The Rush to Mobile Payments
Seldom does a week pass without another announcement of a mobile banking and payments product, couched in urgent tones and
adding to the momentum behind handset-based financial services. The real question, though, is how much of this momentum is built
on vaporware and how much on sound business plans?
On the answer to this question much depends, including the fortunes of entrepreneurs and the considerable investments of major
corporate entities and private-equity houses alike. I have no doubt that one day, consumers will move money around with a few stabs at
a mobile phone and will pay merchants by tapping that phone on a contactless reader. But, if history is any guide, that day is farther off
than the breathless promoters would have us believe.
Perhaps no electronic-payments product today is more popular than the debit card. Its day-to-day use at the point of sale, especially
among the young, is a given. This is just as the early promoters of debit predicted. The only thing is, it has happened about 20 years
later than they thought it would. If anything about electronic payments is axiomatic, it is that consumer habits change with painful
To be sure, mobile payments may be nothing more than a new way to access and move money, rather than a new payments product.
And that may mean that change could happen more quickly. After all, those same young consumers seem to spend half their waking
hours tapping out text messages and buying songs and games as it is already.
I still wouldn’t bet on commercial mobile-payments services within the next two years. It could take even longer—but for one thing:
Payments processors and software providers not only want to establish mobile banking, they want to move on to payments—fast. When
Tripp Rackley announced the sale of his mobile-banking software company, Firethorn Holdings Inc., to Qualcomm Inc. last month, he
told me his company and its new partner are aiming at payment services over the air and at the point of sale—and are prepared to put
some heavy-duty cash behind the effort.
Firethorn isn’t alone in this thinking. Why the rush to mobile payments? Consider alternative payments. Mobile offers services like
PayPal and Bill Me Later a way to connect to the gold mine of physical-world commerce. PayPal has a two-year headstart in this
direction with PayPal Mobile. Bill Me Later will be going into physical stores soon. Revolution Money has launched with both online
and brick-and-mortar functions.
Alternative payments players clearly want a bridge to the point of sale. Look for mobile-payments processors to build it for them.
John Stewart, Editor-in-Chief