Swipers, No Swiping: Mobile Commerce Battle Heats Up
Posted by Sheila Shayon on March 28, 2011 05:00 PM
That Dora-esque complaint could be the battle cry from merchants fed up with paying a substantial fee to the credit card companies in return for carrying their card-swiping and transactional business.
The mobile payments market could reach $618 billion by 2016, according to consulting firm Edgar, Dunn & Co., and the battle is heating up.
Google has partnered with MasterCard and Citigroup to have the Nexus S Android smartphone, developed with Samsung, embedded with near-field communication (NFC) technology to enable purchases with a wave of the device across readers at the point-of-sale or check-out.
It’s the next territorial imperative for m-commerce as the financial-services, technology and telecom industries craft strategies and devices to get more of consumer spending via smartphones which are virtually transforming into electronic wallets.
It’s also part of Google's aggressive move into advertising — offering retailers deeper customer data, more targeted ads, and location-based discounts — all for a cut of the transaction. It's also a move set to rattle its competitors.
Google clearly wants a piece, and a significant piece at that, of the enormous local advertising market populated by Groupon, Facebook and Yelp among others.
VeriFone is supplying the cash register readers, or "contact-less" devices that operate by a wave or a tap of a card, that Google, MasterCard and Citi see replacing old-school credit card swiping.
"A phone is a lot smarter than a card. It opens the door to a rich experience at the point of sale that retailers really covet," Verifone CEO Doug Bergeron told the Wall Street Journal, which broke the story.
Bergeron also said that Apple and Research in Motion will embed NFC technology in their future iPhones and Blackberry smartphones respectively.
It follows a move last year by Verizon Wireless, AT&T and T-Mobile USA. Frustrated with the hefty cut of transactions taken by the credit card companies, they announced their Isis venture last year, a model powered by a chip that’s inserted into a slot in the phone, bypassing cooperation from mobile operators altogether.
Discover will handle those payments, replacing the need to carry cash, credit or debit cards and transit passes. Beyond technology and consumer interface, the battle is being waged amongst these corporate leviathans for clearly defined roles.
"It all comes down to who gets paid and who makes money. You have banks competing with carriers competing with Apple and Google, and it's pretty much a goat rodeo until someone sorts it out," says Drew Sievers, CEO of mFoundry, maker of mobile payment software for banks and retail.
“Payment networks like Visa and MasterCard, along with banks that actually issue credit cards to customers, want to stay at the center of any payment system and continue to collect their fees from merchants.”
This move should paid search more attractive to advertisers, especially local advertisers, by demonstrating ROI in addition to analytics.
"For advertisers, the benefits of this move to their paid search will be two-fold," commented Ben Kirshner, CEO of EliteSEM, to brandchannel. "First, it will create transparency in how they accept mobile payments. Second, it will essentially give them the power to track and analyze the source of their in-store and online sales. More specifically, a brick-and-mortar store can then identify which in-store customers have converted into mobile shoppers."
"As more and more retailers begin to offer mobile payment options, it's likely that shoppers will become increasingly concerned and skeptical about the security of their financial information across the mobile sphere," Kirshner adds. "And those are concerns that Google, Mastercard, Citibank and other retailers should be prepared to answer."
Paypal, Google and Apple, as well as mobile carriers, want control through fees collected by mobile devices, and in the middle are the merchants, including small business owners who have to install terminals to process mobile payments. The market's certainly ripe for an alternative, and smartphones and apps have opened a new path to do an end-run around the old-school swipers.
Visa and MasterCard are currently the dominant interlocutors between credit card and debit payments and banks and retailers, but American Express launched its new service called Serve today.
Notably not using NFC technology, although that's a possibility down the road, Serve enables consumers to make ATM cash withdrawals, purchases and personal payments from their phones or computers, setting their own stage for collecting fees and user data for better-targeted offers.
AmEx is billing it as a "next generation payment platform designed to deliver emerging payments and services to address the changing ways consumers interact and exchange money — with one another — as well as merchants." Consumers are invited to visit Serve.com and connect on Facebook and Twitter to learn more.
“What we are trying to do is put into place a platform — not a card, or an e-wallet — that enables digital payments and commerce that allows consumers and merchants to seamlessly move between online and offline,” says Dan Schulman, Group President, Enterprise Growth at American Express.
He also eschews NFC technology for now, saying it’s still in its infancy. “That’s incredibly uninteresting…That’s a form factor shift, not a value proposition change. The distinction between online and offline is going to blur and become moot as you go out three to five years from now."
“This will enable us to break into a younger demographic for sure, or under-served demographics, and people who’ve used debit, checking or cash. It enhances our ability to address different demographics in the US, but also the rest of the world,” he said.
Serve’s launch partners include Ticketmaster, Concur and Flipswap and the service is also available through a Facebook widget, allowing users to donate to certain causes which Serve will match up to $100,000 for each charity.
The playbook for mobile payments remains crowded, platform agnostic, and unfinished. According to Jeff Mullen of Dynamics Inc, "Although mobile payments is the future, you're not going to move all that overnight to magical phones. So these are step innovations, rather than leap innovations.”
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