Mobile payment, still a nascent service, is expected to reach 32.9 million users worldwide in 2008 and grow to 103.9 million users in 2011, according to a study released by Gartner. While Wireless Application Protocol (WAP) sites are currently the most popular for accessing banking information, short message service (SMS) will remain the dominant mobile payment technology through 2011.

Gartner defines mobile payment as paying for a product or service through SMS, WAP sites, Unstructured Supplementary Service Data (USSD) or Near Field Communications (NFC), a payment service popular in Asia today. All these forms of banking on the go are becoming more prevalent as the mobile market continues to grow. The Asia-Pacific region had the most mobile payment users in Gartner’s global study, with a projected 28 million users in 2008 – 85% of the worldwide total. Western Europe is expected to have 499,000 users in 2008, while North America is projected to have one million users.

“Over here, it is more about a convenience,” said Garnter analyst Tole Hart. “The banks and the carriers are fighting over who gets what piece of the action. If [carriers] can put the banks on their portals, they can get a partial payment on their credit card. Credits companies don’t want to give that up…It is on-the-phone payments in a convenient arena where you are buying something extra; where it allows you to have more convenience than you would waiting in line or paying by credit card.”

The study attributed North America and Western Europe’s slower growth in mobile banking to the more established nature of the payment infrastructure already in place and a higher sensitivity to security. As more advanced mobile payment technologies like NFC make their way to the U.S., the landscape could begin to change. Consumers will appreciate the convenience factor associated with contactless mobile payments, Hart said, and carriers and banks will appreciate the extra revenue streams garnered from mobile banking.

“There is some revenue potential for mobile carriers in terms of credit payments on the phone,” Hart said. “For the banks, they are going to get a bigger cut of the credit card payments. They’ll have more revenue than the carrier, and they’ll get some cost savings from people doing electronic payments. Banks have to think of it the other way too – if is just over the credit card, they get the whole amount. Over the phone, they have to give the carrier a certain amount. But a lot of these purchases will be extra, impulse purchases or for convenience. Do I wait in line for these snacks or do it more conveniently with a phone?”

Outside of banks and carriers, financial institutions want a piece of the action as well. In an unrelated report also released this week, Aite Group’s study of top U.S. financial institutions found that mobile banking, e-mail communications and enhanced fraud detection are the top three application purchases or homegrown developments large U.S. financial institutions will institute during the next 24 months. The survey studied financial institutions’ – ranked by number of checking accounts – use of online and mobile banking technology applications from January to March of this year.

The results determined that enhancing fraud protection, leveraging new channels like mobility or enhancing existing channels like email will dominate online banking technology buyers’ plans going forward. Of institutions surveyed, 59% were likely to very likely to deploy a mobile banking application in the next 24 months, while 41% indicated they would likely deploy a mobile bill payment application.

“The areas where you will see the biggest growth for bill payments will be things like PIN-less debit transactions,” said Nick Holland, Aite senior analyst that covers mobile banking payments. “Mobile is not really seen as particularly a bill-pay channel, or if it is, it is seen as an extension of existing online bill pay. It is being actioned by phone, but that would be it’s still essentially the same as your online system. In terms of Web bill pay volumes, that is going to grow about 15% in the next four years.”

Holland said that while there are a variety of mobile banking solutions like the ones Gartner identified, most use some element of SMS – typically for real-time alerts of abnormal account activity or balance fluctuations. Holland agreed with Hart that the most common method of mobile banking now is through WAP sites on the phone.

“Mobile banking is very simple at the moment, deliberately simple,” Holland said. “Banks don’t want to intimidate end users. You can check your balance or move money between accounts. It is not very sophisticated, but they are looking for more sophisticated services in the near future – things like bill pay.”

Despite the anticipated surge in online banking, the traditional method of checks and snail mail is not going anywhere anytime soon. Checks will continue to double any other format of bill payment for the foreseeable future, Holland said, adding the that the compound annual growth rate will continue to drop by about 6% every year until 2010. “Bill pay is not going to suddenly migrate to some other channel, certainly not mobile,” he said. Aite is expecting about 35 million users in the U.S. by the end of 2009.

“It is down to the technology can support it now,” Holland said. “Even your most basic phone will be able to do text messaging. On top of that, there is a very high likelihood that if you have a phone in your pocket, it is Java based. The U.S. was a bit of laggard in terms of mobile banking adoption, but the majority of the U.S. population has used text messaging. The networks and handsets are capable. The previous third leg that was not quite there, the end user adoption, is getting there. It is pretty likely to succeed at this point in time.”