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Mobile Payments at the Retail Point of Sale in the United States: Prospects for Adoption

Author

Listed:
  • Crowe Marianne

    (Federal Reserve Bank of Boston)

  • Rysman Marc

    (Boston University)

  • Stavins Joanna

    (Federal Reserve Bank of Boston)

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. We summarize short-term and long-term benefits from mobile payments, and analyze the economic framework of that market. Both demand-side and supply-side barriers contribute to the lack of adoption of mobile payments. We contrast mobile payments at the retail point of sale in the U.S. with other countries' experiences and with examples of successful payment innovations in the U.S. Conditions that have facilitated some success in other countries and in other U.S. innovations are not present in the mobile payments market. 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

  • Crowe Marianne & Rysman Marc & Stavins Joanna, 2010. "Mobile Payments at the Retail Point of Sale in the United States: Prospects for Adoption," Review of Network Economics, De Gruyter, vol. 9(4), pages 1-31, December.
    • Handle: RePEc:bpj:rneart:v:9:y:2010:i:4:n:2
    DOI: 10.2202/1446-9022.1236
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    Citations

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    Cited by:

    1. Marc Rysman & Scott Schuh, 2017. "New Innovations in Payments," Innovation Policy and the Economy, University of Chicago Press, vol. 17(1), pages 27-48.
    2. Kevin Foster & Erik Meijer & Scott Schuh & Mike Zabek, 2011. "The 2009 survey of consumer payment choice," Public Policy Discussion Paper 11-1, Federal Reserve Bank of Boston.
    3. Mariotto, Carlotta & Verdier, Marianne, 2015. "Innovation and competition in Internet and mobile banking: an industrial organization perspective," Bank of Finland Research Discussion Papers 23/2015, Bank of Finland.
    4. repec:zbw:bofrdp:2015_023 is not listed on IDEAS
    5. Terri Bradford & Fumiko Hayashi, 2014. "Mobile payments : merchants’ perspectives," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 33-58.
    6. 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.
    7. Zura Kakushadze & Ronald P. Russo Jr, 2018. "Blockchain: Data Malls, Coin Economies and Keyless Payments," Papers 1802.07422, arXiv.org, revised Apr 2018.
    8. Joanna Stavins, 2017. "How do consumers make their payment choices?," Research Data Report 17-1, Federal Reserve Bank of Boston.
    9. Pengfei Han & Zhu Wang, 2021. "Technology Adoption and Leapfrogging: Racing for Mobile Payments," Working Paper 21-05, Federal Reserve Bank of Richmond.
    10. 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.
    11. Scott Schuh & Joanna Stavins, 2014. "The 2011 and 2012 Surveys of Consumer Payment Choice," Research Data Report 14-1, Federal Reserve Bank of Boston.
    12. Scott Schuh, 2018. "Measuring Consumer Expenditures With Payment Diaries," Economic Inquiry, Western Economic Association International, vol. 56(1), pages 13-49, January.
    13. repec:bof:bofrdp:urn:nbn:fi:bof-201511261452 is not listed on IDEAS
    14. repec:zbw:bofrdp:urn:nbn:fi:bof-201511261452 is not listed on IDEAS
    15. Scott Schuh, 2017. "Measuring consumer expenditures with payment diaries," Working Papers 17-2, Federal Reserve Bank of Boston.
    16. Chun-Yu Ho & Nayoung Kim & Ying Rong & Xin Tian, 2022. "Promoting Mobile Payment with Price Incentives," Management Science, INFORMS, vol. 68(10), pages 7614-7630, October.
    17. James Chapman & Jonathan Chiu & Mohammad Davoodalhosseini & Janet Hua Jiang & Francisco Rivadeneyra & Yu Zhu, 2023. "Central Bank Digital Currencies and Banking: Literature Review and New Questions," Discussion Papers 2023-4, Bank of Canada.

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