The first time I got a check for mowing the neighbor’s lawn, I was faced with a vexing problem. “What should I do with this slip of paper that I can’t directly take to the store?”

What an inconvenience to have to go the bank and deposit the check and wait for it to clear before spending my earnings!

Thankfully, the way we exchange funds keeps getting simpler and more convenient. New technologies and social changes are driving the development of new payment systems that can make all kinds of financial transfers easier, faster, and more ubiquitous than ever before.

Online payments may be the most truly portable and personal of all – but they’re still only a small part of the larger financial environment. Why haven’t they become completely mainstream?

The Only Thing We Have To Fear…

Online transaction authentication firm Entersekt‘s 2012 survey of online banking and purchasing found consumers remain split about carrying out online transactions on their mobile devices. Men are more inclined to participate (32%) than women (25%).

The big thing holding back further evolution of online payments seems to be fear. “In today’s world, consumers are not only aware that fraud exists, but many have either experienced it personally, or know someone that has,” wrote Enterseck’s CEO Schalk Nolte. “This criminality impacts all of us through increased insurance, increased prices, and increased hassle. However, what I think is interesting and actually quite comforting, is that people are happy to be inconvenienced if it means they’re better protected.”

Clearly, people need to feel comfortable using online banking and payments. But what will it take to make that happen?

Technology is part of the answer, especially encryption methodologies strong enough to keep out hackers without overly delaying transactions. Merchants and banks today exchange SSL (Secure Socket Layer) encryption protocols in less than three seconds, allowing for fast funds transfers. The residual authorization and payment settlements may take as long as three days.

Doing The Mobile Math

The spread of mobile devices are another key contributor to the growth in online payment transactions, according to a 2012 report by Ecommerce Europe (PDF). Some forecasts indicate that due to the rapid adoption of smartphones, by the end of 2013, 12.5% of all e-commerce transactions will be mobile.

“It needs to be stressed, however, that such prospects will not materialize unless online payment services providers keep constant track of market trends, consumer demands and competition in this challenging market environment,” Ulric Jerome, with Ecommerce Europe, said in the report.

Established financial services companies have not ignored the inroads from online payment providers – and they are essential to full adoption of these services. Banks, credit card issuers and other financial institutions are focusing efforts on customer satisfaction by supporting online and mobile devices. Ecommerce Europe suggests the next step for banks is to establish competitive online payment systems.

What Next?

As the number of people using online payments continues to grow, social factors are becoming just as important as the technology. Consumers are more likely to adopt new methods of currency exchange when they feel that everyone else is doing it too.

Achieving critical mass is, well… critical. Findings by researchers Andrew J. Setterstrom and J. Michael Pearson of Southern Illinois University at Carbondale suggest social influences affect people’s purchase decisions – as well as their online gaming behavior – in complex ways.

“While micro-level influences, such as attitude, arguably serve as the best predictors of [willingness to pay], we found that macro-level social influence, in the form of reputation, played the greatest role in affecting the formation of individual attitudes and behaviors,” Setterstrom and Pearson wrote.

Bottom line: The more people hear and see online payment systems in action, the more they will want to try them for themselves. In the meantime, only the bold are willing to go first.

Image courtesy of Shutterstock.