INSIGHT: Mobile Money – Eight Key Mobile Payments Players

Mobile Money - Eight Key Mobile Payments Players.

Long-touted for explosive growth, the mobile payments space is finally building momentum and the market is beginning to take shape. From plug-in readers to card-scanning smartphone cameras to phones with near-field communication (NFC) technology, companies across a range of industries, including mobile operators, financial services and banks, are entering the market. A slew of solutions are emerging and StrategyEye takes a look at what some of the major players have to offer.

PAYPAL
What It Offers
Originally simply the online payments service attached to eBay, PayPal expanded its service in recent years beyond just website payments. Its moves into mobile payments come in tandem with a wider revamp of its offering for small businesses, with subscribing merchants able to accept cheques by scanning them on their mobiles, accept credit cards via phone or mail, and cash in payments using a branded PayPal debit card. Its PayPal Here offering competes directly with Square, enabling merchants to process payments in person by swiping a consumer’s card through a card reader that attaches to a mobile phone. On the consumer side, PayPal also offers its Digital Wallet to allow users not only to make payments, but register loyalty cards, gift coupons and credit cards and set up complex personal finance rules on their phones.

Advantages
PayPal Here aims to offer merchants and consumers more convenience when making payments in-store. The firm’s history in web payments makes it a trusted brand among users who, with the relative novelty of the mobile payments market, may be more inclined to use a service they already know. For merchants signed up on PayPal’s debit card, PayPal Here also takes a lower fee than Square. Meanwhile, PayPal’s Digital Wallet offers the same advantage of convenience and trustworthiness to consumers, and could represent a truly serious take on a market which the likes of Google have only experimented with.

Challenges
So far, PayPal Here does not stack up to Square when it comes to adoption or usability. Its awkward, triangular reader does not appeal to a post-Apple, design-obsessed market and Square’s clean, easy-to-use reader has won it many more fans in a short time. PayPal Digital Wallet, meanwhile, remains a new and interesting proposition, but it remains to be seen if wary consumers are ready to set up complex financial arrangements about bills and payments via their phone.

GOOGLE
What It Offers
Google is attempting to replace the wallet with the mobile phone. Based on NFC technology, Google Wallet is a mobile app that allows users in the US to store their credit card details, as well as offers and coupons, on their mobile phone. When buying products in brick-and-mortar stores, consumers can pay for items and redeem offers by tapping their phone at the point-of-sale, while they can pay online by signing into their Google Wallet account. Merchants need to have a contactless terminal in-store to accept purchases, or can add a button to their website for online buys.

Advantages
Google Wallet removes the need for merchants to use fiddly plug-in solutions, allowing them to use terminals from the likes of Verifone, ViVOTech and Ingenico to take NFC payments. It also has relationships with 25 national retailers at 140,000 locations and lets consumers pay for goods via their mobile both online and in store

Challenges
Despite launching nearly a year ago, Google Wallet is struggling to gain traction. Sprint, the third-largest US network is so far the only mobile operator to back the service and it is only available on six Android devices. Google may have bet too early on NFC, which is not yet integrated into the majority of smartphones, and is still some way off mass adoption.

SQUARE
What It Offers
Square’s service is two-fold. It offers merchants the ability to process mobile payments using a card reader they can plug into a mobile device running on Apple’s iOS or Google’s Android operating system. Merchants can then start taking payments, giving Square a 2.75% slice of every transaction. Consumers can download the firm’s app onto their smartphone, register their credit  card details and then set up virtual tabs with businesses that are signed up to the service. The app automatically opens a user’s tab once they walk into a particular shop or restaurant using geo-fencing technology. Users can then make payments by saying their name at the cash desk.

Advantages
The plug-in differentiates Square in a market crowded with services that rely on NFC. Distrust over wave-and-pay services among consumers means that despite the hype, NFC is not expected to hit the mainstream for a number of years. In the mean time, services such as Square’s require less of a change in consumer behaviour, closely replicating the card swiping experience they are accustomed to. It appeals to small and medium-sized businesses and has a solid head start in the market having signed up 1m merchant partners. This is equal to 12.5% of US merchants that accept credit cards and it claims it is processing USD6bn in payments annually.

Challenges
Competition is the main threat.PayPal recently launched a rival plug-in device, PayPal Here, which takes a smaller cut on transactions than Square. It also has a massive network of customers and merchant partners that it is now looking to migrate to mobile. Smaller competitors such as iZettle are also gaining ground, and expansion outside the US, where payment regulations are more complex, could also prove difficult. Trust also remains an issue, with consumers still wary of sharing their payment details with third parties and more likely to turn to the big credit card firms that they already trust to handle payments.

VISA
What It Offers
Visa is set to integrate its payWave NFC-based service into compatible smartphones. Currently used in Visa debit and credit cards, payWave enables consumers to make contactless payments. Visa now plans to enable this functionality on smartphones, though only on NFC-enabled devices approved by the card provider.  One such device looks set to be Samsung’s recently-launched Galaxy S III, indicated by the firms’ partnership to create payWave-enabled versions of the smartphone for selected athletes at the forthcoming London Olympics.

