Shopping from your mobile device is nothing new for most of us, but what about using your smartphone to pay for your purchases? EBay’s PayPal is a barometer for mobile payments activity, and the company says it did almost three times as much Black Friday and Cyber Monday business this year as last year. During the third quarter, PayPal processed $35 billion in transactions, up 20% from the year-ago quarter.
Although PayPal insists that it is not a mobile wallet, the company is working hard to make its way into retail stores. It says 17,000 merchants now support in-store payments using PayPal, and through its new partnership with Discover the company hopes to bring that number to 7 million by next year.
Isis and Google Wallet are the other big names in mobile payments. Both of these store credit and debit card information on a smartphone, but only Google Wallet allows users to actually shop online. Isis is used in brick-and-mortar retail establishments, where 95% of all shopping still takes place. “Short-term, not having a mobile app is not bad for Isis, but longer term they must put something together,” says mobile payments analyst Rick Oglesby of Aite Group.
Isis is a joint venture formed by Verizon Wireless, AT&T and T-Mobile USA to capitalize on an important trend in the retail world: the leading makers of point-of-sale systems (cash registers) are upgrading to “contactless” terminals which will use near field communication (NFC) to read credit and debit card numbers. And those numbers can be read just as easily from a smartphone as from the card itself. Isis is betting that consumers would rather tap their phone to a payment terminal than dig out a credit card, especially if the phone automatically retrieves coupons and loyalty cards for the merchant at the time of purchase.
“So far, the biggest complaint we’re hearing from consumers is that they want the Isis app but they can’t get it yet,” says Isis chief sales officer Jim Stapleton. Isis has launched the app in Austin and Salt Lake City, and says that the next step will be a nationwide rollout. The secure element that stores credit card information is embedded in SIM cards that are compatible with 20 Android phones offered by AT&T, Verizon Wireless and T-Mobile USA. The element is also part of an iPhone case sold by Device Fidelity.
If carriers’ retail stores in Austin are predictive, consumers around the country will have no problem finding Isis-ready phones when the app is available nationwide. At a local T-Mobile store, all the Isis-ready Android phones are grouped together in front of a big purple Isis logo that greets customers as soon as they walk in the door.
Of course Android phones also support Google Wallet, and consumers who want to pay with their phones can use both mobile wallets on one device. Different retailers and credit card issuers have partnered with different mobile payments providers, so there is not yet one mobile wallet that works everywhere.
Different business models
Google’s advertising revenue already exceeds that of all U.S. print media combined, according to one study, but the search engine giant knows that it can charge even more for its online ads when it can use mobile payments to prove their efficacy. “Right now if you google ‘coffee shop’ Google gets paid if you click on one of its sponsored links,” says Aite Group’s Oglesby. “They would much rather get paid if you walk into that shop and pay with your phone. Then they can tell the merchant that the purchase originated with Google and they can prove it.”
Meanwhile Isis has a different business model entirely. “What they want to do is build a platform that will be accepted at merchants everywhere, so they can facilitate data exchange,” says Oglesby. “They are like a landlord charging rent to store information. Anybody who would store information in the SIM would pay – a bank, Google, a merchant, all of these would be asked to pay.” Right now, merchants who accept Isis do not pay unless they want to offer coupons and loyalty cards within the wallet. Banks pay Isis when their cards are loaded into the mobile wallet. As the mobile payments ecosystem matures, Isis could end up charging Google Wallet and PayPal for premium spots in its wallet, since the carrier-owned venture is closer to the end user than its competitors.
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