Verizon, AmEx, And The Race To Control The (Possible) Billion-Dollar Mobile Payments Industry

It’s networks versus phone-makers. All that’s at stake is dominance over an emerging business and untold riches to the winner.



Verizon and AmEx have plans to let customers order items simply by typing in their phone number. It’s all about integrating AmEx’s Serve platform into the phones and tablets Verizon sells–an expansion of some fledgling “pay by phone” systems, and very different than the systems other teams are planning for the future of mobile payments.

Put simply, a user’s phone number is a perfect authentication tool because it can prove the relationship between the person wielding a phone and the bank account used to pay its bills. It’s a strong system in terms of security, and has the added benefit that it lets any bank work as a payment source–for on-phone and online purchases. For the Amex-Verizon system to work in a real store, there’s a physical Serve card (already accepted by “millions” of stores in the U.S. who already support AmEx payments) and the two are also working with Payfone to allow an at-checkout payment that uses the same route to a client’s bank details.

Verizon is also part of the Isis team, a group that’s working to develop sophisticated wireless payments via smartphones, but this partnership with AmEx is not necessarily contrary to these plans. That’s because it’s designed to work on any phone–“smart” not needed. So it’s basically just using the phone and the relationship between the bank account and Verizon, with no need for apps.

AmEx actually signed a similar deal with Sprint-Nextel last month, but this new one is much more significant because Verizon is the U.S.’s biggest cell phone network. And this is where it gets interesting: These partnerships with AmEx let Verizon and Sprint build expertise for the coming revolution in mobile payments that will probably center around wireless systems and tech like NFC. This is because they allow a much more sophisticated interaction between store and client that includes smart loyalty card interactivity and even app-based ad solutions–something the simpler Serve platform doesn’t quite manage. MasterCard is beginning trials of this kind of future payment, but by partnering with Verizon, AmEx can get a little ahead of the game. 

There’s also a trend emerging: Verizon is very much involved in this new payment system, whereas competing systems like Google Wallet (and potentially Apple’s long-rumored plans to integrate NFC into future iPhones) involve an effort to craft next-generation payment systems from the phone designer’s perspective. Verizon, and the other phone networks, maybe see their future control being wrestled away from them because mobile payments could turn into a billion-dollar industry–and if the payment channel happens more through iOS and Android, then the phone networks are relegated to merely being a data pipe for the transactions.

[Image: Flickr user spine]


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

About the author

I'm covering the science/tech/generally-exciting-and-innovative beat for Fast Company. Follow me on Twitter, or Google+ and you'll hear tons of interesting stuff, I promise.