The battle for the mobile wallet heats up

It was easy to be distracted by the wondrous devices on display at the Mobile World Congress a couple of weeks ago, with smartphone vendors scrambling over each other with new device launches. However, some of the more significant announcements were not about phones or networks, but about the rapidly-shifting mobile payments landscape.

Google shifts gear

Google have made two major payments-announcements over the past month or so. First they bought Softcard (formerly called Isis) from AT&T, T-Mobile and Verizon and entered a deal with the same carriers to have Google Wallet pre-installed on all Android phones they ship, giving it a reach that exceeds Apple’s and ending the US carriers’ attempts at forging ahead with their own wallet. Subsequently, Google’s SVP for Android, Sundar Pichai announced that they will be releasing an Android Pay API that will allow third-parties to integrate payments for both online and physical in-store transactions, presumably offering developers a level of functionality similar to that offered by Apple.

As does Samsung…

Amidst all the razzmatazz of its double Galaxy S6 and S6 Edge flagship smartphone launch, Samsung also unveiled its imaginatively named Samsung Pay system which will be included in these phones. In addition to NFC contactless payments, Samsung has implemented the proximity magstripe technology it acquired when it bought LoopPay. This allows the phone to emulate the magnetic stripe on a card in a secure way and means it is compatible with the vast majority of legacy Point-of-Sale terminals in the US, which is rapidly becoming the key battleground for payment services. Samsung have secured the support of Mastercard, Visa as well as of JP Morgan Chase, Bank of America, Citi and US Bank – bringing a significant level of market power to the battlefield.

Visa speeding up Cloud-based Contactless Payments for Smartphones

In the meantime,  Visa is apparently lining up “several leading financial institutions around the world” to bring cloud-based contactless payments based on Host Card Emulation technology introduced by Google in the Android platform. This technology simplifies the process by which secure payments can be made on smartphones, without the complex integration required for mobile operators’ preferred SIM-based technology, providing a further boost to the overall sector.

PayPal adds Contactless to its Mobile Point of Sale

PayPal added NFC based contactless support to its Here card reader, which already supported Chip-and-PIN as well as magnetic stripe, meaning that it will be able to accept payment from iPhones. Additionally, PayPal has acquired Paydiant, a startup that provides a platform and mobile wallet to implement coupons, loyalty programmes and payment technology for retailers, and has a big footprint in the US. This will allow PayPal to significantly boost its mobile app offering, while gaining them another channel to acquire physical-world retail partners.

Apple Watch now supports Apple Pay

After the dust had settled on the announcements at Barcelona, Apple provided an update on its plans for the Apple Watch at its ‘Spring Forward’ event last week, which included incorporation of Apple Pay. Apple appear to have integrated  seamless contactless payments into the Apple Watch, allowing a wearer to pay with any card registered with Apple Pay with a simple wave of the wrist. Similarly, apps are being developed to integrate coupons and vouchers into the experience. For example, Retale, a coupon app company is using location information to inform wearers of special offers nearby, something that can be further refined by guiding wearers to specific areas of a retail store using in-building beacons. I would personally find such notifications to be annoying, but there is no doubt that Apple clearly have pulled together the most complete and seamless mobile payment experience anywhere. – see demo below

 Conclusion

Apple effectively kick-started the much-promised mobile payments revolution to life when it launched Apple Pay, still the most compelling and successful mobile payment proposition. Crucially, it also has appeared to extract a significant share of the transaction fees from its banking partners to create potentially significant business value for Apple. This has spurred a rapid response from Google, Samsung and PayPal. Together all blur the line between in-app, online and in-store payments, allowing users to use the same cards and mechanisms to make payments whether online or in a physical store. Particularly, PayPal is accelerating its transition from a leading online Payment platform to offering a broad suite of consumer and merchant services for physical purchases. Amongst the main beneficiaries of this trend are the main payment networks, principally Visa and Mastercard, who will see a greater proportion of all transactions pass through their networks as mobile phones displace cash purchases.

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