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Mobile payments in the United States at retail point of sale: current market and future prospects

Author

Listed:
  • Marianne Crowe
  • Marc Rysman
  • Joanna Stavins

Abstract

Although mobile payments are increasingly used in some countries, they have not been adopted widely in the United States so far, despite their potential to add value for consumers and streamline the payments system. After describing a few countries’ experiences, we analyze the prospects for the U.S. market for mobile payments in retail payments, particularly the use of contactless and near-field communication technologies. We identify conditions that have facilitated some success in other countries and barriers to the adoption of mobile payments in the United States. On the demand side, consumers and merchants are well served by the current card system, and face a low expected benefit-cost ratio, at least in the short run. On the supply side, low market concentration and strong competitive forces of banks and mobile carriers make coordination of standards difficult. Furthermore, mobile payments are characterized by a network effects problem: consumers will not demand them until they know that enough merchants accept them, and merchants will not implement the technology until a critical mass of consumers justifies the cost of doing so. We present some policy recommendations that the Federal Reserve should consider.

Suggested Citation

  • Marianne Crowe & Marc Rysman & Joanna Stavins, 2010. "Mobile payments in the United States at retail point of sale: current market and future prospects," Public Policy Discussion Paper 10-2, Federal Reserve Bank of Boston.
  • Handle: RePEc:fip:fedbpp:10-2
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    References listed on IDEAS

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    1. Stijn Claessens & Luc Laeven, 2004. "What drives bank competition? Some international evidence," Proceedings, Federal Reserve Bank of Cleveland, pages 563-592.
    2. Julia S. Cheney, 2008. "An examination of mobile banking and mobile payments: building adoption as experience goods?," Payment Cards Center Discussion Paper 08-06, Federal Reserve Bank of Philadelphia.
    3. Terri Bradford & Fumiko Hayashi, 2007. "Complex landscapes: mobile payments in Japan, South Korea, and the United States," Payments System Research Briefing, Federal Reserve Bank of Kansas City, issue Sep.
    4. Terri Bradford, 2008. "Developments in interchange fees in the United States and abroad," Payments System Research Briefing, Federal Reserve Bank of Kansas City, issue Apr.
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    Cited by:

    1. Schuh, Scott & Stavins, Joanna, 2014. "The 2011 and 2012 Surveys of Consumer Payment Choice," Research Data Report 14-1, Federal Reserve Bank of Boston.
    2. repec:bof:bofrdp:urn:nbn:fi:bof-201511261452 is not listed on IDEAS
    3. Hayashi, Fumiko & Bradford, Terri, 2014. "Mobile payments : merchants’ perspectives," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 33-58.
    4. Schuh, Scott, 2017. "Measuring consumer expenditures with payment diaries," Working Papers 17-2, Federal Reserve Bank of Boston.
    5. Mariotto, Carlotta & Verdier, Marianne, 2015. "Innovation and competition in Internet and mobile banking: an industrial organization perspective," Research Discussion Papers 23/2015, Bank of Finland.
    6. Zura Kakushadze & Ronald P. Russo Jr, 2018. "Blockchain: Data Malls, Coin Economies and Keyless Payments," Papers 1802.07422, arXiv.org, revised Apr 2018.
    7. Stavins, Joanna, 2017. "How do consumers make their payment choices?," Research Data Report 17-1, Federal Reserve Bank of Boston.
    8. Carlotta MARIOTTO & Marianne VERDIER, 2015. "Innovation and Competition in Internet and Mobile Banking: an Industrial Organization Perspective," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(99), pages 129-146, 3rd quart.

    More about this item

    Keywords

    Mobile commerce - United States ; Payment systems;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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