Opening up the mobile wallet

Plastic may have toppled cash, but mobile payments are poised for the next takeover.

Among the most transformational aspects of mobile are the effects it’s having on consumer purchases. In the same way that plastic has more or less killed cash as the legal tender of choice, mobile will eventually kill plastic — and perhaps sooner than you might expect.

In case you missed it, one of the more grandiose announcements of the summer came when AT&T and Verizon teamed up to displace credit and debit cards with smartphones. That was just one of many recent initiatives and announcements in the mobile payment space. Other include: Starbucks unveiling a mobile rewards program, JC Penney experimenting with mobile coupons, commuters paying for fares with mobile devices, fans at live events ordering concessions without leaving their seats, and transit authorities developing smarter parking meters.

I recently caught up with three innovators working deep within the mobile commerce space: Naveed Anwar, senior director of PayPal’s Developer Network; Kevin Hartz, founder and CEO of Eventbrite; and Humberto Roa, co-founder of iConcessionStand. They share their thoughts on mobile payments and ecommerce below.

How are smartphones changing the ecommerce space?

Naveed Anwar, PayPal: The mobile commerce industry is booming. By the end of 2011, Nielsen predicts smartphones will overtake feature phones in the U.S. market. And Gartner predicts that by 2014, mobile and Internet technology will help over three billion of the world’s adults to electronically transact. In addition, emerging economies will see an increase in mobile and Internet adoption through 2014. The worldwide mobile penetration rate will reach up to 90 percent.

How will mobile wallets affect consumers?

NA: Consumers want to live an on-demand lifestyle, and that trend is driving consumer purchasing behaviors. The mobile wallet is necessarily an on-demand wallet, meaning it’s accessible from different devices and platforms and can hold more than any wallet in your back pocket: multiple funding sources, coupons, receipts, loyalty cards, private label cards, and business cards … and that’s just the start.

What has been the biggest challenge for micropayment platforms?

NA: The biggest challenge they face right now is keeping up with — and getting ahead of — the pace of change. The mobile space, for example, is innovating so fast that we need to be focused and strategic about the opportunities we pursue and the tools we offer. When everything is moving at a hundred miles an hour, that’s a lot easier said than done.

What is the most important thing you’ve learned about building mobile apps on an ecommerce platform?

Kevin Hartz, Eventbrite: The one thing that’s always struck me as being most important is simplicity — the ability to create accounts and conduct transactions is essential to adoption. If you have a platform that anyone can build an app on, then innovation will run rampant and everyone involved has something to win.

How many of your users prefer electronic payments to a more conventional payment option?

KH: The last stats I saw showed that over 60 percent of the volume of Eventbrite transactions use some form of electronic payments, and that figure has been pretty steady over time. We have some exciting plans for mobile forthcoming and expect that number to grow as mobile devices continue to penetrate transaction volume in our market.

How has mobile changed event planning?

KH: One of the biggest changes is the imminent death of the paper ticket. Eventbrite is a big opponent of the conventional paper ticket, and the mobile wallet concept only helps us to kill it dead even faster. It boggles my mind that we still use physical tickets for sporting events, concerts, etc. We’ll definitely see a lot of innovation on this front over the coming months, because it’ll only make things simpler for people. Simple sells.

How have micropayment systems helped you as a small business?

Humberto Roa, iConcessionStand: We offer an exclusively mobile marketplace that’s location-based and that allows people to interact with stores relative to a particular venue, so we’re a small company but have many of the needs of a much larger company. Micropayment systems makes it possible for us to be able to pull off those kinds of logistics.

What aspect of mobile payments needs to change?

HR: I really hope that mechanisms such as chained payments will go mobile. We monetize our app by charging a small convenience fee on each transaction, and ultimately we’d like to be able to collect that convenience fee immediately and pass on the rest of the funds to the ballpark. [Note: iConcessionStand is an app used to purchase concessions at venues, such as ballparks.] Right now, we aren’t able to do that because chained payments aren’t available for mobile, so we send all of the money to the ballpark and then invoice them for our convenience fees.

This post is part of a collaboration between PayPal and O’Reilly exploring the future of payment.

The rise of mobile wallets will be discussed at the Innovate 2010 Developer Conference, being held October 26-27 in San Francisco. Full details are available here.

tags: ,