We're tantalizingly close to mobile payments. Whether it's via SMS, contactless NFC chips, facial recognition (!), dongles that let you swipe your credit cards or other means, plenty of startups want a piece of the pie.
Why should I care?
Cash has many disadvantages, like security and traceability. If you could pay for stuff with your phone, that would be very convenient. In the developing world where entrepreneurs are leapfrogging our current technology, mobile payments and banking are having a huge impact.
Paying for things with your phone would be more convenient and let you track your expenses better.
Why is this such a big deal?
Because it's a huge market. Think of all the cash transactions that occur around the clock around the world. Any company that could get a 1% cut of that would be enormous.
What are mobile payments going to look like, in practice?
No one knows for sure. Every startup has its own twist on it. Some people are betting heavily on NFC chips, which are probably coming to the next generation of smartphones, and would let you pay for things without touching anything but your phone. Some people are betting on using SMS, linking your credit card to that. Some people are making credit card readers that can plug into phones.
It's part of the reason why this market is exciting: everyone is trying a bunch of different things.
Do startups have a chance?
It's an uphill battle, perhaps moreso than for even most startups.
First of all, anything having to do with payments is very complex. There are a host of regulatory issues, as well as security and fraud issues to disentangle.
Second of all, the big guys all want a piece of the pie. If Google and Apple put an NFC chip on their phones, they're going to want to own mobile transactions. PayPal is also making a big mobile payments push.
And finally, distribution is a big challenge. It's a two sided market: for a payment method to work, both buyers and sellers have to have it. And getting merchants to adopt something is very hard, because there are millions of them and they're not usually tech-savvy. Consumers are also not used to paying stuff for mobile, and most of them don't see it as a problem that there's no easy way to pay with your phone. In fact, they may be right: mobile payments are popular in other countries of the world, but that doesn't mean it will be in the US and Europe.
Then again--high stakes and high risk of failure? That's regular for a startup.
Boku lets you pay for stuff online with your mobile phone
Online commerce with the phone is promising. Instead of having to pull out a credit card, you just plug in your phone number, get a text message with a confirmation number, enter it, and boom! You're done. Sales with mobile payments convert much better than PayPal. It also reaches people who don't have credit cards like teenagers.
But because the payment goes through the carrier billing system, carriers have to be on board, and they take huge transaction fees, from 50 to 70%. This has limited this kind of payment to virtual goods on Facebook and other small items.
Zong is Boku's European brother
Zong works like Boku, but it's based in Switzerland and is more international. They have partnerships with more carriers and so cover more countries.
mFoundry tries to tackle the distribution problem by going through banks
As noted earlier, the big problem for these startups is to get distribution. So by working with banks and other companies, mFoundry can get into your phone easier. For example, mFoundry was behind Starbucks' payment app.
Problem is: if you need other people to reach your customers, you're at your partners' mercy.
View more at Business Insider
See Also:
- Google Exec: We're Not In "A War" With Apple Over Digital Subscriptions
- From China With Love: What Your iPhone Went Through To Get To You
- Google TV Not Toast, But Some TV Makers Are Skipping It And Just Using Android
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