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Mobile Payments - US - February 2012

Mobile payments are bringing a whole new perspective to the payments industry, with an avalanche of new players that are using cutting-edge technology. However, for these new innovations to be successful, there must be an awareness of how new rules and regulations may come into play, the dramatic infrastructure changes which must occur, and most importantly, attitudinal changes necessary for adoption by consumers.

This report addresses all of these challenges and opportunities, with particular focus on consumer marketing strategies.

Specific issues addressed in this report include:

  • What is the state of the industry, and what are the most important innovations either already in the marketplace, or currently in development?
  • What is the timeframe for adoption in the US? What does adoption worldwide tell us about this process?
  • What will motivate U.S. consumers to embrace mobile payments?
  • Mobile payments face three major hurdles to adoption that are addressed in this report. Along with consumer education, there is a need to address security concerns, as well as concerns of merchants on the vender side. How can these issues be addressed?

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Data sources
        • Consumer study data
          • Advertising creative
            • Abbreviations and terms
              • Abbreviations
                • Terms
                  • Companies mentioned in this report
                  • Executive Summary

                    • Industry overview
                      • Smartphone adoption key to achieving critical mass
                        • Key players are dividing rather than conquering the industry
                          • Why does the consumer try a mobile payment app?
                            • The chicken or the egg dilemma
                              • Demographics predict mobile payments’ most likely consumers
                              • Insights and Opportunities

                                  • Key points
                                    • Education is the key to adoption
                                      • If it ain’t broke…
                                        • Turn browsing into buying, then reward it
                                          • Smartphones are reaching beyond business and tech-savvy consumers
                                            • A generational shift in cell phone usage
                                              • Figure 1: Attitudes and opinions about mobile phones, by age, October 2010-June 2011
                                              • Figure 2: Attitudes and opinions about mobile phones, by HH income, October 2010-June 2011
                                              • Figure 3: Attitudes and opinions about mobile phones, by race/Hispanic origin, October 2010-June 2011
                                          • Inspire Insights

                                            • Inspire Trend: “Access All Areas”
                                              • Inspire Trend: “Make it Mine”
                                              • Market Size

                                                • Key points
                                                  • The growth of mobile payment volume
                                                    • The intersection of payment and loyalty
                                                      • Mobile devices are the key to mass adoption
                                                        • Figure 4: U.S. factory sales and forecast of smartphones, at current prices, 2006-14
                                                      • Smartphone sales and forecast
                                                        • Figure 5: U.S. unit sales of tablet PCs, 2010-15
                                                      • Growth of mobile payments is limited by a lack of industry coordination
                                                      • Competitive Context

                                                        • Key points
                                                          • Expansive competition in an emerging market
                                                            • Different merchants, different payment needs
                                                              • Many options using different technology
                                                                • Competition from current technology
                                                                  • The end of the leather wallet?
                                                                    • Mobile payments “war”?
                                                                    • Segment Performance

                                                                      • Key points
                                                                        • Four firms dominate the U.S. mobile market
                                                                          • Figure 6: Revenues and profit margins of leading U.S. wireless carriers, 2010 and 2011
                                                                          • Figure 7: U.S. mobile carrier market share, by web usage, Sept 2011
                                                                        • Mobile payments is a young industry with many challenges ahead
                                                                          • Mobile technology is evolving rapidly
                                                                            • Figure 8: Global NFC-enabled smartphone shipments, in millions, 2010-14
                                                                          • Search activity dominates smartphone use
                                                                              • Figure 9: Number of U.S. mobile buyers, 2010-15
                                                                              • Figure 10: M-commerce sales, 2010-15
                                                                            • Mobile couponing will take hold in 2012
                                                                              • Figure 11: Whether redeems coupons on mobile phone, by race/Hispanic origin, October 2010-June 2011
                                                                              • Figure 12: Whether redeems coupons on mobile phone, by age, October 2010-June 2011
                                                                            • Retail has become the fastest-growing mobile category
                                                                              • Figure 13: U.S. mobile subscriber, change in mobile categories accessed, Q3 2011
                                                                          • Market Drivers

                                                                            • Key points
                                                                              • Age is a factor in mobile payments adoption
                                                                                • Figure 14: U.S. population aged 18 or older, 2006-16
                                                                                • Figure 15: Population by race and Hispanic origin, 2006-16
                                                                              • If consumers aren’t spending, they aren’t using payments
                                                                              • Leading Companies

                                                                                • Key points
                                                                                  • Card networks are helping to lead the way
                                                                                    • Visa
                                                                                      • American Express
                                                                                        • Citi
                                                                                          • Verizon
                                                                                            • Sprint
                                                                                              • AT&T
                                                                                                • Google
                                                                                                  • VeriFone
                                                                                                    • First Data Corporation
                                                                                                    • Innovation and Innovators

                                                                                                      • Key points
                                                                                                        • Starbucks
                                                                                                          • State Employee Credit Union
                                                                                                            • Chase QuickPay
                                                                                                              • Square
                                                                                                                • Charitable organizations and mobile donations
                                                                                                                  • Mobile wallets
                                                                                                                    • PayPal Mobile
                                                                                                                      • Apple
                                                                                                                        • MasterCard
                                                                                                                          • ISIS
                                                                                                                            • Google Wallet
                                                                                                                              • Visa
                                                                                                                                • American Express
                                                                                                                                • Marketing Strategies

