermaster, G. (2012). 10 reasons to integrate the payments environment. Financial Executive, 28(7), 65-65. Retrieved from Business Source Premier database.

Kreyer, N., Pousttchi, K.& Turowski, K. (2003). Mobile payment procedures. E-Service Journal, 2(3), 7-22. Retrieved from Business Source Premier database.

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