Bank Technology News reported that Citigroup, the first major bank to evaluate P2P mobile transfers killed a two year old program in December, concluding that consumers are only starting to understand the capabilities of the increasingly sophisticated phones that are now becoming common.
Citi learned that payments are not, in the minds of consumers, a standalone product, and that the demand is not yet explicit. For mobile payments to take off, "lots of banks need to participate."
Aaron McPherson, a research manager for payments at IDC Financial Insights, agrees that few people are clamoring for such capabilities. In a survey of a random sample of 1008 U.S. consumers, he found that just 12.5 percent had a smart phone with a data plan.
In a report by Javelin Strategy & Research, consumers cited speed and convenience as primary incentives for adopting mobile P2P payment services. However, security is a main concern:
* The loss of personal information (62%) and fraudulent transfers (52%) are fears even among “tech savvy” consumers.
* 63% of consumers said enhanced security would encourage them to use mobile P2P payments.
“Perceived security threats are definitely the sticking point for mobile P2P payments right now,” said Mary Monahan, partner and senior analyst at Javelin. “Once the safety and access hurdles are cleared, we expect this technology will become part of everyday life.”
Below are the demographic findings from the report.
* 25-44-year-olds who earn more than $100,000 per year are the most willing to use mobile P2P services.
* Among 45-55-year-olds, 39% said anytime/anywhere access to their money is important, but just 14% of the group said they are likely to use mobile P2P payments.
* In the 55-64-year-old group, 39% value the ability to send and receive money quickly (more so than any other group) - but only 11% are likely to use mobile P2P payments.
* Among 18-23-year-old consumers, 23% are motivated to adopt the service by the prospect of avoiding cash/check use.
The report did point out that unbanked consumers - those without checking or savings accounts - are good candidates for mobile P2P adoption.
Fully 60% of unbanked consumers would be willing to move away from money lenders toward banks to have the ability to conduct mobile P2P payments, more so than banked consumers would be to switch banks (22%).
Is there action in P2P payments? Bank Technology News reported:
iPay Technologies announced it had signed more than 1,000 banks last year (more than half of those in the fourth quarter of 2009) to use its white-label P2P payments technology. All together, iPay boasts more than 2,300 bank customers. In November, at BAI's annual Retail Delivery Show, Fiserv also kicked off its own person-to-person payments offering, ostensibly hoping to appeal to the more than 3,000 banks that already use the vendor's other online payment services.
Despite its well-established position in P2P, eBay unit PayPal has also tossed its hat into the bank market as well, announcing in November deals with popular bank service providers FIS and S1 Corp. to integrate the PayPal system into their bank service offerings. FIS said it had at least three banks planning to pilot the PayPal service.
The real challenge for banks is how to make money offering P2P payments. Most banks are not charging for the service now. The ones that are adopting see it as necessary for customer retention, and gaining the marketing and buzz to promote the service.
Just like Citi learned that P2P payments are not a stand-alone product, the other challenge is how to bundle the service into a wider offering to drive incremental revenues. It will be important to target market to those affluent 25-44 year olds and the 18-23 crowd.