Mobile Payments Space Heats Up - Again

By Paula Bernier, Executive Editor, TMC  |  May 07, 2015

Digital wallets seem to be facing a one step forward, two steps back dilemma.

This technology, or technologies, captured headlines a few years back as several of the big credit card companies, the major communications service providers via their ISIS effort, and Google with Google Wallet moved to get into this space early in an effort to grab market share and mindshare in the U.S. Things haven’t exactly taken off as planned, as you’ve probably noticed.

But there’s still hope.

Many important companies have recently begun moving forward on the digital payments front, and attacking it in new ways. That’s the good news.

The not-so-good news is that some of these efforts – namely, Apple (News - Alert) Pay – are in turn also being attacked.

Apple last September announced Apple Pay would be supported in its iPhone 6 and iPhone 6 Plus devices starting in October of last year. Apple Pay was delivered in collaboration with JPMorgan Chase, and supports credit and debit cards from American Express (News - Alert), MasterCard, and Visa, and cards from major banks such as Bank of America, Capital One Bank, Chase, Citi, and Wells Fargo. The solution, which leverages NFC technology, is supported at Apple’s own retail locations as well as at Bloomingdale’s, Disney Store and Walt Disney World Resort, Duane Reade, Macy’s, McDonald’s, Sephora, Staples, Subway, Walgreens, and Whole Foods Market.

Privacy and security were two key themes Apple pushed when Apple Pay came out of the gate. But in the past few months reports have been circulating that Apple Pay has been a target for fraud.

“About a month post-launch, it seems like fraud has come to Apple Pay (in one case – as high as 600bps for an issuer that I cannot name),” according to a Jan. 5 posting on Drop Labs. “Though what follows was written in the context of Apple Pay, much of it translates to any other competitor – irrespective of origin, scale, intent, or patron saint.”

Part of the problem, according to the posting, is that card issuer implementations of Apple Pay’s Yellow Path process – which involves authentication and verification – are inadequate.

Meanwhile, some of the other important companies on the digital payment frontier have made acquisitions to help them better address mobile payments. That includes PayPal (News - Alert) and Samsung.

PayPal in early March announced plans to buy Paydiant. The deal, reportedly valued at $280 million, was expected to close in March or April.

Paydiant, a five-year-old company based in the Boston area, works with a good number of high-profile companies, including Capital One, Harris Teeter Supermarkets, as well as CVS, Exxon, Sear, Target (News - Alert), Walmart, and Wendy’s. The first three worked with Paydiant to build mobile payments, offers, and loyalty capabilities into their own mobile applications. The other six are just a sampling of the companies that have been working with Paydiant on a mobile wallet platform via the MCX Merchant Customer Exchange, a merchant-owned mobile commerce network.

“Using Paydiant’s platform, our merchant partners can now create their own branded wallets to accelerate mobile-in-store payments and drive consumer engagement through mobile payments, loyalty, offers and the prioritization of preferred payment types, such as store branded credit cards and gift cards,” Dan Schulman, PayPal president and CEO designee, wrote in a March 2 blog. “Similar to PayPal, Paydiant’s technology agnostic approach means that merchants can use any mobile payment technology – QR codes or NFC – that best suits their business.” 

And giving merchants and their customers the ability to support an array of payment types by providing a technology-agnostic platform is what PayPal – whose parent company, EBay, plans to spin it off later this year – says it’s all about.  

The Paydiant deal follows by about a year PayPal’s acquisition of Braintree. It also follows by less than a month Samsung’s acquisition of mobile wallet solutions provider LoopPay.

Meanwhile, Google continues to work on its digital payments effort, having launched a new framework called Android (News - Alert) Pay in March at Mobile World Congress. Noting that mobile payments have reached a new level of importance this year, Google’s Senior Vice President of Product Sundar Pichai at the Barcelona event explained that Android Pay is an API layer companies can use to support secure payments on Android in store and via apps.

The idea of delivering platforms on which businesses can support various payment types and technologies seems to be a developing theme, as PayPal’s comments at Mobile World Congress also fell into this category.

Edited by Maurice Nagle