We Accept Mastercard, VISA and … Your Mobile Phone
As someone who’s constantly trying to downsize baggage, I’m always looking for ways to consolidate devices and accessories. One of the first reasons I chose to buy an iPhone was to consolidate my iPod with my cellphone. Of course, with the iPhone’s newer models and App store, a mobile phone can hold more than just a handful of devices: everything from video camera and game player to personal assistant and running trainer. Now, with new mobile payment companies launching left and right, the phone is taking over yet another accessory: the wallet.
The U.S. has been waiting a long time for mobile payments. When I was in high school in Japan, I remember mobile technologies being second nature to metropolitan lifestyle. It wasn’t unusual for student, businessman, and housewife on the train to be immersed in a text message, novel, or game on their mobile phones. It’s not surprising that telecommunications companies replicated Japan’s Suica smartcard technologies to work with mobile phones, allowing consumers to pay for train rides, convenient store purchases and more, with a simple swipe of their phones. A Forrester Research survey found that 15 percent of Japanese mobile phone users make payments and purchase products in stores with their phones, and most Japanese cell phones today include the standard FeliCa wallet phone chip that makes this possible.
Phone payments have also been successful in countries like Kenya or India, where ATMs and credit cards aren’t as accessible as mobile phones. Some have speculated that the U.S. hasn’t adopted mobile payment technologies as fast as these developing countries because the adoption of mobile devices isn’t growing at the same exponential rate. Although a recent Nielsen report showed that only a quarter of mobile users accessed the Web via their phones in July, that’s a 34 percent increase over last year. Mobile seems to be ramping up in the U.S., and it shows, now that several new startups are coming out of the woodwork to promise the convenience of using your phone as your wallet:
Within the social networks and gaming space, two companies that have been competing mobile micro-payments are Boku, which charges your monthly cell phone bill instead of requiring a credit card or bank account, and Zong, which partnered with Facebook this summer to allow mobile payments for its virtual currency, Facebook Credits, and was selected by LaunchSquad client Mochi Media last week as its mobile payment platform.
For small businesses and merchants, Seattle-based start-up Billing Revolution just announced last month a partnership with credit card processor Authorize.net, which will allow its more than 200,000 retailer partners to offer “one click” mobile purchasing. Freeddom, a company that just launched at DEMO last month, has already built a business in Brazil helping retailers, telecommunications companies and banks turn consumers’ phones into their own private label credit cards. Sellers simply enter the purchase on their phone or Point-of-Sale device and customers enter in their personal identification numbers (PINs) to pay. If you think about all of the street vendors and food trucks around, especially in NYC, it’s obvious that there’s a need for a better, wireless payment system.
There’s even a solution for the average Craigslist or IOU transaction. A few weeks ago, while at nextNY’s @shakeshack II, event (which LaunchSquad sponsored), Megan Soto and I got a chance to demo a new mobile payments solution, Venmo. In under 5 minutes, founders Iqram Magson-Ismail and Andrew Kortina helped us set up accounts, transfered us each $1, and showed us how to transfer funds to each other through SMS texts. Venmo, based in NYC and Philadelphia, has a set of helpful how-to guides on their sites around practical use cases – like how to use Venmo for Craigslist transactions or how to sell music at a gig. I can think of a dozen more examples where I’d text-to-pay micro-payments to friends, and as someone that occasionally sells and buys on Craigslist, I’d appreciate the ability to skip the “CASH ONLY” on every post.
Obopay is 4-year-old company that’s partnering with big players to bring mobile payments to consumers and merchants. In 2010, Obopay and Nokia will launch Nokia Money in undisclosed markets, allowing users to send money to other mobile users, pay merchants and utility bills, or top up prepaid cellphone minutes. Obopay is also working with MasterCard on a person-to-person mobile payment service called MoneySend.
There’s also been talk that Twitter co-founder and chairman Jack Dorsey is working on a mobile payment gadget (hardware) start-up code-named “Square.”
So what does this recent bevy of mobile payment companies mean? Several smart people thinking about and betting on (investing in) this technology means that we’re likely to see a major shift in the way we pay, in the same way that PayPal and Amazon have done online. Speaking of PayPal …
On November 3, PayPal is holding an event, PayPal X Innovate 2009, where it’s going to open its API to third party developers, allowing others to innovate and find new ways to pay and get paid online. TwitPay is an early example of this, combining Twitter and PayPal accounts to essentially allow you to update your status to pay someone instantly. PayPal already has a mobile application, but perhaps its open API will encourage more innovation into new forms of online and mobile payment solutions.
It’s hard to tell if consumer behavior change to support these new forms of payment. Even if it does, mass adoption will probably take a long time (Gartner predicts only 3 percent in North America will make mobile payments in 2012). Nonetheless, it’s certainly impressive to see all of the companies tackling this space, and I look forward to someday lightening my purse of a wallet, its cash, cards, checkbook and all.
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