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Posts Tagged ‘Square’

Battle at the POS Heats Up

November 13, 2012 in Uncategorized | Comments (0)

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In September of this year, mobile payments provider Square announced that it had raised $200 million. Investors included, among others, Starbucks Coffee Company—a surprise for many in the mobile payments industry, as Starbucks has been so successful with its own app.

The press release about the funding includes some impressive numbers. Last fall (2011), Square had about 150 employees and processed about $1 billion in payments (annualized). This fall, it has over 400 employees and processes over $8 billion in payments (again, annualized). Talk about explosive growth.

Square pioneered a new point of sale (POS) by allowing small businesses and consumers to accept credit card payments via their mobile devices. Several Square-like equivalents have popped up lately, including PayPay Here, iZettle in Europe and Tortuga in Asia.

Now it’s clear that Square is onto something new. Its Pay With Square app allows consumers to pay for purchases by simply telling the cashier their name. GPS and a few apps cooperate behind the scenes to take care of the rest—no credit card swipe required. (See my earlier post for details.)

Square’s success is certainly helping to fuel the battle at the POS not only in terms of where the payment is taken, but also in the method of payment. Back in May, Visa and MasterCard both entered the ring in an effort to defend their long-established market dominance. Each launched its own “digital” wallet service—not “mobile” wallet, mind you. Yet.

Visa’s solution, called V.me, is made for online transactions. It stores your credit card, billing and shipping details, allowing you to pay for online purchases by providing only your V.me email address and password to the merchant. It’s not tap-and-pay, but it’s a start. And the company says it plans to introduce the mobile aspect soon via NFC, QR codes or other technology that would allow tap-and-pay, scan-and-pay or something similar.

MasterCard’s answer is PayPass Wallet, which expands on the PayPass brand that does currently offer tap-and-go NFC payments (i.e. Google Wallet). The new addition, PayPass Wallet, is also geared toward online purchases, storing the necessary card, shipping and billing details and allowing you to check out faster, though via a special button on the websites of participating merchants (or in their mobile apps). And like Visa, MasterCard says it has plans to roll out to points of sale at some point in the future, but offers no specifics regarding timeframe or technology.

POS rookie Google Wallet continues to march on, working out the kinks, adding more credit cards, and steadily signing up merchants and users. One stumbling block continues to be the small range of compatible consumer devices. Isis, the NFC mobile payment joint venture between AT&T, Verizon and T-Mobile, just launched its pilots in Salt Lake City and Austin in October.

It’s an interesting battle to watch, and not only because of the different companies vying for control. Technology is developing so fast that NFC may already be yesterday’s news. We’re clearly still in the learning phase, with each solution providing valuable lessons for the next. Offerings are also moving from payment only to payment + additional value. And I think that “additional value” is the key to making mobile payments work. Check back soon for my follow-up post about how QR codes are entering the fray and may give NFC a run for it’s money.

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.