Mobile payment systems enable consumers to use their smartphones, instead of cash or credit cards, to purchase products or services in stores. A number of these systems leverage near-field communication (NFC) chips installed in smartphones, such as Google’s Nexus S and the rumored next-generation iPhone. When consumers touch or wave their NFC-enabled smartphones at devices installed at registers, the NFC chip communicates with the register to process the transaction. The mobile payment arena is littered with competitors seeking to shape the still undefined mobile payment industry; yet, one thing remains noticeably absent: actual products in consumers’ hands. This is slowly beginning to change.
As arguably the world’s largest media company, Google has ventured into mobile payments, underlining the enhanced opportunities that mobile payment systems provide marketers. Not only are advertisers able to influence a consumer’s decision at the point of purchase with mobile coupons and deals, but once a consumer redeems a coupon, the advertiser can also offer future deals specific to the individual’s preferences. Just two weeks ago, Google announced its mobile payment application, Wallet. Once a user purchases the app on an Android-powered, NFC-enabled smartphone, s/he can enter his/her Citi MasterCard information or load a prepaid Google card. At any of the 124,000 merchants with MasterCard PayPass terminals, Wallet users can tap their phones to the terminals to pay.
Google also launched Google Offers, a mobile competitor to web-based Groupon. Consumers can download deals from Offers to the Wallet application, which will then subtract the savings from users’ bills. In addition to coupons, users can also load loyalty programs onto the Wallet app. Entering into a new field already inundated with competition, Google holds one distinct advantage: its partnership with MasterCard and Citi as well as retail and restaurant chains, including Macy’s, American Eagle, and Subway. With the help of these partners, Google hopes to market the new concept of mobile payments to consumers.
In collaboration with MasterCard and Barclays, Verizon, AT&T, and T-Mobile are itching to drive the mobile payments industry with their own commerce platform and mobile wallet, Isis. After checking-in to stores with their phones, consumers can touch their NFC smartphone to shelf-talkers along stores’ aisles, end-caps or posters to load coupons. Once consumers are ready to purchase their products, they then touch their phones to readers at the registers in order to deduct the offerings from their bills. Isis will pilot its mobile payment system in Salt Lake City beginning in the first half of 2012.
Another formidable and particularly innovative player in the mobile payments space is Square–a startup led by Twitter’s co-founder Jack Dorsey. Two weeks ago, Square released its own mobile payments system. Consumers who use Square’s Card Case application can store their credit card information in the app. Upon purchasing a product or service at one of 50 local merchants (in Los Angeles, New York, St. Louis, San Francisco, and Washington), the user can simply mention his name to the store’s employee. The merchant will then look the customer up on the Register app on the iPad and complete the transaction. The advantage of Square’s mobile payments system is simple: it already exists. Square is the only major player in the market to successfully place a mobile payments program in consumers’ hands. The video below outlines how Square’s system works: