Is 2013 the year I put all the cash under my mattress away, leave my credit card at home, and start paying for everything with my phone?
Not bloody likely. At least not for a neo-Luddite like me. Yet some proponents of mobile payments are saying this is a crucial year for the sector to start going mainstream.
“I think 2013 will be the year that a mobile payment winner will be named,” says Seth Priebatsch, the founder of Boston-based LevelUp. He doesn’t mean it’ll be the end of the story—just that a default leader will be crowned by the public. “We haven’t hit an inflection point yet,” he says, in terms of adoption. “But by the end of this year, it will be clear you can pay with your phone.”
That’s not all, of course. Many of the field’s innovators insist that the real opportunity isn’t even in the payments. “Loyalty and marketing, that’s the most interesting,” says Chris Gardner, the co-founder of Wellesley, MA-based Paydiant. “It’s not a technology debate anymore. It’s about the business model.”
Mobile payments is one of those tech sectors, like online advertising or cloud virtualization, that makes my head hurt. There are so many players coming in from different angles and at different levels of the value chain: Besides all the techies with apps and software platforms, you’ve got retailers, brands, banks, credit card companies, payment-processing firms, and a slew of loyalty and rewards programs, all vying for a piece of the pie.
That can lead to confusion—and a reluctance to buy in, among merchants and consumers alike. For the latter, it’s still pretty convenient to use a credit card or cash, even if you might save money by using your phone. And a typical merchant or retailer might think, “I’m still figuring out Twitter, please don’t talk to me about mobile payments,” says Priebatsch.
Yet times may be changing. LevelUp, for one, has been shifting its strategy in recent months. It has expanded beyond its consumer app to a platform approach, whereby third-party developers working for (or with) larger merchants can use LevelUp in the systems they build. And the startup has integrated its software with more than 20 point-of-sale companies, so that more stores and restaurants can handle LevelUp transactions directly; that helps with advertising campaigns, such as a recent one with Coca-Cola. The payoff so far? Priebatsch says February was his company’s highest-revenue month to date—up 35 percent over January.
Meanwhile, Paydiant has been progressing as well, signing up big banks and retailers as part of its “acceptance network,” Gardner says. The company’s software platform enables corporate customers to add capabilities in payments, offers, and rewards to their own apps. This “white label” approach will see more competition in the future from emerging players, including LevelUp, which Gardner views as pursuing a “land grab” strategy. “I really admire what they’ve done,” he says, “but I don’t know how the economics work long-term.”
And let’s not forget about the big boys. Google, PayPal, ISIS (from the wireless carriers), and Square are all significant players
