Era of Mobile Payments Almost Here

After many years of discussion it appears that mobile payments will finally break through in the US in 2011. The SF Chronicle offers a nice roundup of some of the mobile payments initiatives going on, focusing on near-field communications and a company called Bling Nation:

Bling Nation, a Palo Alto startup founded in 2007, is among the furthest along in this emerging field, with more than 1,000 retailers nationwide accepting its payment system. The company provides so-called Bling tags, or small stickers, that affix to the back of a mobile phone and transmit data using a wireless standard known as Near Field Communication.

When users tap the tag on a proprietary reader at participating retailers, it pulls money from their PayPal account. For security, users have to enter a personal identification number for purchases over a certain amount, or when transactions occur at an unusual frequency or location.

Here are the major existing and potential mobile payments contenders in the US market:

  • Visa (and Mastercard)
  • PayPal (eBay)
  • Apple/iTunes
  • Verizon, AT&T & Discover (carriers + payments processor)
  • Others: Boku, Zong, Square, Bling Nation, Amazon potentially¬†

As the article explains Bling Nation's appeal to merchants is lower fees vs. traditional banks/cards. It then hopes that merchants will proselytize and evangelize the system to consumers. Companies in Bling Nation's position typically face the proverbial "chicken and egg problem." Smaller players must often build merchant and consumer acceptance for their service at the same time, like Tabbed out or Square. Bling itself has reportedly built some of that scale with merchants. 

Successful smaller companies, as measured by relative scale, will be acquired in the near term. Mobile payments will be a kind of "clash of the titans" ultimately, where size and scale will matter significantly. There can be three or maybe four major players that can co-exist and succeed in the market. However Visa and the carriers are unlikely to offer anything truly innovative in terms of user experience or merchant discounting. So it's up to Apple, PayPal and the startups to innovate around the merchant and/or user experience.  

And where's Google in all this? The company will definitely want to be part of mobile payments. Google's payments platform, Checkout, has largely failed to catch on because of tepid consumer promotion. Google could try and reinvigorate it and/or acquire one of the smaller companies in the space. Watch for a payments acquisition by Google I predict.