Getting Vertical - Retail

Payment via Mobile Device? There's An App for That

By Paula Bernier, Executive Editor, IP Communications Magazines  |  August 17, 2010

Virtually everybody carries a mobile phone these days. Wouldn’t it be nice if we could lighten our loads by using these wireless devices as virtual wallets to make payments at various retail locations?

Right, we’ve all by now heard about the prospects of mobile payments. But despite years of talk, this concept has yet to materialize in a significant way in the U.S.  That may soon change, however, given new momentum in this space as important companies like Apple, eBay (News - Alert), MasterCard and Visa have announced, or delivered tools to help enable, new initiatives on this front.

For example, in mid May, DeviceFidelity Inc. made available its In2Pay solution for the iPhone (News - Alert). The application lets iPhone users buy stuff by waving a specially-equipped iPhone in front of a contactless payment terminal.

The solution, which involves placing the DeviceFidelity product into a special protective iPhone case, was expected to be in trials starting last quarter. Visa has collaborated with DeviceFidelity to combine its own contactless payment technology, known as Visa payWave, with the solution.

"Visa is working to bring the security and convenience of digital currency to mobile users around the world," says Dave Wentker, head of mobile contactless payments at Visa. “Our collaboration with DeviceFidelity can extend the reach of Visa mobile payments to millions of iPhone users.”

Meanwhile, PayPal (News - Alert) is expanding its horizons in a big way – and you won’t necessary have to be on your computer to use the payment service. That’s the word from John Donahoe, CEO of eBay Inc., which owns PayPal, who discusses mobile payments and related matters in a recent report.

As part of the strategy, PayPal is making it easier for software developers to create applications using its payment engine. About 30,000 developers are already working on such apps.

The interest around PayPal shouldn’t come as any surprise, given it claims 84 million active accounts around the globe. Neither should it come as a surprise that there’s already an iPhone app in this category.

PayPal recently released a new Send Money application for the iPhone. Version 2.0 of the PayPal Send Money app offers users secure mobile access to their money and other helpful features. Using Bump, users can put two iPhones together to transfer funds quickly between their PayPal accounts. This, for example, could enable two users to split the cost of a shared meal. Collect Money is a way to allow people to collect funds from a group, such as taking up a collection to buy a teacher an end-of-the-school-year thank you gift.

“Today, you leave the house with three critical things: your phone, your wallet and your keys,” says Osama Bedier, PayPal's vice president of platform and emerging technology. “PayPal Send Money lets consumers access their wallets through their phones. Because with PayPal, the wallet lives in the cloud – the mobile phone is just one device customers can use to access it.”

Meanwhile, another big name in the payments industry, MasterCard, in late May issued an invitation to developers to use its payment technology in third-pay applications and on cellular phones.

“You’re seeing quite different ways people are paying for digital goods, but you haven’t really seen that translate into physical goods,” Josh Peirez, MasterCard’s chief innovation officer, says. “It’s still really hard to buy a physical item from your phone.”

In an effort to change that MasterCard is now offering an open platform that allows developers to embed its payment capabilities into various applications, which could run the gamut from straight e-commerce apps, to social networking sites, to virtual games. This is an improvement over MasterCard’s previous set up, which required developers to get a merchant agreement, set up the payment part and then require the end user to resubmit his or her payment information with each transaction, according to a recent report on the matter.

While the idea of using a mobile device to make payments at retail institutions and to do banking remains a new idea here in the U.S. (at least to those outside the communications and payment industries), where it has yet to see widespread acceptance, it’s much more popular abroad. About 8.5 million people in the Philippines and 4.5 million in South Africa use mobile banking today. And that’s expected to grow over time.

"One billion consumers in the world have a mobile phone but no access to a bank account," says Gavin Krugel, director of mobile banking strategy at GSM Association.

Mobile phones enable individuals in a location such as Kenya, for example, to send money to family that live elsewhere, or to get paid via a text.

Edited by Stefania Viscusi