Mobile Payments with Smartphone

Mobile Payments - Ready for Prime Time?

Yes, you can now buy that turbo-mocha-frappe-latte at Starbucks with a wave of your mobile phone. But only if the device is a Blackberry, iPhone, or iPod Touch, and if you have a Starbucks card backed by a credit card. Owners of Android, Windows Mobile, and other smartphones are out of luck, as is anyone who doesn't use credit cards. What will it take to get a user-friendly mobile online payment system going in the USA?

In Japan, more than 10 million people use their smartphones to pay for things quickly, after signing up just once with their phone service provider. It's easy over there because there is only one dominant phone service provider, NTT Docomo, and the Japanese are big on centralization.

Here in the States, we have multiple major phone service providers, multiple payment systems (credit cards, debit cards, checking accounts, Paypal, etc.), and mega-multiple sellers all competing to offer something the others don't. The result is (or will be) a fragmented myriad of mobile online payment programs and apps. Competition is slowing innovation, not fostering it. Eventually, of course, one mobile electronic payment system will become dominant: the one that works most efficiently. Competition is slow and painful but it does give rise to excellence.

Mobile Payment Contenders

Current contenders for the mobile payment market include MasterCard PayPass, which relies on a tap of a Master Card against a reader device; PayPal Mobile App which sends money to a phone number or email address; Amazon Mobile Payments; and Google Mobile Checkout. The Paypal, Amazon and Google solutions all work on Android devices, as well as the iPhone and Blackberry.

It is likely that a major credit/debit card company will win the U.S. mobile payment solutions battle. Visa and Master Card have the greatest share of consumers' wallets and merchant accounts. It's just a matter of developing a mobile app that runs on any operating system (probably using Java) and getting merchants to adopt mobile payment terminals. Just don't make me download a payment app for every store, please!

But there are other possibilities. In Asia, the "direct mobile billing" model is very popular. The buyer's mobile phone service account is billed for mobile payments to other vendors. The buyer pays his mobile bill, and the mobile service provider pays the third-party vendors. The advantage is convenience for consumers. The downside is delayed cash flow for the merchants who must wait until the mobile carrier is paid before they get paid. There is also the service fee deducted from their receipts by the mobile service provider, but similar merchant fees apply to credit card and Paypal transactions.

Mobile credit card processing is still in its early stage. But as it ramps up, merchants and consumers will save time and exchange more value. The average swiped-card transaction takes 57 seconds, while Starbucks mobile payment solution does the deal in 10 seconds. Seconds count when you want coffee!

Are you using a mobile payment system? Tell us your experience, or post your comment or question below...Yes, you can now buy that turbo-mocha-frappe-latte at Starbucks with a wave of your mobile phone. But only if the device is a Blackberry, iPhone, or iPod Touch, and if you have a Starbucks card backed by a credit card. Owners of Android, Windows Mobile, and other smartphones are out of luck, as is anyone who doesn't use credit cards. What will it take to get a user-friendly mobile online payment system going in the USA?

In Japan, more than 10 million people use their smartphones to pay for things quickly, after signing up just once with their phone service provider. It's easy over there because there is only one dominant phone service provider, NTT Docomo, and the Japanese are big on centralization.

Here in the States, we have multiple major phone service providers, multiple payment systems (credit cards, debit cards, checking accounts, Paypal, etc.), and mega-multiple sellers all competing to offer something the others don't. The result is (or will be) a fragmented myriad of mobile online payment programs and apps. Competition is slowing innovation, not fostering it. Eventually, of course, one mobile electronic payment system will become dominant: the one that works most efficiently. Competition is slow and painful but it does give rise to excellence.

Mobile Payment Contenders

Current contenders for the mobile payment market include MasterCard PayPass, which relies on a tap of a Master Card against a reader device; PayPal Mobile App which sends money to a phone number or email address; Amazon Mobile Payments; and Google Mobile Checkout. The Paypal, Amazon and Google solutions all work on Android devices, as well as the iPhone and Blackberry.

It is likely that a major credit/debit card company will win the U.S. mobile payment solutions battle. Visa and Master Card have the greatest share of consumers' wallets and merchant accounts. It's just a matter of developing a mobile app that runs on any operating system (probably using Java) and getting merchants to adopt mobile payment terminals. Just don't make me download a payment app for every store, please!

But there are other possibilities. In Asia, the "direct mobile billing" model is very popular. The buyer's mobile phone service account is billed for mobile payments to other vendors. The buyer pays his mobile bill, and the mobile service provider pays the third-party vendors. The advantage is convenience for consumers. The downside is delayed cash flow for the merchants who must wait until the mobile carrier is paid before they get paid. There is also the service fee deducted from their receipts by the mobile service provider, but similar merchant fees apply to credit card and Paypal transactions.

Mobile credit card processing is still in its early stage. But as it ramps up, merchants and consumers will save time and exchange more value. The average swiped-card transaction takes 57 seconds, while Starbucks mobile payment solution does the deal in 10 seconds. Seconds count when you want coffee!

Are you using a mobile payment system? Tell us your experience, or post your comment or question below...