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Enough Nickel and Diming, How About Mobile Payments?

Lionseye insights from AC Lion

Mobile phones have surpassed wallets on the worst things to lose list. To paraphrase moderator Rich Ullman from the PluggedIn Ventures Mobile Payment roundtable on January 29th: “Leave your wallet by your in-laws in Buffalo – wait for it to be shipped. Leave your mobile phone – drive 5 hours to Buffalo.” 2012 was a breakout year for the mobile payment industry and it might evolve to become this generation’s’  “Cola-War” Additionally, according to a recent IDC Financial Insights study, worldwide mobile purchases have a current trajectory of eclipsing the $1 trillion mark by 2017. IT IS the next big thing and the face of currency is changing as we know it.


Mobile payments are undoubtedly trendy and gaining some good movement; plus, contrary to popular belief, it can actually be safer than your ordinary credit card. When using a smartphone to pay, you are being run through a gauntlet of authentication processes, from creating “fake” or unique credit card numbers, to pins, to geo-tagging, etc…

Question from the roundtable:
There are 4 major credit card companies, Visa, Mastercard, Amex and Discover who have a chokehold on the market. How (or possibly why) are they letting startups take such a big piece of the currency pie?

Four quick answers from the roundtable:
A1: They are taking the “why fix what’s not broke” route, and while understandable, this puts them at risk with the likes of Kodak and Blockbuster.
A2: The risk is far too great; startups are agile and have the ability to fail, the big 4 don’t.
A3: The credit card titans can’t compete with the numbers – i.e. Dwolla doesn’t charge a fee for any transaction $10 or under and a flat .25 cents for anything above $10.
A4: “The big financial institutions view startups like flies, they keep swatting at them until one truly materializes as a strong contender; once that happens they’ll snatch one up… However, this mindset gives startups the ability to position themselves as outsourced innovation in an industry populated with titanic corporations.” – Jay Bhattacharya, CEO of Zipmark

One additional point that I came across the: “The real leaders are little startups like Square, Shopkeep, Dwolla and LevelUp. These companies see an opportunity and are rushing to fill it, leaving behind the big bureaucracy and striking real partnerships with real business”, Dan Rowinski


What’s on the horizon?
– Consumers and merchants will become more open to the concept and see the added value and simplistic efficiency.
– PayPal has been and will continue to make a very strong push toward physical mobile payments (e.g. using PayPal at BestBuy). We may see some movement as a result of their efforts.
– Creating a solution to the problem of having different mobile payment apps for each retailer or merchant. A quick fix would be white-labeling, but there is high probability that each of these retail giants (think Walmart, Macy’s, or Bloomingdales) want full control of their app.
– Google Wallet and NFC tech will gain more traction as the technology is integrated into future phones (which will open the floodgates for advertisers to deliver offers, but that’s a whole different discussion).
– Apple will make a play at the market – possibly in tandem with its Passbook.

Bottom line:
The crux as to why “showrooming” and then heading to Amazon is so popular (aside from the more affordable pricing, albeit great), is because the checkout process is seamless and uncomplicated. To quote Jeff McGregor CEO at Dash, “Mobile payment apps need to give real value to the user; make it easy for the consumer, not just the merchant.” BOTH sides need to benefit. It seems that until there’s a painless payment method which either spawns from a unified solution, or a startup emerging as victor, using your CC or cash for splitting checks, paying bills or sending your friends money, will remain commonplace for the immediate future.