Mobile Payments Fragmentation - Growing Number Of Players

Growing field of mobile payments increasing with standards still to be determined.

 
The idea of Mobile Payments is one which is expected to take hold this year around the world. The US appears to be a little slower on the uptake for getting on board, but it is the supporting structures which are necessary to make this happen. From the mobile phone and the Near Field Communication (NFC) chips which are embedded, the necessary flow from that point on needs to be provided and is being worked on. The Point Of Sale (POS) devices are being installed in retail outlets and you probably have seen them already. It is the handling of the transactions which has been the problem because of a lack of standards. The first company to get the biggest share of the market will probably have more leverage in establishing their standards for everyone else. The latest one to join the push is MasterCard and their PayPass Wallet.

This was announced this week and joins a growing field of players which look to fragment the market along with fragmenting the standards. There are at least 4 primary players now including MasterCard PayPass, Google Wallet, Visa PayWave and PayPal Digital Wallet. There is also the Isis group and their mobile wallet of which MasterCard and Visa are members of the group. Exactly how all of these will work together is an unknown right now. It would appear that the Isis group is working to handle the mobile payments from the back end so that they can go through a bank, credit card or wireless carrier's bill.

There are all these competing methods of making payments from the mobile device via NFC and it at times causes problems. I am simplifying the process and only talking about the NFC and in reality, there are other chips and processes involved in making mobile payments. When the Samsung Galaxy Nexus was about to be released by Verizon, problems as to whether they would support Google Wallet became an issue and in the end, Verizon chose to not use Google's payment method. Instead they are going to be supporting the Isis group and the methods that are determined there. Whether they go with the MasterCard or Visa mobile solution has yet to be announced by Verizon, but we can expect to hear that decision this year. Given that Google has worldwide coverage, this will create more fragmentation in the market and standards.

It is the fragmentation which looks to be coming as a potential problem. Each wireless carrier is going to potentially have a say as to which one their wireless network is going to be supporting and that is a problem. When you purchase a smart phone from a carrier, you will more than likely be forced to use their predefined method for NFC payments. If you switch wireless carriers in the future, how you make your payments will more than likely change given the way that things are looking right now.

Given that Google has their Google Wallet, we can expect that Apple has some payment method in the works as well. We have not heard from them, but knowing the past with Apple, they have something which we will hear about when the NFC enabled iPhone 5 is announced.

In Asia, they are already using mobile payments and have been for years with a majority of the population using the payment system. They have one primary method which sets them apart from what we are seeing. And of course the US has to do things differently. One of those differences is to make sure that things will work around the globe. In Asia, many of the systems are local to a country and not much further beyond that.

Where all this is going to end up and which standards are going to be established is up in the air. We do expect to see more competition this year, such as Apple entering with their version. This is leading up to the US utilizing mobile payments in a way we have never done before and may take years to gain the kind of acceptance which is needed. For now, there appears to be growing fragmentation.