Billions of dollars are flowing through the mobile channel

But mobile payments are far from mature.

Kevin Woodward

Mobile payments, ranging from transactions through m-commerce sites and apps to taxi credit card readers to smartphone-based mobile wallets, are on the rise. And a host of players are starting to see significant growth in the volume of transactions they’re enabling.

More than half of the merchants using VeriFone Systems Inc.’s payment gateway are using it for mobile payments, the company announced this week. The payment-terminal maker says the gateway, which connects a merchant’s point-of-sale service to a variety of payment processors, currently projects $10 billion in electronic payments in 2012. But it isn’t saying how much of that $10 billion is coming from mobile payments.

Transactions on the gateway stem from e-commerce sites, bricks-and-mortar stores, taxis, smartphones and tablets, VeriFone says. VeriFone’s PayWare smartphone-based mobile point-of-sale service, called PayWare Mobile, relies on the gateway to process transactions. VeriFone would not say how much of the revenue derives from mobile commerce.

VeriFone is not alone in touting its mobile payment volume. It competes against Square Inc., PayPal’s PayPal Here, Intuit Inc.’s GoPayment and North American Bancard’s PayAnywhere in the mobile payment acceptance arena. These services use a smartphone or tablet as the point-of-sale equipment instead of a conventional POS terminal that lacks mobility and the smaller size. They use a card reader that attaches to the smartphone or tablet, usually via the headphone jack, to enable a card-present transaction, which is cheaper for merchants to process than if they keyed in the card number.

Square Inc., which launched in Dec. 2009 just as VeriFone’s PayWare Mobile did, projects $4 billion in mobile payments in 2012, but would not disclose its 2011 volume. Last year, Square released an iPad version of its app to enable merchants to use an iPad as a mobile cash register. VeriFone offers a similar service, which retailer Eastern Mountain Sports Inc. uses in its stores. Eastern Mountain Sports is No. 423 in the Internet Retailer Top 500 Guide.

PayPal, a unit of eBay Inc., recently launched PayPal Here, a smartphone-based point-of-sale service for small businesses. PayPal also can be used to pay for items purchased on mobile commerce sites and apps. In 2011, PayPal says it processed approximately $4 billion in mobile payments volume and expects to process $7 billion in 2012. PayPal’s mobile payment growth has been exponential. In 2010, it processed $750 million in mobile payments.

And judging from the promotion to PayPal president of David Marcus, hired last year as vice president of mobile when PayPal bought mobile billing company Zong, mobile appears poised to garner more attention at the payment brand.

Payment processor North American Bancard declined to disclose its 2011 mobile payment volume, but Rick Oglesby, senior analyst at consulting firm Aite Group LLC, estimates its volume is less than $100 million.

Intuit, which offers GoPayment, did not respond to an Internet Retailer inquiry.

The flip-side of mobile payments is when a consumer uses a smartphone-based digital incarnation of the conventional credit or debit card to complete a payment.

Here, PayPal is seen as dominant given its PayPal Mobile Express Checkout service that enables consumers to complete a mobile commerce purchase by entering a phone number and personal identification number in an m-commerce site or app.

But it faces some competition from Google Inc. and its Google Wallet, which enables consumers to load their payment card details into a smartphone app and wave the phone against a payment reader to complete a transaction, and Isis, a mobile wallet that is expected to begin testing this year. Google declined to provide details about payment volume made with Google Wallet. “At this time we're not sharing specific metrics on Wallet. But we are very happy with the progress we've made to date,” a Google spokesman says.

Not quite a year old, Google Wallet is available only on one smartphone on the Sprint network.

Consumers also may have yet another choice as a group of retailers is working on its own mobile wallet scheme. A spokesman says the group, which does not have a name yet, envisions a mobile wallet form that will work across mobile commerce, e-commerce and inside bricks-and-mortar stores.

Square also offers a digital wallet called Pay with Square, a new name for its Card Case application.

With $8 billion in mobile payments today between Square and PayPal alone, mobile payments may appear to be large, but it is a small amount compared with other retail channels. Consumers spent $202 billion through e-commerce in 2011, according to the U.S. Census Bureau.

“Ten years from now, mobile payments will dominate all payments methods,” says George Peabody, director of emerging technologies advisory service for fraud, risk and analytics at Mercator Advisory Group Inc. “It’s just going to take awhile.”

Peabody suggests mobile payments will become more competitive. “PayPal Here is very similar to Square, and fractionally cheaper. But it doesn’t have the Square Register or the Pay with Square merchant locator and payment app. That’s probably next but they’re two years behind. They will do well with it.”

Google also will learn from its first year operating Google Wallet, Peabody says. “Version 2.0 will be better,” he says. “They’re learning from their mistakes.”


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