A study released on Wednesday by KPMG, a professional services network, found only 23% of consumers were willing to use mobile payments in place of other forms of payment, with 30% of younger adults much more willing to do so. One major obstacle to universal adoption of mobile payments is doubt among consumers and some companies that paying with one's smart phone is secure and easier than using a credit or debit card or cash.
Shoppers in cities such as New York, San Francisco and Chicago are warming up to the idea of paying by phone, but it will still take another two to four years for widespread adoption, potential participants in the mobile payment  industry said.
Richard Mader, head of the technology division of trade group National Retail Federation , said, "Multiple things must come together. Mostly, consumers need to have the right amount of knowledge and education about the technology, and retailers must be able to accept mobile payments."
Others, such as Marc Freed-Finnegan Sr, business product manager of Google Wallet, agreed.
"Just the act of paying with your phone is a new thing for most of us. We're also working hard to educate people about why mobile payments represent the future of commerce," said Finnegan.
Still, it is hard to ignore the small but growing pay-by-phone market. Research firm Aite Group  expects the pay-by-phone transactions to total $2.1 billion in 2012 and $22.6 billion by 2015.
While the long-term potential seems huge, near-term hurdles related to security  concerns, availability of contactless payment machines and installation costs for retailers are working against the initiative. In the United States, only about 500,000 NFC readers (contactless payment machines) have been installed at retailers' point-of-sale locations or checkout registers.
"We feel that it will take time," said David Marcus, vice president of mobile at eBay's PayPal unit. "We don't want to ... solely rely on NFC to go offline in a big way."
PayPal is watching developments in mobile payments but also getting ready to roll out a "wallet in the cloud " initiative that lets shoppers pay using their computers, cell phones and cards that give access to their coupons, or by simply typing their mobile number and pin at checkout counters.
Amid other challenges, 71% of 970 companies surveyed by KPMG  (Amstelveen, Netherlands) said they believed they must overcome security concerns to succeed in mobile payments.
"2012 will be about a beta and expanding that beta test. It will take some time for these this to become mainstream," said Thomas Kunz, senior vice president at PNC Financial. "There are 11 million merchants in the United States, and nobody's being paid to make this change. Using a phone instead of a card is not such a big deal, at least right now."
Telecom competitor Sprint (Overland Park, Kan., USA) meanwhile has joined with a host of companies in another joint venture. In it Google  (Mountain View, Calif., USA will supply Google Wallet software that today can hold MasterCards issued by Citi, and FirstData will provide infrastructure for securely delivering payment credentials to Google Wallet.
Google has also signed agreements with Visa,  American Express and Discover, and hopes to include their cards in Google Wallet, Freed-Finnegan told Reuters.
Starbucks, which has had a lot of success with its own mobile apps is also optimistic about the potential of mobile payments.
"It will be a big deal. It is just a matter of time," said Adam Brotman, senior vice president and general manager of Starbucks Digital Ventures.
Despite the lack of immediate rewards, some store chains are currently testing the payment method, and more merchants are expected to join the pay-by-phone bandwagon in 2012.
American Eagle Outfitters, Container Store, Foot Locker, Guess, Jamba Juice, Macy's, OfficeMax, Toys R Us and Gap are among the chains that let shoppers use "Google Wallet."
"It's still very early, but the goal is to make the AEO shopping experience as fun and convenient as possible. Our customers are rarely without their smartphones, so any engagement that connects with them through these devices tends to be effective," said Jani Strand, a spokeswoman for American Eagle.
Currently about 200 Toys R Us and Babies R Us stores let shoppers pay using their smartphones.
In addition to the playing the convenience card, many such as MasterCard and Google said the pay-by-phone method is actually safer than regular credit card transactions.
Purchases by phone are safer because of the added software limits in place to keep people from accessing your data improperly, whereas they can just swipe a number off a debit card illicitly, MasterCard executive Mario Shiliashki said.
Also, consumers are more likely to carry their phone than anything else, because it has become a key social tether.
"You're more likely to leave your home without your wallet or your cigarettes than you are your phone. And I mention cigarettes because the phone has become more addictive than the most addictive substance out there," Shiliashki said.
(Reporting by Dhanya Skariachan in New York and Joe Rauch in Charlotte, North Carolina; Editing by Steve Orlofsky)