Mobile Payments dogfight

August 23rd, 2012

Recently, we heard that Starbucks – the behemoth in coffee retailing business, invested in Square – the American Mobile Payment startup; as well Starbucks stores will be accepting payments via Square mobile app. Starbucks already had their mobile wallet solution and had seen a record number of transactions via this platform, wherein the customers would just wave the starbuck app barcode on their smarphones in front of a reader in a Starbuck store and the amount gets deducted from the user’s Starbucks mobile wallet.

Now Starbucks is betting on Square – that zingy startup which has attracted tons of VC money from big name investors. Starbucks buyin gives Square the credibility that is needed by the tech firm to sell into big name retail. So far Square app was popular for mobile payments, but primarily limited to thousands of small businesses which had adopted this solution. Starbucks approval puts Square square and centre in the Mobile payment contender space – along with the traditional digital payment firm Paypal. Paypal has been experimenting with Mobile Payments for sometime now and has the backing of millions of consumers and merchants who use Paypal daily for moving around money online.

Paypal, in turn, announced a partnership with Discover Card financial services, Paypal mobile app will mediate a Discover payment in select stores. Discover is the smallest of the 4 big Credit Card vendors in United States. Visa, Mastercard and American Express cards are working on their own mobile payment solutions or partnering with other internet and telco players. Discover is relying on Paypal to carry the smaller card vendor into the Mobile payments vertical (although Discover works in Mobile Payments via telco partnerships as well).

It seems like a dogfight between Square and Paypal has begin to try to dominate this upcoming area. Although there are other heavyweights in the ring – namely, ISIS (telecom carrier joint venture), Google Wallet, Apple potentially, banks and some others. It would be interesting to see what tricks Apple has up it’s sleeve. Apple is a killer firm which, when it enters a market, comes up with such innovations that few are able to compete with it.

The Mobile Payments space is fragmented and there is no clear winner or dominant player yet. The complexity in financial regulation and the difficulty in scaling this business over a large number of merchants has kept this area into the hobby domain so far. As it seems, it seems to be breaking out now with some startups and large firms making aggressive moves to create a market in this now. We watch this space with keen interest.

As far as India goes, there are local startups who have tried to tackle this space – firms like ngpay, paytm, obopay and some others. But most are still small and captive scale is not there yet. Many of these firms have survived in India by doing things other than Mobile payments. Eg Ngpay has become a mobile shopping mall, PayTM has gotten into recharge business and so on.

Filed under: 4G,Android,Apple,Asia,AT&T,Australia,Bharti,Blackberry,BSNL,China,Cloud Computing,Convergence,e-Commerce,Enterprise Mobility,Europe,FaceBook,Google,India,Internet,iPhone,Japan,Location Based Services,LTE,m-Commerce,Mobile Advertising,Mobile Applications,Mobile Devices,Mobile Marketing,Reliance,Startups,T-Mobile,Technology,Telecom Carriers,UK,USA,Venture Capital,Verizon Wireless,Vodafone

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