The Great Tech War Of 2012: On The Mobile Pay Front [Updated]

Apple, Google, Facebook, Amazon, and the long march toward our wallet-less future.

Apple, Google, Facebook and Amazon are locked in a tech-driven cage match to win in the greater innovation arena.

And one of the biggest battles is off to a heated—if not always clean—start: controlling the mobile pay market. The reasons why the Big Four are grappling so, can be understood by looking at a single number: By 2016, mobile payments could be a trillion-dollar industry all its own.

Disruption here is already rampant. Consider Square, or its chip-and-PIN supporting European competitor Payleven, or LevelUp with its QR-NFC solution, among a handful of others.

But none of these startups has near the might of the primary players in the Great Tech War.

The Apple Passbook Is Prologue?

Apple was poised, at last, to make good on what seems like a long-term investment into mobile payment tech with the iPhone 5. Instead it chose not to include NFC technology at all. The closest thing we have from the company that Steve built is Passbook.

But that's actually quite a lot. Passbook may turn out to be Apple's sleeper hit for turning the general public on to mobile payment tech by a kind of bait-and-switch maneuver—in a good sense.

Passbook is half of a digital wallet, equivalent to the bit in your real life one where you keep your loyalty cards, membership cards, boarding passes, and other paper trails from regular life. It's smart, it's location aware, so it can prompt you with a passbook card for your boarding pass as you approach the airport, and it seems to be catching on. Starbucks has now leapt aboard the Passbook bus, meaning its loyalty scheme can be accessed via Apple's system. McDonalds has joined up too, as have Eventbrite and Airbnb. It seems the frictionless way Apple puts Passbook data before the end user appeals to these vendors...not least because it may tempt customers to engage in loyalty promotions more than before.

But as soon as Apple gets everyone comfortable with using your iPhone like this—including passing it under a barcode scanner when you buy your venti Chai Tea Latte, for example—it's not too much of a leap to imagine Passbook 2.0 offering a popup that says something along the lines of: "Would you like to pay for this now?" And with a single tap—you've got a mobile payments system running on iOS.

The missing link for this is security. Which might explain, in part, the rumors that Apple's bought a biosecurity firm called Authentec. This company specializes in fingerprint scanning and recognition, and that's the kind of neat, swift authentication you'd want if you were using your iPhone as a digital wallet.

Apple's known to be slightly cautious about brand-new tech (think Blu-ray) and it's biding its time in this space, likely because there's no clear market leader in the mobile payments game yet, and a lack of defined standards probably does limit immediate growth options. As to how Apple will achieve its payment system, it's certainly shied away from NFC now, but that's not necessarily going to be true in 2013. And there's always the fact that it now has one of the largest credit card databases ever in the form of its iTunes subscriber list—turning it into a payments clearing house all of its own.

Update: Lest you think Passbook really is just a fad, the CEO of Major League Baseball Advance Media pointed out to MarketWatch that during a two week test phase of using digital ticket sales at the end of the season, 12% of buyers used e-tickets via Passbook. This is an adoption rate that shocked him, and which has moved his organization to consider phasing out paper tickets altogether.

Google Wallet And The Paywall Paradox

Google's Wallet has been available in limited parts of the real world for a while now, but it hasn't exactly rocketed into the stratosphere of success. Partly this is due to the fact it's the first real NFC pay solution on the scene, and thus it encounters consumers and merchants who're very bought-in to the existing payments systems. Partly it's due to the limited number of handsets it's available on.

But Google's just made a very important move to expand Wallet in a new direction: Micropayments, online. Saying in a tweet that it had "started an experiment to help content creators bring high-quality content to the web," Google launched a system that lets users buy web content for a small fee of between $0.25 and $99. Alongside the payment, there's a 30-minute instant-refund time, and adverts. It's essentially Google enabling a micropayment paywall for online content providers, with a frictionless payments for users.

While paywalls remain controversial, Google's probably hoping a micropayment system, along with analytics delivered to content providers, will alter this situation. After all, we're all now accustomed to paying $1 or $2 for an app on our smartphones.

And with the company rumored to be pushing more Nexus-branded Android phones on the market (supporting NFC and thus Wallet) Google is angling to get Wallet into more end users' hands.

