Your mobile phone is becoming your wallet
By Laurie Segall, staff reporter
(NEW YORK (CNNMoney) -- Welcome to the dawn of mobile currency.
For years, tech companies have demoed flashy prototypes of systems that let customers use their mobile phones in place of cash or credit cards. This year, those systems are heading out of the labs and into the real world.
The result: A gold rush on the next e-commerce frontier.
"There's a lot of money at stake if it's done right," says Omar Green, director of strategic mobile initiatives at Intuit (INTU).
Starting Wednesday at Starbucks (SBUX, Fortune 500) stores throughout the U.S., the cashier can now scan your phone to deduct payment for your latté from the balance on your pre-loaded Starbucks card. Splitting the dinner bill with a friend? Download Bump, and you can beam over the cash from your PayPal account.
Those transactions are small sliver of a global mobile payments market analysts estimate at $69 billion in 2009, the latest year for which data is available, according to research firm Generator Research.
But by 2014, it expects mobile payments to reach $633 billion annually, with 490 million customers using their phones to move cash around.
The battlefield: The mobile payments space right now is a primordial soup. Both new and entrenched players are battling about fundamental aspects of how the market will work.
Issue number one: How many middlemen will there be?
PayPal created an empire for itself by making it easy for consumers to send money online to friends and merchants. Rivals like Google Checkout and Revolution Money never gained much traction.
The company is determined to extend its dominion. "We are already the leader in mobile payments," says Laura Chambers, senior director of PayPal Mobile. "We're going to continue to innovate, and we're getting very aggressive about mobile payments in the next two years."
PayPal, a unit of eBay (EBAY, Fortune 500), processed $700 million in mobile payments in 2010, according to Chambers. While that's a small fraction of the more than $70 billion a year PayPal handles, it's an increase of almost 500% increase over the prior year's $141 million mobile total. PayPal's platform is an easy one for developers to build on top of, and the company has been actively striking integration deals.
But PayPal sits in the commerce market's shaky middle ground. It doesn't control the financial network payments run through -- that's in the hands of companies like Visa (V, Fortune 500) and MasterCard (MA, Fortune 500) -- and it doesn't control the devices consumers use, or the data networks their transactions happen on.
The companies that do control those things are determined to get their piece of the action.
Three of the nation's biggest wireless carriers -- Verizon Wireless, AT&T (T, Fortune 500) and T-Mobile -- teamed up in November to create Isis, a new mobile commerce network the carriers hope to have up and running within 18 months. Working around the Visa/MasterCard duopoly, they picked Discover Financial Services (DFS, Fortune 500) as their financial services partner.
Banking giants Visa, Bank of America, JPMorgan Chase, and Wells Fargo have also been testing technologies that would transform a smartphone into a wallet.
What happens next: The looming game-changer in mobile payments is a technology called "Near Field Communication" (NFC), which swaps data over very short distances.
Put a NFC chip -- for example, one built into in your smartphone -- near an NFC reader and you don't need to awkwardly scan a bar code on your phone or send a text message to transfer money.
Key mobile players are on board. Just months ago, Google CEO Eric Schmidt said that the next version of Google's Android would include tap-and-pay functionality and "could replace credit cards." Apple recently hired an NFC product-development veteran to lead its mobile commerce efforts.
"The lifecycle of a phone is fast: 18 months. If some of the big players -- like Apple, RIM, Google and Motorola -- all get going with NFC, it could be a standard within two years," says VeriFone CEO Doug Bergeron.
5 ways to pay with your phone right now
Developers are currently kludging together workarounds. Startups like Blaze Mobile and Bling Nation are pushing stickers with embedded NFC chips. Slap one on your phone, and you can use it to pay at participating merchants that have installed compatible NFC readers.
That's where VeriFone (PAY) comes in. The 30-year-old company makes point-of-sale systems that are used by millions of U.S. merchants. VeriFone is experimenting with the pay-by-phone market, striking partnerships with many of the field's pioneers, including PayPal and Bling Nation.
"We're going to play the role of Switzerland," Bergeron says. "The more the merrier in our view."
The scramble: In a year or two, NFC technology will be more widespread. Isis will be closer to launching. The battle lines will harden.
But for the moment, it's anyone's game.
