The prospects for the emerging technology are considered in a public policy discussion paper issued by the bank, which suggests that the investment costs currently outweigh the potential benefits.
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, suggests the paper. On the supply side, low market concentration and strong competitive forces of banks and mobile carriers make coordination of standards difficult.
"Although it appears that some useful standards, both proprietary and open, will be available in the short or medium term, they will not be widely adopted until a business model develops that gives industry participants incentives to support this product, or until consumer demand for mobile payment services increases substantially," the paper concludes.
It suggests that the Fed could intervene in a policy push to establish appropriate regulatory oversight for mobile payments and encourage private industry stakeholders to work together to establish common industry standards.
Download the full analysis directly from the Boston Fed at http://www.bos.frb.org/economic/ppdp/2010/ppdp1002.pdf