Editor's Note: This is the second in a two-article series covering the current state of mobile payments. The first article was published March 25, 2013, in issue 13:03:02.
In the minds of many Americans, the Western Union Co. name is practically synonymous with payments. Whether it's consumers looking to send money to friends or relatives overseas, or companies seeking to collect money from customers, chances are Western Union is a contender for their business. And that's why the company is heavily invested in mobile payments.
Consumers want a mix of payment options that fit their lifestyles and cash flow needs, and billers want to be able to accept as many payment methods as possible, said David Shapiro, Senior Vice President, Payments at Western Union. "We're early on in the game, but this is the way payments is going," he said.
Recently, Western Union unveiled a set of mobile bill-pay apps that, according to Shapiro, make sense for several reasons. Actually, there are potentially millions of reasons. The company's data indicates that one out of every eight consumers intend to use mobile devices more often in 2013 to pay bills than previously.
About 2 percent of bills are paid using mobile phones at present, according to the latest Western Union Money Mindset Index.
"Consumers really like paying this way," said Bill Gajda, Head of Global Mobile Product at Visa Inc., in a panel discussion on mobile payments at the Bank Administration Institute's Payments Connect conference in early March 2013.
Recent announcements from Visa suggest the card company is betting that near field communication (NFC) technology will emerge, over time, as a key driver of mobile payments (for more information, see "Mobile payments 2013 - Part 1," The Green Sheet, March 25, 2013, issue 13:03:02). But Gajda stated the card company will support multiple technological approaches to making payments with mobile devices.
"It's all about acceptance," said Paul Moreton, Senior Business Director for Mobile Payments at credit card issuer Capital One Financial Corp., who joined Gajda on the panel. "Until there are enough merchants able to accept mobile payments, it's still a very nascent market."
U.S. consumers paid for $12.8 billion in purchases using mobile devices in 2012, according to Forrester Research. Forrester expects that total to reach $90 billion by 2017 with in-store, proximity (NFC) payments charting the healthiest growth.
However, as was discussed in part one of this series, payment companies need to think beyond NFC in formulating mobile payment strategies.
Consider Visa. It has an agreement with ROAM Data Inc., an Ingenico SA company that pioneered mobile phone-based card acceptance with what were billed as the first secure card-reading devices for smart phones. Visa also has also invested in Square Inc., which markets a similar device, primarily to micro-merchants.
Square is positioning itself to become the provider of the Everyman's mobile card reader. Square dongles are available free online; they also can be purchased for $10 at retail locations (like Starbucks Coffee Co. outlets) and come with a $10 mail-in rebate.
In February 2013, Square launched Business in a Box and Square Register, a full-scale POS system for brick-and-mortar merchants who don't want the costs and hassles of traditional acquiring relationships.
At a starting price of $249, merchants get two mobile phone card readers, a stand and cash drawer, along with the functionality to track sales and item information.
POS terminal manufacturer VeriFone Inc. - which earlier in 2013 abandoned plans to compete head on with Square - is working with MasterCard Worldwide to support mobile payments using MasterPass, the latest iteration of MasterCard's PayPass tap-and-go digital wallet solution.
MasterPass employs VeriFone POS software to enable consumers to pay for purchases via mobile devices from anywhere inside stores.
VeriFone will integrate acceptance of MasterPass as a cloud-based payment option within its mobile platforms. The company's executives described the move as a natural one.
VeriFone's "experience and assets enable us to manage the complexity of integrating these new technologies into the existing retail infrastructure, whether the format is NFC, QR code or the cloud," said Jennifer Miles, President, VeriFone Americas.
MasterCard also signaled that it isn't keen on nonbanks, like PayPal Inc., using its network rails to clear payments. Later in 2013, the card brand plans to charge PayPal when a MasterCard bankcard tied to a PayPal account is used to pay for purchases. Both Visa and Discover Financial Services have stated publicly they're not planning similar moves.
PayPal said it's interested in using mobile payments to capture share among brick-and-mortar businesses, and it has an integration agreement with NCR Corp. to help execute the plan. NCR said its data indicates 52 percent of consumers want the option of using mobile technologies to scan and pay for items while shopping, yet only 12 percent of retailers offer mobile payment options.
Meanwhile, a survey by the National Restaurant Association revealed that a third of consumers like the idea of mobile payment options at restaurants.
Hospitality is a key vertical market for NCR; its customers include eight of the 10 fastest growing quick service restaurants and fast casual restaurant chains. NCR said it will first integrate PayPal with its restaurant and convenience store offerings.
"Combining NCR's broad hospitality and retail footprint with PayPal's global customer base enables restaurants and retailers to redesign the consumer experience," said John Bruno, NCR's Chief Technology Officer and Executive Vice President.
PayPal also has an agreement with Fort Worth, Texas-based ISO First American Payment Systems LP to support acceptance of PayPal mobile wallets for any of the 140,000 merchant customers First American serves throughout the United States and Canada.
