New Year, New Trend?
I have a friend from Japan who once described to me the way in which she uses her cell phone to purchase goods from vending machines in her native country. That was pretty much the first time my eyes were open to the power of mobile payments, and it is something in which I take great interest.
Now, it seems mobile payments can take two directions. The first, is a more traditional method that I think gives it an advantage. In this case, physical device is attached to the phone, a credit card is swiped, and bingo bango bongo, purchase made. An example of this is Twitter co-founder and angel-investor Jack Dorsey’s new service, Square. In yesterday’s NY Times, Dorsey explained the service:
The goal is to build another utility like Twitter that will scale to any kind of usage. Anywhere from coffee shops or clothing retail stores, to someone selling their couch on Craigslist, or getting paid back from a friend.
No card or private information, including your e-mail and signature, is ever stored on the phone. As soon as that swipe happens, it’s encrypted with our keys, sent up to our servers and forgotten, so it’s never stored on the actual device. We’re also going to create experiences that you can always expect around Square, like an instant SMS or e-mail receipt, and being able to see a photo of your face when you swipe the card.
Square will no doubt benefit from Dorsey’s standing in the tech world and from the similarity to a users current experience with credit card transactions. But another method is the direct charge of your credit card using your cell phone number. Today’s Mobile Commerce Daily features an interview with Ron Hirson, the co-founder of Boku, a mobile payment service (via FrontlineSMS).
The category where we’re focused, online purchases made using your mobile phone number as a means for payment, will continue to see remarkable uptake.
Depending on the type of purchase, the phone number will either bill directly to a user’s mobile phone bill or in some cases serve as a proxy for additional payment methods such as credit cards and Automated Clearing House (ACH).
This coming year will not be the year for physical world purchases using your mobile phone in the United States via Near Field Communication, as chip-prices, handset turnover and point-of-sale build-out will continue to push the vision of buying a soda with your mobile phone to 2011 or 2012.
While Hirson is probably correct to be cautiously optimistic about growth in 2010, it will be interesting to follow as these two separate platforms develop. The important aspect to remember is consumer fickleness, and finding a product that fits into their conceptions of safety and usability. From a pure convenience perspective, it seems a service such as Boku would have the upper hand. But the similarity in transaction appearance of Square could certainly give it an advantage as well.
On thing I do think is that within a few years we will almost certainly see a rise in the ubiquity of mobile payments, regardless off platform. While consumers will have very real concerns over safety and privacy functions, the arguments are relatively similar to those that consumers had about online payments last decade. Once the industry moves past this hesitance, though, I think we will see a future in which mobile payments are the standard.
