Upward Mobility: The Mobile Payment Problem

Mobile Payment is going to take a lot of cooperation by a lot of competing interests, or a clever end-run

There was a time when the two big unsolved puzzles of online finance were micropayments and mobile payments. Micropayments were a problem because no one seemed willing to make sub-dollar transfers economically viable, while mobile payments had a chicken-and-egg solution / vendor paradox. Sites like PayPal and Square seem to have finally resolved the micropayment issue, as are more out-of-left-field ideas like Bitcoins. Mobile payment is still a morass of competing solutions, however.

For a while, Near Field seemed to be the sword that would slay the dragon, but Apple’s continual refusal to adopt the technology would leave a big segment of the mobile market out of the play. Even if someone comes up with a new point of sale (POS) terminal leveraging the more universal Bluetooth Low Energy, the real challenge isn’t the hardware. The problem is getting dozens of POS vendors and all the banks that issue cards to sign onto a new standard, and getting enough stores and retail venues to adopt it. Chicken and the egg once again.

To date, all the mobile solutions have been clumsy and required individual retail outlets to sign onto a new proprietary payment solution. The genius of the Mag Card stripe is that it is universally accepted and adopted, and even so it has only been recently that you could use credit and debit cards with anything like ubiquity in locations like fast food restaurants. With Google, PayPal, Square and other players each fighting to make their own solution the universal one, there’s no consensus growing.

In the end, banks and other credit card providers are likely to be the ones driving the process most strongly. They are the ones who, in the end, have to fulfill the transaction, and it would be in their best interest to keep as much of the control (and profit) as they can. Or perhaps someone clever can do an end-run around the entire problem. For example, the Loop kickstarter project claims that they will be able to make an iPhone transmit magnetic signals to ordinary card swipers using a special sled/case. It needs to work in practice, of course, and the fraud implications worked out, but if it does turn out to be the real deal, the developers could conceivably license the technology to Apple and other smartphone makers, and mobile devices could turn into mobile payment solutions with no changes needed on the retail side.

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