The Future Of Payments: Who Will Be The Winner?

Posted on 15. Nov, 2009 by Antonella Stellacci in Mobile

In our connected ubiquitous future, what role will cash have? Are we moving towards a cash-less society, where payment will happen through your mobile device? PayPal, Amazon and Google seem to think so.

PayPal was the first to move into the space with its 2006 launch of the PayPal Mobile Checkout. But it’s only a few weeks ago that it unveiled its real ambition to become the payment method of the future, with its PayPal X platform – a set of API that lets third-party developers incorporate its online payment system into their own applications, online or mobile, Iphone included. PayPal X’s ‘enhanced’ pricing structure – a 50-cent flat-fee price point for a 3-day settlement, and a 75-cent fee for an immediate settlement – is also a direct shot at Amazon, the most direct competitor in the space.

Mobile Payments Service was launched by Amazon less than two months ago, to allow mobile developers and merchants to provide payment options to their customers within mobile Web sites and applications–leveraging on the convenience of the Amazon’s 1-Click checkout system. But with Amazon having existing relationships with hundreds of thousands of businesses, its quick expansion into the space is an easy bet.

And let’s not forget about Google. In a document sent to the Newspaper Association of America in September, Google reveals that it is planning to unveil a micropayment system over the course of 2010, in the hope that newspapers will use it in their efforts to find a new business model. According to the document, the micropayment system will launch as an extension of Google Checkout.

But Amazon, Google and PayPal are not alone, an increasing number of startups is working on shaping the future of payments.

- Paying Through Your Mobile Bill. Zong.

The potential is clear. 4.6 billion users will have a cell-phone by the end of 2009. Using a mobile phone, instead than credit cards and PayPal, has the advantage of making the user experience frictionless and accessible to a larger audience, which is what social networks, online gaming sites and virtual worlds are desperate for, in their continuous effort to monetize on the users’ impulses to buy that virtual gift or that extra level of a game.

This year, mobile payment service Zong has processed mobile payments for more than 10 million unique users worldwide. It has partnerships with 107 carriers in 25 countries, and deals with social networks such as Facebook and MySpace, virtual worlds and online gaming sites such as Gaia Online, IMVU and Outspark. Most recently it added to its roster Mochi Media,which according to ComScore is the largest online games property worldwide.

Want to buy your Facebook friend a virtual gift? Use Zong, it’s as easy as entering your phone number and the PIN sent via text message. A no brainer? Yes and no, the hassle being that carriers want their “unfair” share of the transactions, so building a sustainable business is a much tougher challenge. A Facebook credit with Zong costs 20 cents, with a credit card 10 cents. And that’s because of the carriers’share.

But as everybody knows, payments with mobile phone convert so much better that lower margins could be made up by volumes. And Zong is up to the challenge.

- Your Iphone as a credit card reader. Square.

A new mobile payments venture called Square (previously Squirrel) was born from the fine mind of Twitter co-founder and chairman Jack Dorsey. What’s a Square? It is a hardware add-on that can turn an iPhone into a credit card reader.

From Coolhunting:

The innovation is in a small, plastic card reader that fits in to the headphone jack of an iPhone (or iPod Touch) and transfers the credit card’s swipe data to the app. After the employee enters the amount to charge, the customer confirms by scrawling their signature with their finger and then either one enters the customer’s email address to send the receipt to. The payment is processed by Square for a small percentage plus a fixed fee; the funds are transferred directly to the store’s bank account, cutting both time and complexity on the processing side. The customer’s receipt includes a map showing the location of the transaction which is handy for those who record, sort and file such things.

That Dorsey is also an angel investor in FourSquare, only proves the point of how potent mobile advertising and commerce could be in the very near future. Needless to say that hardware doesn’t spread as fast as software and it will take some time to gain traction, but the potential is so big that Dorsey could have really be up to the Next Big Thing after Twitter. For now, the service is in closed alpha in New York.

square

-Enabling Mobile Commerce. Billing Revolution.

A Seattle startup, Billing Revolution wants to make mobile payments as widespread as possible by empowering merchants to access the latest technologies of mobile commerce. In September, it announced a partnership with Authorize.net to help merchants who use the payment gateway conduct mobile transactions. The mobile credit card payment system allows more than 200,000 Authorize.net merchants to sell everything from coffee to magazine subscriptions to hotel rooms.

In October, Billing Revolution announced another key partnership with PayPal to enable mobile transactions for all PayPal merchants wishing to conduct mobile credit card transactions can easily use Billing Revolution to process transactions through their existing PayPal accounts.

Billing Revolution is backed by SK Telecom Ventures, the venture arm of South Korea mobile powerhouse SK Telecom. SK Telecom has been a leader in mobile payments in South Korea for years.

So, is there a winner yet? Not really and possibly there won’t be one, but many each one catered to a different target audience.

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