The Western European mobile money market is finally set to take off and will be worth up to EUR5 billion by 2013, according to research from Frost & Sullivan.
Frost & Sullivan says that both wireless operators and banks are turning to mobile transactions in a bid to foster loyalty and drive revenues and that customers are becoming more receptive.
So far the technology has gained most traction in the developing world as a way to provide the unbanked with financial services.
In the developed world, providers are still attempting to get users comfortable by concentrating on services such as balance checks rather than transactions.
Frost & Sullivan says SMS-based services will drive growth in the short term but that once issues surrounding hardware costs and mass market availability are overcome, NFC-based contactless payments could prove the "pot of gold at the end of the rainbow".
Sharifah Amirah, principal analyst, Frost & Sullivan, says: "Growth will be driven by high frequency and low-value transactions supported by widespread, cashless transaction systems that are cost-effective and secure."
Amirah warns that if m-payments are to take off, concerns about security, the lack of regulation on mobile transactions, quality of service, high costs and limited collaboration between different participants still need to be addressed.
However, these hurdles are being tackled and several trials and small-scale deployments are being carried out, particularity in Eastern European markets and collaboration between banks and wireless operators is improving.
Says Amirah: "Once there is trust, security and greater interoperability, only then will there be growth in proximity transactions and m-commerce."