Handicapping the Mobile Payments Competitors

It seems that a day doesn't go by without news of some new company getting into mobile payments. It has all gotten quite noisy and confusing. Here's a quick roundup of what's going on and the outlook for these companies. 

Amazon: is said to be considering a near-field-communications (NFC)-based mobile payments platform for local stores and retailers. The key here is that Amazon has millions of stored credit card numbers and is a trusted brand. That puts the company ahead out of the gate. 

Apple: is rumored to be providing NFC support within iOS 5. However there are mixed signals on this question. In addition Apple has more than 200 million credit cards accounts on file at iTunes. Those stored credit cards are a huge advantage, though it's more of a stretch for Apple to become a broad payments platform than Amazon. 

Google: has already built-in NFC support in its "Gingerbread" OS update (Android 2.3). In addition the company is reportedly working on conducting an NFC payments test in New York and San Francisco with several retailers. 

Microsoft: a future version of Windows Mobile/Windows Phones' software will feature NFC support. 

Visa: has several mobile payments initiatives going. The splashiest is a 2012-Olympics-related NFC partnership with Samsung. It will require a Visa-enabled SIM card (and maybe a new phone). Visa is sure to be a "player" in mobile payments because of its consumer relationships -- if it can get the user-experience right. 

AT&T-Mobile & Verizon: AT&T, T-Mobile and Verizon have teamed up with Discover Card (and others) to introduce a "Hulu for payments," called ISIS. Like the others it's also an NFC-based system. AT&T also has relationships with Boku, Zong and BilltoMobile. In that context, payments are made with a PIN and the charge shows up on the consumer's AT&T bill. 

Sprint: is independently working on an NFC-based payments system and hopes to make it operational this year, before ISIS can launch. Sprint currently also offers a mobile wallet, based on a stored credit card number not dependent on NFC. However that product is a non-starter at this point. 

PayPal: is well ahead of most others on this list in mobile payments, saying that it will do more than $2 billion dollars in total transaction volume this year. It relies on the current PayPal infrastructure translated into mobile apps and doesn't require NFC-enabled phones or terminals in stores. 

Square, Intuit: both enable small merchants to take credit cards, with reduced fees, through mobile devices. Square in particular plugs into the iPhone and Android handsets. Merchants don't need a merchant account just a Square account to accept credit card payments. 

Boku, Zong, others: Along with PayPal these companies were first-in with mobile payments. However most use carrier billing (mostly for virtual goods). Carrier billing is not going to be the center of activity for mobile payments for several reasons. The efforts of these companies are being overshadowed by the initiatives of larger and more established players. These startups will likely be acquired in the next 18-24 months by companies seeking to jump start their entry into mobile payments. 

The irony of all this is that consumers are well behind the technology companies in terms of their thinking about NFC. There's almost no awareness of NFC or "wave and pay" systems and most consumers have no experience with current deployments. Accordingly tt might be years before NFC-based smartphone payments hit the mainstream.

Systems like PayPal's are more accessible and familiar to users -- hence the sales volume. That model, where a stored credit card can be accessed on the phone, is an interim step toward NFC-based payments systems. However most companies on the list are skipping interim steps and racing to be first with NFC payments.

Regardless, companies that consumers have trusted, existing relationships with are in a better position to become viable payments platforms than those that do not. Thus Visa or Amazon are in a stronger position than the carriers, Google or Microsoft, which are in turn in a stronger position than the payments startups like Boku. However better usability and execution can overcome some or all of that trust and familiarity gap. 

Below is a global iSuppli forecast of handsets with NFC capability:

These numbers now emerge as conservative because the next generation of smartphones will all have NFC capability. But there are big questions surrounding consumer education and adoption. I have no doubt that mobile payments will become desirable to consumers and eventually mainstream. However it may take several years longer than the companies above anticipate.