Despite retailers’ enthusiasm for mobile payment, consumers don’t want it, providers can’t offer it, and technology can’t support it, according to a new Report by Forrester Research B.V. (Nasdaq: FORR). These issues will not be resolved in the first half of this decade, limiting mobile payment to €26 billion in 2005. Of the five segments for mobile payment that Forrester analyzed, payment for mobile content will claim nearly half of the €3.2 billion in mobile payment gross profit generated over the period.
“While online and brick-and-mortar retailers believe that mobile payment will account for 10% of their transaction value in three years, Forrester believes this is actually at least a decade away,” said Michelle de Lussanet, analyst at Forrester. “Three barriers will limit the penetration of mobile payment for the next five years: consumers aren’t ready to change their payment behavior; providers will continue to resist collaborating on full-featured services; and easy-to-use, cheap, secure, and standardized technology will take years to roll out. Also, European consumers don’t trust a mobile payment system and have historically resisted attempts to change their payment habits.”
Forrester incorporated these factors into a forecast model of mobile payment in Europe, drawing on consumer spending data from organizations like the ECB and Eurostat. We project that mobile payment will amount to only €26 billion in 2005 — €87 per mobile phone user per year — and just 0.5% of consumer spending, excluding housing and vehicle purchase.
While payment for mobile content dominated last year’s market, totaling €51 million, leadership will shift to low-value mobile payments in the real world in 2003, like vending machine payments; it will finally move to higher-value mobile payments like supermarket grocery payments in 2005. Although stable growth will lead mobile content payment to €5 billion in 2005 — €7.40 per user per year — its share of the mobile payment total will drop from 50% in 2000 to 20% in 2005. Forrester expects only €27 million from higher-value payments on the PC-based Internet for goods like CDs. Low-value mobile payment for PC-based Internet content, like pay-per-use news articles, will never take off.
Belgium, France, Greece, Luxembourg, and Spain will adopt mobile payment slowest, averaging €3.47 per mobile user per month in 2005. Austria, Ireland, Italy, the Netherlands, Portugal, Switzerland, and the UK will see an average of €6.77 per mobile user per month in 2005. The Nordic countries plus Germany will lead in mobile payment adoption, averaging €10.90 per month in 2005.
“Operator margins of 30% on content services today will drop to 10% in 2005 as competition increases, but volume gains will still yield a gross profit opportunity of €1.4 billion from 2000 through 2005,” de Lussanet added. “Real-world micropayment will hit nearly €1 billion gross profit and ensure that premium margins drop only slightly from 10% today to 7% in 2005. Real-world macropayment will yield €666 million over the next six years, and more than half of that will appear in 2005. Internet macropayments will show low returns of €201 million over six years. Finally, Internet micropayment is a waste of time and is so small that total gross profit over the period will reach a mere €3 million.”
For the Report “Mobile Payment’s Slow Start,” Forrester spoke with 50 European retailers in three categories:
10 service retailers, 20 online retailers with an average revenue of €4.4 million per year, and 20 brick-and-mortar retailers with an average revenue of €7.1 billion per year.