Where Silicon Valley leads, but citizens lag

Constance Gustke, Special to
Daniel Acker | Bloomberg | Getty Images

Joel Stanton shrugs at the idea of simply tapping his smartphone against a reader to pay for his coffee. The senior research manager at Lightspeed Research, in Warren, N.J., swiping a card is nearly as fast.

"I'm perfectly happy pulling out my credit card to pay for something," he said.

Stanton isn't alone.

Famous for Silicon Valley innovations and edgy start-ups, the U.S. lags many countries in consumer use of smartphones as wallets. Mobile payments will hit $235.4 billion globally this year, driven mainly by growth in Singapore, South Korea and India, according to Gartner Research.

Meanwhile, according to Lightspeed, just 1 percent of Americans use their smartphones to pay for anything.

Many parts of the world are going cashless—and quickly.

(Read more: Who will own mobile payments? Close eyes, point)

You'll be able to do anything. But for now, I must have five different mobile wallets.
Daniel Mattes
CEO of the mobile and online payment firm Jumio

In Europe, consumers merely tap their smartphones to pay for parking, meals, groceries or bus tickets. In Finland, people can buy Coca-Cola from vending machines using mobile cash. And Australians use tap and pay widely, for everything from buying food to paying the taxi.

The mobile-wallet market is fragmented, but Europe has sidestepped problems by pooling resources. Most countries have four or fewer dominant institutions, simplifying adoption, according to Wayne Johnson, senior research analyst for payment and transaction processing at Raymond James.

In Japan, which has had mobile wallets for years, people use smartphones to open buildings, buy airplane tickets, shop or bank.

"Japan is very electronic-centric," Johnson said.

Emerging countries such as Uganda, Tanzania and Kenya are going cashless rapidly.

"They skipped Internet payments and went straight to mobile," said Mary Monahan, a mobile analyst at Javelin Strategy & Research. One reason for that, she added, is the dearth of banks.

(Read more: Baidu now accepting bitcoins)

Security and privacy fears are part of the reason Americans are keeping their smartphones in their pockets when paying, according to a Federal Reserve study.

About 45 percent of all payments are still made with cash or by check, Johnson said.

Why cash costs Americans $200 billion a year
Why cash costs Americans $200 billion a year

The endurance of cash is costly—$200 billion per year for Americans, including the tabs they pay for using ATMs and checks, according to a study by Tufts University.

The time taken to get cash also entails costs, said Bhaskar Chakravorti, executive director of the Institute for Business in a Global Context at Tufts and co-author of the study.

Many experts blame entrenched networks, such as credit cards, as another reason Americans are being held back. U.S. credit and debit cards rely on magnetic stripes for swiping, a 40-year-old technology, for example, versus chip and pin cards read by electronic readers that the rest of the world is adopting quickly.

(Read more: Retail banks worst nightmare? Google)

Though many Android phones have these chips for near field communication (NFC), another obstacle is that many U.S. retailers have not installed readers that can work with a chip card.

"Only 1 million out of 8 million have been updated," Johnson said.

Several of the largest financial and telecom players are working to get their own mobile wallets up and running.

Isis, a mobile wallet venture spearheaded by Verizon, AT&T and T-Mobile, has been tested in the Southwest. Visa and MasterCard have their own wallets. And a consortium of a dozen big U.S. retailers, including Wal-Mart and Target, are forging a mobile payment network called MCX.

Time ultimately is on the side of a U.S. mobile system to handle tasks we still deal with like Luddites—boarding a plane, buying flowers, storing a passport.

"You'll be able to do anything," said Daniel Mattes, CEO of Jumio, a mobile and online payments company. "But for now, I must have five different mobile wallets."

By Constance Gustke, Special to