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Google, Isis put aside competition in mobile payments to drive adoption

Mobile payments’ biggest players, including Google, PayPal and Visa, have decided cooperating may be the better way to drive further growth instead of competing with one another.

Competition in the mobile payments space is quickly heating up and some of these companies want to ensure they are not left out of the equation. While initially it seemed as though near-field communications would dominate mobile payments, the answer has become more complicated as NFC has taken longer than expected to catch on while other solutions such as Square are gaining acceptance with merchants and consumers.

“Nearly everyone involved in some aspect of mobile payments or mobile commerce recognizes that there are certain points at which this fledgling technology is vulnerable,” said Jason Oxman, chief executive officer of the Electronic Transactions Association, Washington.

“In particular, there is concern that legislation or regulation might make using mobile payments difficult enough to discourage consumer use or prevent its full development,” he said. “Along with that, there are technical issues around interoperability and connections to payment networks that need to be addressed, as well as the difficulties of educating consumers and merchants about the security and benefits of mobile payments.

“These are problems easier to address in a unified way under the umbrella of a trade association like the Electronic Transactions Association.”

Common fears
The new Mobile Payments Committee will be a part of the Electronic Transactions Association and features representatives from all four major mobile carriers as well as many of the other big players in the mobile payments space. The committee will be focused on developing and implementing industry-wide solutions that address the policy and business issues surrounding mobile payments.

Big companies coming together to try to drive growth is noteworthy and speaks to the significant potential these companies see in mobile payments. Some of the participating companies in the committee include AT&T, Sprint, T-Mobile, Verizon, Google, Isis, Verizon, Wells Fargo, Capital One, American Express, Discover, MasterCard, Visa and PayPal.

“While there are many reasons competitors might unite, I think there are only two that matter here,” said Drew Sievers, CEO of mFoundry, Larkspur, CA. “One is fear of a common enemy — banks, merchants, Square, etc. — and the other is to use their combined scale to dominate.

“Mobile payment solutions are heating up as we saw with Starbucks and Square,” he said. “The opportunity is potentially huge, and the ecosystem is ripe.”

Mobile payments represent only a small percentage of overall online and retail sales but are quickly growing and there is widespread consensus that mobile will play a significant role in retail sales in the future.

Confusion grows
The need for such a committee reflects the complexity of mobile payment solutions, which involve many different stakeholders, including wireless carriers, software and hardware providers, financial institutions and more.

Such a committee can also be seen as a reaction to the growing number of different solutions in the mobile payments space, including ones that use NFC technology, 2D bar codes, mobile applications and cloud-based technology.

This proliferation threatens to confuse consumers and retailers, which could ultimately stall growth in the market.

“There are far more new players, solutions, and existing stakeholders than the industry can possibly hope to support,” Mr. Sievers said. “Customer and merchant confusion is not just a possibility, it’s inevitable.

“Creating a committee to try and create a fertile ground for innovation seems a contradiction in terms,” he said.  “I’ve never known a committee to add any value to innovation.”

While NFC has been long touted as the mobile payments technology that will break open the opportunities here, it has been slower to catch on in the United States compared with elsewhere, in part because of the complexity of the U.S. marketplace.

As a result, other solutions are gaining some steam, such as ones using the delivery of unique 2D bar codes on a mobile app to authenticate a payment.

Last week saw the partnering of two of the larger mobile payments upstarts, Starbucks and Square, to broaden the reach of their mobile payments offerings (see story).

Addressing the issues
The Mobile Payments Committee will address several issues facing mobile payments, including the business relationships needed to foster innovation and achieve network interoperability.

Additionally, it will also focus on best practices and education.

The ETA’s Mobile Payments Committee will hold its first meeting in late August and hold regular monthly meetings thereafter.

“It’s clear that mobile payments has reached the proverbial tipping point where no one is seriously asking whether it will happen, but focusing on when and how,” ETA’s Mr. Oxman said. “ETA, because our membership is involved in every aspect of the electronic payments business, is in the right place at the right time to bring all the important companies together through this committee.

“It’s early in the development of mobile payments, so ETA’s approach is to do all we can to encourage new entries and the innovation that will flow from them,” he said. “Merchants and consumers deserve the widest array of choices and they will ultimately decide which approaches and which products become mainstream.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York