It’s not happening just yet, but in the next few years we’ll start to see much wider adoption of mobile phone-based consumer payments in the U.S. It’s kind of a numbers game at this point—there just aren’t enough phones in the market right now enabled with near-field communications technology that will make paying for groceries akin to waving a security badge to enter the office.
As that change approaches, a lot of the infrastructure is starting to get settled. And Vikram Pavate, vice president of business development at Kovio, says there are four major tech companies standing at the center of that evolution: Google, Apple, Amazon, and PayPal.
“These are the four players that we watch. And each one of them is in a position to really make some big moves,” Pavate said today at the Mobile Breakfast Series event in Seattle, organized by Chetan Sharma Consulting.
Venture-backed Kovio, based in Milpitas, CA, uses advanced inks and printing technology to make thin semiconductors in forms like stickers and barcodes, which can be scanned with near-field communications (NFC) devices that pick up electronic signals. Sharma calls Kovio “probably one of the most important companies you have never heard of in the NFC space,” citing work with Google and Facebook, among others.
So why are Pavate’s big four to watch in mobile payments all tech companies? Because the roles of wireless carriers and banks look like they’re pretty much set for the developing mobile payments architecture.
Banks will be the primary channel for processing payments, Pavate and Sharma agreed—something that’s illustrated by the carriers’ movement away from “Isis,” their hoped-for standalone payments system.
That competition with the financial industry mostly ended with the recent Dodd-Frank federal banking regulations, which included limits on how much companies could charge for payment processing fees. The limits made a new payment system not profitable enough for carriers, so they’re focusing more on becoming providers of “mobile wallets,” which encompasses a ton of data about users. (Financial guys also say consumers trust them more to provide this service anyway).
With those roles more or less set, Pavate said, the banks will follow “whoever gets them the largest user base.” And that’s where he boils the race down to Google, Apple, Amazon, and PayPal.
“I think it’ll just gravitate to these four players,” Pavate said. “Apple just because of what they can do, and they have such a huge mass of iTunes accounts. We just have to wait and watch what they do. Amazon, of course, has a really good background in payments, so they can do a bunch of things. But amongst these four, I think PayPal looks like the most interesting one.”
PayPal gets the nod for most intriguing, Pavate said, because of its relative flexibility—“they’re not wedded to a technology, they’re just using what’s available.” And PayPal, which is owned by eBay, also has not been content to sit on its big lead in online payment processing: It recently unveiled competitors to both the Google Wallet and Square, a startup that supplies subsidized credit-card readers for small businesses who use its online payment system.
Notice who’s left out of this discussion? Other than Apple, phone manufacturers aren’t looking like a notable player in the coming wave of mobile payments for the U.S. market, Pavate said. Once consumers become more familiar with the benefits, it’s not hard to imagine NFC hardware functions becoming just another standard feature for smartphones.
“I don’t buy a Samsung phone because it gives me a payments option,” Pavate said.
