In the past few weeks, we have seen a bunch of new announcements and other news regarding your wallet. Mobile payments are becoming a huge business already, and the mobile payment future is just beginning. The interesting part of this discussion is that there are solutions coming from multiple directions for different purposes.
First, we have the working systems that use some hardware that attach to your phone to support acceptance of credit cards as payment. Solutions like Square and Intuit have been processing payments for some time now. These systems allow almost anyone to accept credit cards without the need to large register devices or even a physical office. Think about those food trucks you see everywhere. They are a cash only business normally. What if you have a large order? Do you always have $50 in cash in your pocket? By accepting credit cards, these businesses can quickly expand because they can drop the cash requirement.
Another direction that many companies are targeting is near field communication (NFC). If you have not been following the hype around NFC, Don Dodge has an excellent post with some really good information. He also has a nice description of why NFC is beneficial to consumers:
How does NFC work? Basically there is a microchip in your smartphone that stores your credit card information and maybe your loyalty cards and all your rewards programs. No more need to carry around all these cards.
Don works for Google, so he has Google’s new Wallet concepts in his head as well. ISIS, the joint venture from mobile operators, is working on an NFC solution as well. The reason mobile operators want to get into this industry is because they can also push the billing through your mobile phone bill and easily take a slice of revenue. This allows mobile operators to avoid some of the security concerns that a typical wallet solution has. ISIS is supporting a mobile wallet as well. Google is going directly after the mobile wallet solution, and they think it will be bigger than just a place for credit cards:
Because Google Wallet is a mobile app, it will do more than a regular wallet ever could. You’ll be able to store your credit cards, offers, loyalty cards and gift cards, but without the bulk. When you tap to pay, your phone will also automatically redeem offers and earn loyalty points for you. Someday, even things like boarding passes, tickets, ID and keys could be stored in Google Wallet.
The problem with mobile wallets is that they need to be very secure. There are going to be a lot of privacy debates with wallets as well. If you store your ID, or essentially your digital identity, along with credit card information, there will be significant concerns about what data is stored and what data is passed to the various vendors and solution providers.
With both mobile wallets and NFC solutions, the problem is going to be adoption. Hardware solutions like Square and Intuit focus on the small business, replacing the cash register. We have already seen that there is significant adoption in this direction, mainly because it is a very simple way to accept payments. Mobile wallets and NFC solutions require the consumer to do work in order to gain benefits. Depending on the simplicity of the solutions, and the debates around security and privacy concerns, there could be issues with mass adoption.
Making adoption easier is a major target for any startup, and it is going to be a big factor in the mobile payments space. One player that is not talking about a mobile wallet or MFC, but will have huge adoption rates, is Facebook. Last week’s announcement about Facebook Credits payouts with PayPal is huge, but went somewhat ignored due to all of the news last week. PayPal has the mass consumer adoption that everyone wants. It already hooks into credit cards and bank accounts. Facebook has mass consumer adoption as a platform that people use every day. A ton of Facebook users are already familiar with Credits, and the adoption will only increase. The Facebook-PayPal partnership is also an interesting direction that the other solutions are missing. They are taking existing, proven solutions and applying them to new areas. This is also why PayPal could be a major player in mobile payments.
Trying to build a new payment solution that consumers will add their credit card information will be a slow process. Gaining adoption quickly is the key. The main benefit that consumers will see is that the problem is being attacked from several different angles by several different companies. This means that the companies will need to make their solution more attractive to consumers. In the end, with all of that competition and all of the vendors answering the privacy and security questions, the consumer will benefit the most.