While mobile payments is certain to become a multi-billion dollar market in the next several years, it's getting more difficult to predict who will gain traction. That's partly because there are now so many competitors jockeying for consumer and merchant attention that it's clouding and confusing the market. Indeed, we could see delays in adoption given the absence of any apparent standards or common platforms.
NFC could be one of those standardized plaftorms however most consumers in North America don't have handsets that are NFC-enabled. It will take one or two replacement cycles (2-4 years) for meaningful NFC-handset penetration to be reached.
In the non-NFC payments category, this morning JPMorgan Chase-backed GoPago launched. GoPago is a mobile app that offers mobile payments but also provides a range of additional services, including online ordering and a number of small-business marketing capabilities. The company has developed a cloud-based POS system that interfaces and integrates with existing POS systems. If the local business doesn't use a POS GoPago has other ways to work with merchants. The app is conceived as a holistic mobile storefront for SMBs that will enable ecommerce and not simply a payments solution like Square.
The JPMorgan partnership helps GoPago establish credibility and gain notice, which otherwise might elude the ambitious startup. However the JP Morgan backing doesn't guarantee adoption by consumers or merchants, especially given that eBay, Google, Visa, Amex, Intuit, Mastercard, Square and others are similary seeking adoption of their mobile payments tools and systems. GoPago said however that JPMorgan would help market and educate consumers and merchants about the service.
During the call with GoPago I discussed how the major players (PayPal, Google, Square) had effectively marginalized earlier mobile payments companies such as Bango (which just announced a deal with Facebook) and Boku. Another mobile payments vendor Zong was acquired by eBay. Somewhat ironically, Boku has made a renewed bid for relevance through a just-announced deal with Mastercard that involves its NFC-PayPass system:
BOKU, Inc., a leading global provider of on-line mobile payments, announced today a partnership that will enhance the shopping experience for consumers by allowing them to make payments, receive discounts and targeted offers, and monitor spending -- all via their mobile phones anywhere MasterCard PayPass is accepted . . .
Offered through a mobile subscriber's mobile network operator BOKU Accounts with MasterCard Prepaid gives consumers a convenient way to pay while on the go. Account holders use a MasterCard Prepaid card or PayPass-enabled device to make purchases anywhere MasterCard is accepted with a simple swipe or tap . . .
Boku also offers merchant loyalty and marketing tools in addition to payments functionality. Given all that's now happening I remain very skeptical of Boku and its ability to gain much adoption in this very noisy payments market.
Similarly LevelUp (from SVNGR) is trying to evolve into a payments provider as well. LevelUp (which used to be a couponing and loyalty program) links a credit card to a QR code that merchants then scan at the point of sale. LevelUp also offers a physical card in addition to apps. PayPal and Boku also offer physical cards -- which strikes me as strange. Why link a plastic card to another card or a checking account when one can use a credit or debit card at all the same merchants already? It's redundant.
There are value-added features for both merchants and consumers in using these systems but those features are probably not enough to justify adoption, especially given that they're being offered by "no name" brands. Here consumer trust is a significant issue and there are only a small number of companies, credit card issuers, handset makers and carriers, that consumers trust (to varying degrees) to handle payments.
Merchants, especially small merchants, are also being bombarded by marketing services and will be reluctant to implement a system that has little or no consumer scale. It's the classic chicken and egg problem: you need merchants to get consumers and vice versa.
A system like Square is simple and elegant and doesn't require any changes in consumer or merchant behavior. It simply removes much of the friction of accepting credit cards for small merchants. However, the many moving parts and seeming complexity of payments systems like those offered by Boku, GoPago and LevelUp means they will probably be slow to gain adoption -- if they succeed at all.