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Emerging Payments

Mobile Payments Gained More Momentum In 2011

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The chatter coming from the industry near the end of last year was that 2011 would be when mobile card acceptance and payments finally emerge as legitimate experiences for consumers and merchants in the United States.

That proved to be partly true.

Companies such as Square Inc. and Starbucks Corp. made waves in the market without relying on Near Field Communication, which some say is necessary for mobile payments to emerge on a wide scale. Google Inc. launched its wallet, albeit in a limited rollout. Isis gained pivotal partnerships with key industry players but has yet to test its wallet. And PayPal Inc. announced a comprehensive mobile approach designed to change the brick-and-mortar shopping experience, mostly without NFC.

And in between, other companies made moves to convince consumers and merchants they have the answer to widespread mobile-payment use.

The industry should expect more of the same to occur in 2012 as more NFC-enabled phones enter the market and companies continue to fine-tune their plans.

Square reached a recent milestone when it announced 1 million merchants now use the company’s dongle and mobile application to accept payments. It processes some $11 million each day, up from $4 million daily as recently as July (see story).

In December, Starbucks revealed its customers had initiated some 26 million mobile transactions since the application officially launched in January (see story).

Richard Crone, the chief executive of payments-consulting firm Crone Consulting LLC in San Carlos, Calif., believes Starbucks’ mobile-data results show how the company has redefined closed-loop prepaid.

“They have turned their closed-loop product into a personal-use card,” he says.

Starbucks’ mobile app makes it simple to connect with the consumer to help drive transactions through loyalty offers and a store-location service, Crone adds.

On the NFC front, Google got the jump on Isis with soft rollouts in New York and San Francisco (see story).

Meanwhile, AT&T Inc., Verizon Communications Inc. and T-Mobile USA reportedly are investing more than $100 million into Isis (see story).

Isis also stirred the market when it signed Visa Inc., American Express Co. and MasterCard Worldwide to its system (see story).  It initially had a relationship with Discover Financial Services as its only card network.

Isis plans to pilot its service in Salt Lake City and Austin, Texas, next year (see story).  The Salt Lake City test involves fare payments charged by the Utah Transit Authority. Consumers in Austin would use NFC-enabled smartphones to conduct purchases at participating merchants.

PayPal is making changes to its mobile offering to provide enhanced features (see story).

One scenario shows a buyer interacting with a PayPal application at a merchant’s point-of-sale terminal. Another buyer is seen scanning barcodes at a supermarket, putting those goods in a shopping bag and paying for them instantly on a PayPal mobile-phone app and bypassing the cashier’s line.

PayPal also will integrate location-based merchant offers through mobile alerts when a consumer is in a retailer’s general area.

Smaller companies pushed other forms of mobile payments that applied billed purchases to a wireless bill.

Boku Inc., Danal Inc.’s BilltoMobile and Zong Inc. each have agreements with multiple wireless carriers for direct-to-mobile billing services.

So what will the industry experience in 2012?

Sales of NFC handsets in 2012 will reach nearly 80 million, an increase of 129% from this year, according to a recent prediction from United Kingdom-based IMS Research (see story).

If Apple launches an NFC-enabled iPhone, “it might by itself create a breakthrough with NFC because Apple alone could make the market, in a sense, given their market share and consumer effect,” says Todd Ablowitz, an emerging-payments consultant and president of Double Diamond Group in Centennial, Colo.

Indeed, the U.S. Patent and Trademark Office on Nov. 15 published 31 patents granted to Apple related to NFC technology and what appears to be a new location service that uses the global positioning system (see story).

Apple’s NFC patent covers the sharing of information between different devices, including iPhones, iPads, Mac computers and point-of-sale terminals in retail environments.

Industry observers have noted throughout the year that NFC-rollout forecasts would decrease if Apple did not include a payment capability in its new phone.

However, Eurosmart on Nov. 15 said it expects NFC-device shipments to increase 50% next year, to 120 million from 80 million this year, as more handset manufacturers begin incorporating the technology into mobile phones (see story).

And that prompted Jeff Miles, NXP vice president of mobile transactions, to tell PaymentsSource in a Nov. 16 telephone interview from Paris that “the momentum we see here assures us that NFC is the future for mobile-payment development (see story).”

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