"There's no cut and dry 'this is how to do it' approach," says Nick Holland, a Yankee Group senior analyst. "In the U.S., it's going to be the Wild West, since anyone can play in this space."
Quick-moving startups are charging in. Last week, investors poured $27.5 million into Square, a venture launched in 2009 by Twitter cofounder Jack Dorsey. Square lets mobile merchants accept credit-card payments on their phones.
Venmo is another startup the tech world is buzzing about. It allows users to text each other money -- and just like PayPal did a decade ago, it's actively cultivating a developer ecosystem of apps built on top of its platform.
Venmo raised about $1 million in seed funding last year and is currently in beta testing, with plans to officially launch by mid-2011. (CNNMoney readers can sign up and try it out by following this link.)
"There's a lot of time for these smaller players to make some noise," Intuit's Green says of the scrum.
Holland predicts there will be much noise before clear winners emerge: "There's going to be quite a lot of fragmentation."
We're still in the early days, and it'll be years before smartphones are ready to completely wipe out cash and credit cards.
But don't be surprised if sometime this year, you find yourself handing over your iPhone to pay for a Frappuccino.
Ditch the plastic, pay with your phone
Cash, credit or iPhone? Here are a few of the growing number of ways your smartphone can replace your wallet.
Scan your phone
No more fumbling for your wallet when you want a latte. Starbucks' mobile app, available for the iPhone and BlackBerry, allows users to essentially replace their Starbucks card with their phone.
Download the app, enter in your Starbucks card number, and your phone will display a barcode that can be scanned at the checkout counter. Users can track their balance on their mobiles, but the real selling point is the ability to order and pay quickly -- vital during a morning coffee rush. To reload the card, customers can link it to a debit, credit card or PayPal account
Starbucks started testing mobile payments in September 2009 in a handful of Bay Area and Seattle shops. On Wednesday, it expanded the effort to all 6,800 of its stores throughout the U.S.
By Laurie Segall, staff reporter
Skip the lines at the ballgame
For sports fans, there's nothing worse than waiting in line for food and missing out on a home run or touchdown. The solution: Order and pay right from your seat through your mobile phone.
The New Orleans Saints experimented with the idea way back in 2001, when the team tried out a custom-built system at the Superdome that worked on BlackBerrys, Palm PDAs and WAP-enabled cell phones. Of course, phones are smarter now -- making it much easier to tap out your snack order. Major League Baseball's official At Bat app now has that functionality baked right in, letting customers at the Philadelphia Phillies' Citizens Bank Park click away to summon cheese steaks.
Another upstart, iConcessionStand, won the $100,000 grand prize in a recent PayPal developer challenge. The app lets customers order and pay by phone, then alerts them when their food is ready for pickup. So far, it's only been in action at Seattle's Safeco, but stay tuned for it to hit more ballparks this year.
Split the bill via text
It's a common plight: You're at dinner trying to split the bill with friends, and no one has cash on them. Enter Venmo, a Philadelphia startup that lets you connect your bank account to your phone and transfer money on the fly. Once you link your account to a friend's, you can transfer money to them by text or through Venmo's app.
"We started using it with each other, then we invited a few friends and it turned out they really liked the product," cofounder Iqram Magdon-Ismail says of Venmo's creation. He envisions roommates using it to split the rent, or friends digitally ponying up for movie tickets.
The Venmo app is now in beta testing, with plans to officially launch in mid-2011. CNNMoney readers can give it a whirl by signing up through this link.
Accept credit card payments on your phone
Credit cards can be a nightmare for small-scale or mobile business owners. But it's getting easier to take them, thanks to a wave of devices that turn mobile phones into swipe machines.
The splashiest is Twitter cofounder Jack Dorsey's Square, a small gadget that hooks on to an iPhone or Android phone. Without having to set up a merchant account or pay monthly fees, small businesses can plug into the payment system. Other rivals in the space include VeriFone's PayWare, Intuit's GoPayment and North American Bancard's Pay Anywhere.
Bump phones, swap $$
Like Venmo, the market Bump targets is casual payments between friends. The app makes connections between smartphones when users "bump" them together, allowing them to swap info.
Linked users can share photos, contact info, calendar details -- and cash. In March, PayPal integrated Bump into its mobile app, making moving money as easy as tapping a button.
Credit: CNN (www.cnn.com)
No comments:
Post a Comment