Facebook's Bango And Zuck's Payment Pivot

At first blush Facebook may seem like an unlikely player in the mobile payments game. But its decision to enable in-app frictionless payments via carrier billing hints at a different future. The new system, available in the U.S, U.K., and Germany, at first has been built with Bango, which itself specializes in enabling billing for digital services directly to the user's carrier. It's pretty easy to make a payment in this way, and cell phone owners are already familiar with the notion of paying their carrier for ancillary services. Hence Facebook hopes it will spur in-app purchases inside its ecosystem.

But as GigaOm notes, it's also quite definitely a move in the direction of enabling Facebook payments to reach the real world. There's a certain logic to this: One of the key parts of a digital payment is identifying the payee as being the right person and not a thief, and what Facebook's very good at is identifying its users.

Could Facebook turn its expertise in this field into a real-world mobile payments system, perhaps billed by carriers? In its new post-IPO position, where the company is feeling pressure to monetize assets, an experiment in mobile payments and a sweet slice of that trillion-dollar payment pie seems possible—and even plausible.

Will Amazon Make A Square Deal?

Among the fighters in the Great Tech War, it's Amazon that's so far been the quietest in terms of mobile payments. It's worth remembering that the retailer sells both digital and real-life goods through its online sales portal, and that it's now got millions of bits of Amazon-branded hardware in people's hands in the form of Kindle devices as well as own-brand apps running on other companies' smartphones. If Amazon enabled mobile payments via an own-brand smartphone or its app, it would be able to leverage its hundreds of millions of registered customer credit details in the same way Apple could do with iTunes.

Now there are rumors via TechCrunch that Amazon is pursuing a low-fee mobile pay solution to compete with Square. Added to last year's rumors from Bloomberg that Amazon was looking at an NFC mobile payments system, this could suggest Amazon is now poised to try a bold mobile payments experiment.

[Image: Flickr user jurvetson]

Chat about this news with Kit Eaton on Twitter and Fast Company too.

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6 Comments

  • James Wester

    Nice linkbait! Include 3 companies that aren't even doing mobile payments in the headline. (I'll call it 2.5 companies since Passbook is a quasi-digital wallet since it supports Starbucks now.) 

    I kid.

  • Kit Eaton

    Check out the update, which shows data on rapid adoption of Passbook among MLB fans

  • James Wester

    That is very cool, but it means 88% of digital ticket holders used the MLB app. And that begs the question: what value is Passbook providing over the actual app? Opening the ticket from the lock screen? I'm not quite sure I get it just yet. (I'll admit having a boarding pass ready to go without opening the American Airlines app is nice but speaks to deficiencies in their app not necessarily the necessity of Passbook.)

    Additionally, one wonders what adoption would be if Passbook wasn't so buggy. Not sure if you've used it yet, but it's not a great experience. The Starbucks support is merely ok. And heaven forbid you want to use your Starbucks card at an airport location prior to boarding a flight. It wouldn't let me get past my boarding pass.

    And I WAS kidding about the linkbait. :) 

  • Jeff Stewart

    This mobile payment article is a very US centric, the key to payment will be found in the emerging markets.  The ability to manage payments is interlocked with the ability to extend credit.  Mobile and Social media adoption are greater in much of the emerging markets, and there is less credit card penetration.  Lenddo is using the socialgraph and community to extend credit based on your reputation.  This typ of "character and reputation" based credit will be the underpinnings of wallet 2.0 

  • Kit Eaton

    Well *part* of the key to mobile payments is about extending credit. In many EU nations digital payments are instantaneously linked to current accounts, not credit cards. In this way the EU has long been in the lead of the US. Mobile would simply expand where these instantaneous current account payments are available. Credit itself is a little discredited in the aftermath of the recent downturn, eh?

    Character and reputation not likely to dominate Wallet 2.0, in my mind--though they'll be a part of it. Instead ad-linked instant mobile payments, with strong location-based elements will be the secret. Because location where you make a transaction is a saleable, actionable asset all of its own. The speed will suit users and banks, and the frictionless purchasing will suit buyers and merchants.