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Mobile Melee

By Philip Butta
The fight is on to turn your smartphone into a waller. Who will win?

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how they're posit-
ioned now


sometime before 2022

BANKS

Banks have millions of customers, existing merchant relationships, and--oh, yeah--dibs on most of our money, so they'll be a necessary back-end component of any near-term mobile wallet. But . . .


"They're risk-averse, and they tend to be technology laggards," says Nick Holland, a mobile-tech analyst with the Yankee Group. "I can't see them innovating here."

MERCHANTS

To lure consumers, some merchants have launched their own mobile-money platforms. A Starbucks app, for example, lets users load cash onto their mobile phones, which then display a bar code baristas can scan at the register. Since January, the app has processed more than 3 million transactions. But . . .


Merchants are too self-involved to lead the general charge; it's more efficient for them to partner with a bigger player, like Google Wallet, says Mark Beccue, a mobile-commerce analyst at ABI Research.

STARTUPS

From Zong's direct-to-carrier billing gimmick to Punchd's all-in-one digital loyalty cards, there's no denying that startups--free from the confines of bureaucracy--are sparking the best new ideas in the mobile-payments space. And Square, whose dongle turns iPhones into credit-card readers, now fuels more than $1 million a day in transactions. But . . .


"At the end of the day, startups get distribution" when they're snapped up by the big guys, says Karen Webster, a reporter with Pymnts.com. To wit: Punchd and Zong now play for Google and eBay, respectively.

CREDIT-CARD COMPANIES

Merchants already tout thousands of Visa payWave and MasterCard PayPass terminals, which give the credit-card companies lots of leverage if tap-to-pay becomes the mobile-payments standard (as many analysts expect). And in March, American Express launched Serve, a mobile platform that lets users send and store money--without funneling it through banks. But . . .


AmEx aside, credit-card giants don't interact with customers directly--so they're partnering with bigger players that do. AmEx, Discover, MasterCard, and Visa all recently joined Isis, a mobile-money venture led by carriers (see next column). Visa also licenses its payWave tech to Google.

MOBILE CARRIERS

Mobile carriers are experts at processing payments--thanks to those billions of cell-phone charges--and, shockingly, are willing to work together.

Last November, AT&T, T-Mobile, and Verizon all joined forces to create Isis, a forth-coming mobile-payments network that now touts support from the big four credit-card companies. Odd man out Sprint linked up with Google Wallet in May. But . . .


Like banks, mobile carriers aren't known for major innovation. They've also been mum on the specifics of Isis. "Just because there are partnerships doesn't necessarily mean there's anything real there," says David Evans, founder of the tech consultancy Market Platform Dynamics.

PAYPAL

The leading digital-payments platform boasts 100 million users; $3 billion worth of mobile transactions (in 2011); a robust suite of fun, useful smartphone apps; and PayPal Access, a Facebook Connect-like feature that aims to streamline the entire virtual-payments process. It's also working on a cloud-based NFC alternative that would allow customers to pay for products by using their phones to scan bar codes or by entering their mobile number and a PIN at existing payment terminals. But . . .


Those grand ambitions require strong relationships with physical retailers, which has not been a priority for PayPal. Although that's likely to change soon (it recently opened its first pop-up store in New York), the late start puts PayPal at a slight disadvantage.

TECH TITANS

In the near future, Amazon (with its $34 billion online retail operation) and Facebook (with its 800 million-strong user base) could easily make plays for the mobile-payments pie. But thus far, Google and Apple are leading the charge. They've got assets aplenty: great relationships with consumers, more pull with physical retailers than PayPal, an active culture of innovation, and, because they both outfit market-leading smartphones, control over when NFC chips could become standard. (Much of that influence, by the way, has been siphoned off from the once-dominant mobile carriers.) To be sure, there's much to be worked out--namely, which company will emerge as the mobile-payments victor, which technology it will use (NFC or otherwise), and which partners it will need to pull the whole thing off. But most analysts agree that Google Wallet--with its sleek interface, ad-based business model, and rising adoption rate--is a big, bold step in the right direction.

Photo: Flickr user dogbomb (red bell)

A version of this article appears in the December 2011/January 2012 issue of Fast Company.