Advantages
Visa’s vast consumer base is the obvious advantage, with those that already use Visa cards more likely to transition with a well-known and trusted brand. The early roll out of payWave-enabled debit and credit cards is also likely to boost adoption as consumers become used to contactless payments.

Challenges
Scale: There are currently less than 150,000 payWave-enabled point-of-sale terminals in the UK, with many commentators claiming that numbers need to be closer to the 1m mark for services to have any kind of success. This infrastructure needs to be in place before consumers begin to use the service or their existing card and cash options will continue to prove more convenient. NFC-enabled smartphones also need to hit critical mass, even before they are approved by Visa for the service. Alan Moss, VP Marketingfor VeriFone, says that just 20% of global smartphone shipments have NFC functionality, indicating the challenge still ahead.

MASTERCARD
What It Offers
PayPass is Mastercard’s mobile payments platform. It enables users to pay in-store using a PayPass enabled phone, credit card, key fob or mobile payment tag. Devices enabled with the service contain a microchip and radio antenna, which submit payment details wirelessly to a PayPass reader at checkout.

Advantages
Financial institutions are still in the driver’s seat in mobile payments because they have a trusted relationship with consumers. PayPass comes with encryption and access to Mastercard’s network, which verifies transactions with a user’s bank. The service will also only charge users once, even if they mistakenly tap a terminal twice, and transactions over USD50 require users to enter their PIN.

Challenges
The fact that Mastercard relies on a link with Google Wallet for mobile phone payments provides an extra level of complexity for users already struggling to see the attraction of mobile payments.

BARCLAYCARD
What It Offers
Barclaycard’s foray into mobile payments is PayTag, a sticker that users can affix to the back of their phone to turn it into a mobile wallet. Users simply have to sign up for an account, which then links PayTag with their Barclaycard and enables payments via NFC. Merchants need to have a contactless terminal to accept the payments.

Advantages
PayTag allows consumers to make mobile payments anywhere that accepts contactless transactions and doesn’t require merchants to invest in specific hardware. It also enables anyone with a mobile phone to make mobile payments and doesn’t require technology such as NFC, which isn’t in most devices yet. Barclaycard also limits payments to GBP20 (USD31) and only stores up to GBP150 (USD233), which should go some way to reducing consumers’ concerns over fraud as they try out mobile payments for the first time. Barclaycard already has a huge customer base that trusts it with their personal information and all transactions are protected again fraudulent activity.

Challenges
At the moment PayTag is limited to select Barclaycard customers in the UK, meaning its reach is limited. Also, some users may be put off by the fact that it requires them to put a sticker on the back of their phone, especially if it’s an expensive smartphone like the iPhone.

iZETTLE
What It Offers
Billed as Europe’s answer to Square, iZettle offers merchants the ability to take mobile payments using a plug-in card reader for iPhones and iPads. The service currently operates in Sweden, Norway, Denmark, Finland and the UK. iZettle recently dropped a flat rate EUR0.15 fee it charged on all transactions alongside a cut of the payments to make its service more competitive. Now, like Square, it takes only a 2.75% cut of payments made using MasterCard, Visa and Diners Club, and 3.75% for payments via American Express.

Advantages
The firm is steadily building up crucial partnerships with local merchants, claiming that 50,000 retailers are now signed up to the service in Europe. While this means it lags behind its American cousin, Square, with 1m merchants on its books, iZettle is making decent progress less than a year after launch. The firm claims its payments are more secure than rival services, reading credit card chips rather than more easily tampered-with magnetic strips. Payments also require an on-screen signature to authenticate transactions.

Challenges
iZettle is currently only available on iOS devices, which is a limitation as it attempts to build up its users. The firm says it is planning to release a version for Android later this year, and the sooner it does so the better as competition ratchets up. PayPal Here is due to roll out in Europe over the next few months and, while Square is yet to move into the market, its larger user base and more established name means it could be a formidable enemy.

JUMIO
What It Offers
Jumio facilitates mobile payments by allowing webcams to read credit cards. Rather than swiping cards, people hold them up to webcams attached to their computers or integrated within their smartphones and make payments that way. . After scanning their card with their smartphone camera, consumers must still enter their three-digit security code on the reverse to complete the transaction, but CEO Daniel Mattes tells StrategyEye that the camera-scanning takes less than a second. Developers can embed the functionality in their apps.

Advantages
The fact that Jumio doesn’t need software, such as NFC, to be included in the mobile device for it to work is likely to work in its favour as it seeks to gain adoption. The firm is backed by Facebook co-founder Eduardo Saverin, who boasts that the firm is growing faster than Facebook did at the same point in its evolution. He also claims that Jumio is already “highly profitable” and is on course to generate USD100m in sales this year.

Challenges
While the iPhone software development kit is out, Jumio is yet to provide an equivalent for Android, restricting its potential reach. And at a time when mobile payment services are attempting to persuade consumers to adopt their various products, the act of taking a picture of a credit card may be a step too far. Mattes insists that Jumio’s smartphone camera-turned-scanner is “not simply taking a picture”, saying that it analyses each card for authenticity. Despite this, the fact remain that merchants, many of which are keen to bolster their mobile options, may also need to be convinced of the safeguards in place to ensure that payments are processed quickly and securely.

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