Digital Transactions Authoritative, insightful and timely information for payments professionals
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Competing visions of the mobile-payments future emerged in recent days with the long-awaited official launch of Google Inc.’s Google Wallet on Monday, five days after PayPal Inc. gave a sneak peek at what it calls “the future of shopping.”
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So far, Google Wallet and PayPal’s plans are indeed futuristic payments visions with little actual utility currently. But cutting through all the hype, both schemes do show that mobile devices probably will be at the center of electronic payments in a few years, threatening the plastic cards that have dominated retail payments for more than three decades.
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“I am just extremely excited about all the prospects,” says Madeline K. Aufseeser, a senior analyst at Boston-based Aite Group LLC who follows the mobile-payments market. “This is becoming a reality. We will have phones with wallets within [them].”
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She tempers that excitement, however, with a big caveat. “The merchant-capability side is not there yet,” Aufseeser says. “It’s a huge hurdle. It’s not only the hardware, but the software applications to go with it.”
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Indeed, MasterCard Inc. yesterday said 144,000 U.S. merchant locations currently accept contactless card payments, confirming long-running speculation that the number was somewhere between only 100,000 and 200,000. That’s just a tiny subset of the country’s approximately 8.7 million card accepting locations. Contactless card terminals are necessary for Google’s and other mobile-payment systems that rely on near-field communication (NFC) technology in which a smart phone or other mobile device with an NFC chip exchanges payment, loyalty, electronic coupons, and a host of other data with an NFC-enabled terminal.
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In contrast, PayPal’s mobile-payments plans, which will bring eBay Inc.’s online-payment system to the physical point of sale, seem to exclude NFC, at least if the Sept. 14 post on The PayPal Blog by company president Scott Thompson and an accompanying video are any indication. PayPal, however, has never come out against the technology and in July announced an NFC-based person-to-person payments system. Still, in his post dubbed “PayPal Unveils the Future of Shopping” Thompson seemed to take a dig at Google and its NFC-based system. “We’re not just shoving credit cards onto a phone … the fact is you’ve got to have more than just a shiny new technology to really change the way people shop and pay,” he wrote.
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The post and video hint at how PayPal will work with geo-coded mobile advertising, bar-code scanning for in-store offers, real-time inventory scanning, payments using mobile devices and POS terminals, and the company’s own virtual wallet that accesses the PayPal user’s underlying bank and card accounts. The video portrays PayPal as device-agnostic, working not only smart phones but also tablet computers and even on a car’s dashboard display.
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A PayPal spokesperson declined to comment on Google Wallet, instead referring a reporter to Thompson’s post. PayPal said it would reveal more details about its plans over the next few months, including at the X.commerce Innovate Conference October 12-13 in San Francisco.
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In addition to the fascinating possibilities it depicts, the PayPal video does reveal one potential problem when smart-phone payments come to the point of sale. The video shows a woman in a grocery store checking out via PayPal on her iPhone. She bypasses the long line at the counter by holding up her iPhone with the electronic receipt displayed for the clerk, who glances at it for about a second. Then she’s out the door. “What does that mean for security for a retailer?” asks Aufseeser. “I love the vision, that it gets consumers through the checkout line quickly. But there are major security questions.”
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Despite the potential problems, Aite predicted in a recent report that merchants would buy into mobile payments, with the number of NFC-enabled locations hitting 6.7 million by 2015.
