Biggest Mobile Breakthrough of 2011? Survey Says: Payments.

Press release – January 3, 2011

By Tricia Duryee, All Things D

The hottest mobile sector this year won’t be location-based services, voice over-IP, or even mobile advertising, say industry insiders.

In a survey among mobile executives, the most likely category to break-out this year is mobile payments. In second is the closely related field of mobile commerce. (Mobile advertising and mobile coupons is third and fourth, respectively.)

What’s more, this group of insiders believes that the big winners within the category will be the financial guys: Visa and MasterCard, which garnered more than 30 percent of the votes.

After the large credit card companies, respondents voted for wireless operators, which are working together to build a mobile payments platform called Isis.

Further down the list is Google, PayPal and the handset makers. In sixth, execs placed the well-funded start-ups, such as Boku and Zong, which allow users to make purchases via their mobile phone bill, and Facebook ranked last with less than 5 percent of the votes.

The two companies noticeably missing were Apple, which has a healthy payments platform via iTunes, and Amazon, which also offers developers a mobile payments platform.

So far, the mobile payments industry in the U.S. mostly consists of buying-and-selling digital goods, such as music, or virtual goods in Facebook games. The industry has failed to break into physical goods because of the significant revenue splits demanded by all the parties involved. The cuts make it financially impossible to sell something that doesn’t have ridiculously high profit margins.

But that’s also expected to change, according to more than 30 percent of the respondents, who expect “selling of non-digital goods on mobile” to gain traction in 2011.

The survey was conducted by Chetan Sharma Consulting, which received responses from 225 executives. Thirty-three percent of participants were C-level executives, and 55 percent were from North America.

Another figure that points to mobile’s increasing influence on the retail industry was in response to the question: “Which enterprise segment will mobile impact the most?” The top answer–by far, with nearly half of the votes–was retail. Other answers included: Sales (less than 20 percent) and health (less than 20 percent).

Mopay Managing Director Kolja Reiss told eMoney that 2010 was an instrumental year for mobile payments as it became a major focus for wireless operators. Mopay, a mobile payments provider, recently expanded to the U.S. from Europe after opening an office in Palo Alto, Calif., this year. “I think what has changed is that all the [U.S.] carriers now have mobile payment specialists in house. A couple of years ago, they didn’t know how to treat it or how to maneuver their way around. They have dedicated people and there’s tons of initiatives that are based on those people.”

At the minimum, this year should see heated competition, with many players launching alternative products in the space. “We aren’t alone,” Reiss said, “which makes it even more interesting. There’s a race going on right now on who has the best product.”

Amdocs-owned OpenMarket, which has been handling payments for ringtones and other mobile content for years, is also forecasting that this year mobile devices will increasingly become an alternative to credit cards, especially for purchases under $25. Jay Emmet, general manager of OpenMarket: “Operators appetite for non-traditional services is increasing. They have competitive advantages, that a Google doesn’t have. They have a billing relationship with you.”