For many, credit and debit cards are often the cash-free payment option of choice. More and more consumers, however, are becoming enamored of the newer concept of mobile payment, which enables them to use their always-handy cell phones and smartphones to pay for purchases at a number of stores that allow such transactions.
Frustrations are rising, however, not only for consumers who find the number of places that offer this convenience sketchy at best, but also for retailers and businesses that feel the need more control over the lucrative mobile-payment market.
Essentially, there are two types of mobile-payment systems: near-field communications-based, whereby consumers merely tap their phones on a compatible merchant-based reader; and the type pioneered by Square, which uses iPhone and iPad apps in conjunction with a merchant's tablet-like terminal. Internet titan Google (Nasdaq: GOOG), through its payment vehicle Google Wallet, dominates the NFC arena, while newcomer Isis, the joint venture of T-Mobile, AT&T (NYSE: T), and Verizon (NYSE: VZ), will make its debut this summer. Neither method is yet widely available, and the inconsistency of the methods is causing annoyance among retailers who are now banding together to come up with their own mobile-payment platform.
A market worth billions
Experts estimate the mobile-payment market to be worth more than $600 billion in just four years, so it's understandable why so many want a piece of the pie.
Target and Wal-Mart are the only two retailers who have owned up to being part of this new coalition to brainstorm a better system, spurred by merchants' concerns over security and lack of control over coupon and other store offers. They are silent on whether the new model will be NFC-based or whether they will gravitate more toward something like what Square offers. eBay (Nasdaq: EBAY) property PayPal, which is currently testing its own digital-payment system with Home Depot, will soon be jumping in with a payment-solution menu for small businesses that may be upset with current options.
NFC or Square?
Although there seems to be plenty of market share to go around, it seems to me that one or the other of these digital-payment systems will come to dominate the market in the next few years, much as credit cards have done. Much will depend upon which platform the merchant coalition chooses. While some observers think they may be partial to NFC, privately held Square has made great inroads into this market as well, currently processing approximately $4 billion in mobile payments annually, the same as PayPal -- and it may be an attractive choice. The biggest wild card yet, though, may be Apple (Nasdaq: AAPL), which may sway the argument by introducing an iPhone or iPad that has NFC capability built right in. Until then, watchful waiting is the order of the day, because when the victor emerges, there will be plenty of money to be made.
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