Meanwhile, Atlanta-based ISO Global Payments Inc. has an overseas agreement to acquire and process transactions for Intuit Pay, an integrated mobile payment solution from Intuit Inc., the company behind the QuickBooks small-business accounting software.
Intuit Pay is designed for micro-businesses in the United Kingdom. Global Payments Senior Vice President and Global Head of Product Sid Singh said the arrangement would "transform" these very small businesses.
Meanwhile, Heartland Payment Systems Inc., a New Jersey-based acquirer with its own line of POS terminals (featuring industrial strength security), teamed with LevelUp Inc., a mobile payments and loyalty network, to integrate LevelUp technology with Heartland terminals and sales initiatives.
"The biggest challenge facing mobile payments companies right now is scale," said Chris Mahl, Chief Revenue and Strategy Officer at LevelUp.
The 1 million users and 5,000 merchants LevelUp has signed since launching less than two years ago is a start, but far from the scale of large acquirers like Heartland, with its merchant base of 250,000 and a sales force of 800.
The two companies said that in addition to selling to small, individual merchants, which have been LevelUp's bread and butter market, they will co-promote white-label versions of LevelUp programs for larger businesses.
LevelUp said it is unique among mobile payment companies in the way it integrates loyalty programs with sophisticated analytics and marketing support, but perhaps most notable is its promise to merchants of zero payment processing fees for certain merchants enrolled in its loyalty programs.
Heartland sees more value from the arrangement than transaction fees. Ian Drysdale, President of Heartland's Network Solutions Group, said the arrangement combines "a shared vision and commitment to accelerate the shift from card payments to mobile payments."
He added that the companies' "collective goal is to proactively expand market share while creating additional value for both merchants and consumers."
Chris Gardner, co-founder of Paydiant Inc., a mobile wallet and loyalty platform company that works with acquirer Vantiv Inc. and several large merchants, said it's not about the payment.
"It's about all the data around the transaction - data about users, where they shop, and how they spend is the most valuable asset," Garner said. (For more information, see "Mobile payments 2013 - Part 1," The Green Sheet, March 25, 2013, issue 13:03:02.)
Jason Blackhurst, Senior Vice President, eCommerce, at Bank of America Corp., agreed. At BAI's Payment Connect conference, he said, "The transaction is more than just the payment"; it's about the data, too.
"There are people out there stripping [transaction] data and aggregating it for their own benefit," he added. And retailers are willing to pay for information about their customers, said Shikko Nijland, Managing Partner at the European payment consultancy Innopay BV.
"We see that merchants are increasingly willing to pay for interaction earlier in the value chain like advertisements and coupons," he said. "It is the checkout where all transactions need to come together, and the loop is closed."
Capital One's Moreton said, "You need to be able to support offers and loyalty programs as well as payments."Bank of America Merchant Services (a joint venture of BofA and First Data Corp.) offers a Square-style mobile payment service that comes with a fee structure competitive with Square's rates.
But in addition to reading card data, Mobile Pay on Demand, as the product is called, is readily integrated with an electronic marketing platform. And as an added bonus, it supports next-day access to funds through BofA checking accounts. Such an implementation is a sign that acquirers and other payment companies are beginning to get the message.
Improving customers' retail experiences is the key to the success of mobile payments. That's what 53 percent of mobile industry leaders said when surveyed recently by SAP, the enterprise software company.
The survey, undertaken during the GSMA Mobile World Congress in February 2013, also revealed that 29 percent of mobile executives expect banks to be most successful in offering mobile payments, followed closely by online payment schemes, such as PayPal and Amazon Payments (at 28 percent) and credit card companies (26 percent).
SAP also asked mobile executives what they felt was holding back wide-scale adoption of mobile wallet schemes; 38 percent pointed to a lack of consumer awareness and too much confusion around mobile wallet offerings.
While mobile payments have been slow to gain traction in the United States, the same cannot be said for other countries, especially developing countries like Kenya and Tanzania, where consumers are more likely to have mobile devices than bank accounts.
At the 2013 Mobile World Congress in Barcelona, the GSMA, an international trade group for mobile operators, released a report indicating that in one month in 2012 (June) more than 30 million people worldwide undertook 224.2 million mobile transactions totaling $4.6 billion. "That exceeds the 196.3 million transactions performed by PayPal customers on average each month during Q3 2012," the GSMA said in revealing the results of its second annual Global Mobile Money Adoption Survey.
The GSMA survey identified 81.8 million registered mobile customers worldwide, with a significant share in sub-Saharan Africa, where people with bank accounts are rare. At a total of 56.9 million, there were twice as many mobile money users in that region in June 2012 as there were Facebook users, the trade group said.
Not surprisingly, the GSMA also found that in several African countries the number of mobile money agent locations far exceeds total bank branches. There is one big difference between the United States and African markets: technology. In the developing world, mobile schemes use SMS (short message service) messaging to execute mobile payments.
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