                                                                                                                                  • Key points
                                                                                                                                    • Overview
                                                                                                                                      • Print advertising
                                                                                                                                        • Citibank
                                                                                                                                          • Figure 16: Citibank New York Times mobile banking ad, 2009
                                                                                                                                        • Fidelity
                                                                                                                                          • Figure 17: Fidelity Investments mobile ad, 2011
                                                                                                                                        • Direct mail advertising
                                                                                                                                          • USAA
                                                                                                                                            • Figure 18: USAA direct mail ad, May 2011
                                                                                                                                          • Discover Bank
                                                                                                                                            • Figure 19: Discover direct mail ad, October 2011
                                                                                                                                          • AT&T
                                                                                                                                            • Figure 20: AT&T mail piece, October 2011
                                                                                                                                          • Verizon
                                                                                                                                            • Figure 21: Verizon direct mail ad, October 2011
                                                                                                                                          • Online and email advertising
                                                                                                                                            • Citibank and Google Wallet
                                                                                                                                              • Figure 22: Citi Google Wallet email advertisement, November 2011
                                                                                                                                            • CitiBank
                                                                                                                                              • Figure 23: Citi Text Banking email advertisement, November 2011
                                                                                                                                            • Chase Mobile Banking
                                                                                                                                              • Figure 24: Chase Mobile Banking email advertisement, December 2011
                                                                                                                                            • Television advertising
                                                                                                                                              • Mercantile Bank of Michigan
                                                                                                                                                • Figure 25: Banking Made Easy, Mercantile Bank of Michigan, TV ad, September 2011
                                                                                                                                              • Verizon
                                                                                                                                                • Figure 26: Faster Business, Verizon, TV ad, October 2011
                                                                                                                                              • Sprint
                                                                                                                                                • Figure 27: Sprint Biz 360, TV, September 2011
                                                                                                                                            • Consumer Ownership of Smartphones

                                                                                                                                              • Key points
                                                                                                                                                • Smartphone ownership is the first step to mobile payments
                                                                                                                                                    • Figure 28: Type of mobile device owned, by age, November 2011
                                                                                                                                                  • The link between income and device ownership
                                                                                                                                                    • Figure 29: Type of mobile device owned, by income, November 2011
                                                                                                                                                  • Asians are the early adopters of the smartphone world
                                                                                                                                                    • Figure 30: Type of mobile device owned, by race/Hispanic origin, November 2011
                                                                                                                                                  • The upgrade cycle continues
                                                                                                                                                    • Figure 31: Upgrade expectations, by gender, November 2011
                                                                                                                                                    • Figure 32: Upgrade expectations, by age, November 2011
                                                                                                                                                    • Figure 33: Upgrade expectations, by income, November 2011
                                                                                                                                                    • Figure 34: Upgrade expectations, by race/Hispanic origin, November 2011
                                                                                                                                                • Non-smartphone Owners—Why and Why Not?

                                                                                                                                                  • Key points
                                                                                                                                                    • Three in 10 non-owners plan to buy a smartphone in 2012
                                                                                                                                                      • Figure 35: Smartphone purchasing intentions, by age, November 2011
                                                                                                                                                      • Figure 36: Smartphone purchasing intentions, by income, November 2011
                                                                                                                                                    • Why consumers haven’t made the switch to smartphones
                                                                                                                                                      • Figure 37: Reasons for not owning a smartphone, by gender, November 2011
                                                                                                                                                    • Selling phones on functionality, not image
                                                                                                                                                      • Figure 38: Reasons for not owning a smartphone, by age, November 2011
                                                                                                                                                    • Utility, not cost, the main barrier for high earners
                                                                                                                                                      • Figure 39: Reasons for not owning a smartphone, by income, November 2011
                                                                                                                                                  • Smartphone Use Among Owners

                                                                                                                                                    • Key points
                                                                                                                                                      • A third of smartphone users have scanned a QR code
                                                                                                                                                        • Figure 40: Attitudes of current smartphone owners concerning bar/QR codes, by age, November 2011
                                                                                                                                                      • Financial activities on mobile devices
                                                                                                                                                        • Figure 41: Payment channel used to pay bills, by age, October 2010-June 2011
                                                                                                                                                        • Figure 42: Payment channel used to pay bills, by household income, October 2010-June 2011
                                                                                                                                                      • Two in five have used their mobile phone for banking in the last year
                                                                                                                                                        • Figure 43: Banking activities conducted on mobile phone in last year, mobile phone owners, by income, November 2011
                                                                                                                                                      • 25-34s lead the way with mobile banking
                                                                                                                                                        • Figure 44: Banking activities conducted on mobile phone in last year, mobile phone owners, by age, November 2011
                                                                                                                                                      • Activities on mobile devices—a comparison over the course of a year+
                                                                                                                                                        • Figure 45: Banking activities conducted on mobile phone in last year, mobile phone owners, by age, 2010-2011
                                                                                                                                                    • Interest in Using Smartphone for Payments

