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Archive for May, 2012

Start-Ups Build the Mobile Payment Ecosystem

May 31, 2012 in Uncategorized | Comments (0)

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There’s been lots of hype in the North American market recently about mobile point-of-sale (POS) startup Square—and for good reason. The company has made a habit of revealing impressive stats about its rapid growth. For example:
• It processes at a rate of $5 billion USD per year (up from $3 million a year ago, and $4 billion in March).
• That divides up into about $416 million per month (compared to $11 million just last month).
• As of December 2011, the company had signed up over one million merchants.

Square and its disruptive cousins, including Intuit’s GoPayment and Swiff, make it easy for merchants to accept credit card payments using smartphones and tablets. Their simple, elegant solutions are creating a new ecosystem and accelerating mobile POS without waiting for the big players.

Even though they’re still processing payments through Visa, MasterCard and American Express, the startups are doing so well in part because they offer merchants a better deal. They provide for a market that would normally be unable to access card processing, and previously only accepted cash. In addition, Square just announced it’ll deposit funds in its merchants’ accounts by the next business morning for all transactions that go through before 5PM. Traditionally, merchants have had to wait two-to-five business days.

Square has also recently expanded its offerings to include a new mobile payment app for consumers. People with the app can pay at any merchant with a Square mPOS without even swiping a card. Compared with the successful Starbucks Mobile app, this solution is so interesting because it’s open and has tremendous growth potential. Starbucks Mobile is so successful because the company has a large and loyal following that buys coffee every day. Preloading the app with a credit card payment so they don’t need cash is a convenience, and getting the loyalty points is a bonus. For companies that sell products we buy less frequently to a smaller clientele, say books or appliances, the same kind of closed-loop system wouldn’t work as well. Something like Square’s growing ecosystem just might crack the code—or at least get us one step closer to a widespread mobile payments ecosystem.

Startups success doesn’t mean that the big players are out of the mobile payments game. Square is displacing some acquiring banks and the POS terminal suppliers, but Visa is a major investor in the company. MasterCard’s new Mobile Money Partnership Program (MMPP), in which Sybase is a partner, aims to deliver financial services to the unbanked and under-banked through mobile phones. The natural extension of the MasterCard approach is leveraging merchants.

These initiatives have potential to work together to create open payments systems and extend coverage from mobile wallets to payment through mobile POS. Nowhere are mobile payments poised for greater success than in emerging markets where POS infrastructure is limited. The main reason people don’t have bank accounts in these markets is that they lack access to banks—yet most people have mobile phones. That’s all well and good, but doesn’t make a success story unless there are also merchants who accept mobile payments.

The challenge is to create interoperability for mobile payments, so consumers can pay as easily with their mobile device as with cash or credit. Square, the MasterCard MMPP and solutions like Telefónica’s mobile wallet that are focused on interoperability will drive the market forward.

Mobile Payments: Marching On

May 23, 2012 in Uncategorized | Comments (0)

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Leading up to the CTIA Wireless Event in New Orleans earlier this month, there was some anticipation around a potential update on the timing for widespread availability of a NFC mobile payment deployment from Isis, the mobile payments joint venture between Verizon, AT&T and T-Mobile. Not surprisingly, it looks like we will have to wait a little bit longer to hear news about when we may actually start to see real progress in the availability of NFC. But as we march ahead on the mobile payments battlefield, we need to look beyond NFC and ask ourselves who are the key industry players in the mobile commerce war? And are they doing enough to educate consumers about the service’s security features and their benefits? The answer: probably not.

There’s been a lot of chatter in the media about whether NFC could be the missing link the mobile payments industry needs to achieve widespread adoption, but we’re not addressing the fact that mobile payments do exist without NFC, and are widely adopted all over the world. Americans tend to have a limited view of the world, so let’s take a look at our own market. Here, in the U.S., the mobile payments ecosystem is disjointed. In fact, it’s a bit of a mess.
This year we polled attendees at both Mobile World Congress in February and last week at CTIA to try and uncover what industry experts believe is holding mobile payments back. And in both cases, the overwhelming majority (76% and 71% respectively) of respondents cited that perceived security threats and lack of coordination among key industry stakeholders are the main obstacles to widespread adoption of mobile payments.

Security isn’t a threat to mobile payments adoption; it’s the perception that mobile payments are less secure than traditional payments. To date, the industry has failed to establish clear standards and ensure that everyone plays by the same rules.

Which players in the mobile payments industry are likely to succeed in facilitating widespread adoption of mobile payments? Almost half of our respondents at CTIA (47%) believe that financial service providers such as the banks and credit card companies are most likely to succeed in driving adoption rates.
There’s a clear disconnect between the service that mobile payment players are trying to deliver, and what consumers understand to be the value or benefit. Part of the problem with mobile payments in the U.S. today is that the credit card system works. There’s no flaw with plastic payments as they are, but in order to entice consumers to engage in a new way of doing things, there must be an added benefit.

This year’s CTIA survey results reveal that there’s still an unwillingness amongst consumers to pursue mobile payment options, and right now they’re not very optimistic the industry will be able to come together in the next year or so to deliver enough incentive to make mobile payments attractive enough.
NFC could very well become a universal standard, but it’s far from a sure thing. 84% of those polled at CTIA believe it’s still at least two to five years away. With all of the different providers looking to compete in the mobile payments space, they will need to find a way to come together, interoperate and make life easier for the consumer.

Plastic payments won’t be eliminated, but the industry will need to facilitate an extension of payments beyond the credit card, giving consumers more options. And consumers won’t consider the mobile option until the industry works together to develop standards and they understand the benefits. Until then, we’ll keep marching on.