Consumers need to be sold on benefits of mobile payments

The way people have been talking about near field communication, digital wallets and carrier billing, you’d think consumers were ready to embrace mobile payments. But Consumer Reports thinks consumers may not be that excited yet about paying for goods with their phones, nor should they be.

The consumer advocacy organization highlighted transaction problems and fees when warning about potential hurdles standing in the way for mobile payments. Consumer Reports said only 5 percent of recent survey respondents had used their cell phone to pay for day-to-day purchases in the previous month, and only 10 percent had billed a purchase to their home or cell phone account.

The low usage number isn’t completely surprising, given that mobile payments are still quite new to most people, but it underscores the challenges ahead in getting consumers to opt-in to the tech. Many are open to the idea, but there needs to be a good case for ease of use and added flexibility. Payment processes like near field communication require new hardware purchases and some changes in behavior. The challenge for Google (s goog), the carrier consortium Isis and others pursuing NFC payments will be to convince consumers that it’s clearly a better option than swiping a card, which is pretty familiar and easy for people.

Consumer Reports said consumers will need to consider how different payment methods handle problems and errors. It found that one in four respondents said they had an unauthorized charge, billing error, non-credited payment, or other problem in the last year when paying for purchases or paying bills. The frequency of those problems could present issues for the growth of mobile payments if left unchecked.

The publication said digital wallet payment services linked to a credit card offer the most protection. Payment methods based on prepaid debit cards offer few guaranteed protections, while direct billing is affected by wireless operator contracts, which Consumer Reports said provides less protection generally that credit-card based payments.

Another issue is the cost of transaction fees for mobile payments, many of which are tied to credit and debit cards and carry the same fees. In most cases, consumers won’t be saving any money with mobile payments, Consumers Reports said.

Now Consumer Reports is going to be conservative here as it looks to protect consumers. But it’s a good reminder that with all the hype around mobile payments, payment providers will need to tell a good story about why this is all necessary. People paying with a wave of their phone makes for a nice commercial, but there’s more to it than that. Consumers will need to know that it’s really that easy, and perhaps more importantly, that it’s safe and secure.

This, however, opens opportunities for companies that can better convey the benefits of mobile payments, or of their particular approach. Mobile payments are expected to take off in the coming years, and could generate $670 billion by 2015. But I think for it to gain more mainstream momentum, the industry will need to show the value of mobile payments to consumers and merchants alike.

You can hear more about mobile payments at GigaOM’s Mobilize Conference on Sept. 26 and 27 in San Francisco, where we’ll be discussing the issue during a panel called: Mobile Payments 2012: Will This Be the Year?