                                                                                                                                                      • Key points
                                                                                                                                                        • Strong interest in the idea of mobile payments
                                                                                                                                                          • Figure 46: Interest in mobile phone usage for various activities, overall, November 2011
                                                                                                                                                        • Acceptance highest among the mobile generation
                                                                                                                                                          • Figure 47: Interest in mobile phone usage for various activities, net interested by age, November 2011
                                                                                                                                                        • Health information could draw in older consumers
                                                                                                                                                          • Figure 48: Interest in mobile phone usage for other activities, overall, November 2011
                                                                                                                                                          • Figure 49: Interest in mobile phone usage for other activities, net interested, by age, November 2011
                                                                                                                                                      • Concerns About Security

                                                                                                                                                        • Key points
                                                                                                                                                          • Security a greater fear for mobile than for plastic cards
                                                                                                                                                            • Figure 50: Concerns about security when using various payment methods, all respondents, November 2011
                                                                                                                                                          • Under 25’s are concerned about all payment methods
                                                                                                                                                            • Figure 51: Concerns about security when using various payment methods, by age, November 2011
                                                                                                                                                          • Higher earners have significantly greater concerns about mobile payments
                                                                                                                                                            • Figure 52: Concerns about security when using various payment methods, net concerned, by income, November 2011
                                                                                                                                                          • Security is the key concern for mobile payments
                                                                                                                                                            • Figure 53: Reasons for concern about using mobile payments, by gender, November 2011
                                                                                                                                                            • Figure 54: Reasons for concern about using mobile payments, by age, November 2011
                                                                                                                                                        • Custom Consumer Groups

                                                                                                                                                          • Key points
                                                                                                                                                            • Asians are at the forefront of adoption
                                                                                                                                                              • Figure 55: Internet access via phone, desktop, or laptop, by race and Hispanic origin, July 2010-March 2011
                                                                                                                                                              • Figure 56: Type of mobile device owned, by race/Hispanic origin, November 2011
                                                                                                                                                              • Figure 57: Planning to upgrade in next year, by race/Hispanic origin, November 2011
                                                                                                                                                            • Most Asians have already used their mobile for banking purposes...
                                                                                                                                                              • Figure 58: Banking activities conducted on mobile phone in last year by mobile phone owners, by race/Hispanic origin, November 2011
                                                                                                                                                            • ...and half of Asians want to use their mobile phone to make purchases
                                                                                                                                                              • Figure 59: Interest in mobile phone usage for various activities, net interested, by race/Hispanic origin, November 2011
                                                                                                                                                          • Appendix: Trade Associations

                                                                                                                                                            Companies Covered

                                                                                                                                                            • American Express Company (The)
                                                                                                                                                            • Apple, Inc
                                                                                                                                                            • AT&T Inc.
                                                                                                                                                            • BP p.l.c.
                                                                                                                                                            • Chase Home Finance
                                                                                                                                                            • Citibank
                                                                                                                                                            • Citigroup Inc.
                                                                                                                                                            • Consumer Bankers Association
                                                                                                                                                            • Consumer Electronics Association
                                                                                                                                                            • Credit Union National Association
                                                                                                                                                            • Discover Financial Services Inc.
                                                                                                                                                            • Exxon Mobil Corporation
                                                                                                                                                            • Federal Communications Commission (FCC)
                                                                                                                                                            • First Data Corporation
                                                                                                                                                            • FMR Corp.
                                                                                                                                                            • FOX Broadcasting Company
                                                                                                                                                            • Google, Inc.
                                                                                                                                                            • Independent Community Bankers of America
                                                                                                                                                            • Intuit Inc.
                                                                                                                                                            • Isis Asset Management PLC
                                                                                                                                                            • MasterCard Incorporated
                                                                                                                                                            • National Association for Stock Car Auto Racing (NASCAR)
                                                                                                                                                            • National Automated Clearing House Association
                                                                                                                                                            • National Credit Union Administration
                                                                                                                                                            • PayPal Inc.
                                                                                                                                                            • Research In Motion (USA)
                                                                                                                                                            • Samsung Electronics (USA)
                                                                                                                                                            • Sprint Nextel Corporation
                                                                                                                                                            • Starbucks Corporation
                                                                                                                                                            • T-Mobile USA
                                                                                                                                                            • The American Bankers Association
                                                                                                                                                            • The American Financial Services Association
                                                                                                                                                            • The New York Times Company
                                                                                                                                                            • The Salvation Army
                                                                                                                                                            • Twitter, Inc.
                                                                                                                                                            • U.S. Bureau of the Census
                                                                                                                                                            • USAA
                                                                                                                                                            • Verizon Wireless (Cellco)
                                                                                                                                                            • Virgin Mobile
                                                                                                                                                            • Visa International
                                                                                                                                                            • Visa U.S.A. Inc.
                                                                                                                                                            • Washington Post Company (The)

                                                                                                                                                            Mobile Payments - US - February 2012

                                                                                                                                                            £3,277.28 (Excl.Tax)