We've been talking about mobile payments gaining U.S. traction for years, but it's been during only the past few weeks that there's been a stampede of activity signaling that the fight for dominion over mobile payments is about to begin.
What makes the topic such a tangle is the fact that the term "mobile payments" can mean anything from NFC (near-field communication) technology at the cash register or bus stop to paying for items with a smartphone app.
How mobile payments will work (FAQ)
Four types of mobile payment
Samsung, Visa to give NFC payments a boost
Mobile phone e-wallets get closer to reality
What needs to happen before the iPhone gets NFC
For each of the four main categories of mobile payments there's a crowd of players big and small with plans for making money through your phone. Mobile phone carriers, credit card companies, and third-party sluggers, like Google and PayPal, all gain--either through selling hardware, or through transaction fees and revenue-sharing.
Banks: As with credit cards, banks can extend lines of credit to individuals for NFC and other mobile-payment use.
Credit card companies: When mobile payments start catching on, consumers will depend less on credit cards and more on NFC chips in their phones for approving digital deductions from their bank accounts while at a register. If Visa and MasterCard can give their mobile apps traction, they can keep money flowing through their channels while keeping it away from new contenders.
Terminal makers: Someone has to make the boxes that sit at cash registers and on bus poles, and make it possible in general to make payments with a wave of your phone. VeriFone made its name with credit card and ATM terminals at supermarkets and department stores, but scores of others aim to profit as well. VeriFone and Google have reportedly partnered to create NFC-capable point-of-cale terminals in New York and San Francisco.
Device manufacturers: If you build it with NFC chips, it will sell. Google's Nexus S phone is already NFC-enabled, as is newcomer Nokia Astound. Microsoft will reportedly incorporate compatible software in its Windows Phone OS, and there are plenty of indicators that iPhones will also get these chips. According to Forrester Research, manufacturers expect to ship at least 40 million NFC-enabled devices in 2011 globally.
Carriers: Mobile purchasing is convenient, and phones with NFC chips inside can help attract and keep customers. That's just one part of the equation. AT&T, Verizon, and T-Mobile have banded together to form the Isis mobile-payment network, which also includes an incentive element, with deals and coupons. Sprint is apparently also hatching its own plan to partner with deal-makers.
E-commerce players: Google, Amazon, eBay (PayPal), and other online sellers with their own payment structure can hope to extend their services to the mobile space. Amazon is considering its role with NFC, according to one report. Another report points to Google working on an Android solution with MasterCard. PayPal will also be extending its mobile presence, CNET learned. PayPal already has various mobile apps for peer-to-peer money transfers as well.
Coupon and daily deal providers: Software makers already got the ball rolling with apps that scan loyalty cards and other bar codes (like the Groupon app) in exchange for goods. As people grow accustomed to using a phone instead of a card for buying goods and services, deal makers and advertisers will be able to expand.
Merchants: Merchants themselves have much to gain. For example, they can take advantage of coupons and impulse buys to drive sales at brick-and-mortar shops and stalls.
There are financial gains in store for players across the field, if they can make their solutions stick. But experts so far agree that it will take significant infrastructure investments and consumer campaigns to make mobile payments mainstream. For NFC payments in particular, we'll need to see more phones come embedded with chips, and we'll get there. Next, we'll need one or two far-reaching systems in enough urban centers to make NFC payments as natural as swiping your ATM card at the grocery store (our NFC field test here).
Although NFC is short-range (about 4 inches) and encrypted, security and privacy concerns are another potential hurdle for widespread adoption. Yet, given the recent swell of interest from companies with means like Google and Visa, mobile payments will reach a tipping point where they become an inevitability.