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Mobile payments competition moves to OS as Microsoft eyes entry

Microsoft is reportedly developing a payments solution for Windows devices, making it the latest mobile operating system to push into the space and lending further support to proximity payments.

Several reports this week point to Microsoft’s regulatory filing of an application to deploy a money transmission service in all 50 states as evidence of a possible mobile payments offering. While Windows controls a tiny share of mobile users, the move would be in keeping with the recent trend of mobile payments solutions that are specific to operating systems, such as Apple Pay and Google Wallet.

“It would appear that the competition for mobile proximity and in-app payments has migrated to the OS, and since MSFT can’t play with Apple, Samsung or Google, they either need to create their own platform or use a third party,” said Thad Peterson, senior analyst at Aite Group, Atlanta, GA.

“They only have around a 2.7 percent share of mobile OS, so the impact of their payment capability on the space will be low,” he said.

“But if they are in fact building this capability, then it’s a further validation of the mobile proximity payment vision and will assure that regardless of a customer’s choice of platforms, a mobile payment capability will be available.”

The competition
The Microsoft solution – which the company has not confirmed – may be based on near field communications technology, as is Apple Pay.

At the same time, Microsoft is embracing host card emulation, which enables proximity payments without the need of a secure element controlled by a manufacturer or carrier – something that NFC does require. HCE will reportedly be available on Windows 10.

The news comes as Apple Pay, which was introduced in the fall of 2014, continues to gain steam.

On April 8, MasterCard announced that more than 20 new banks and credit unions are now live with Apple Pay for MasterCard cardholders. The list includes KeyBank, US Bank, Meijer Credit Union and BMO Harris.

At the same time, Google continues to focus on building its standing in mobile payments.

Earlier this year, Google acquired the intellectual property of Softcard and reached a deal with the major wireless carriers behind Softcard to bundle the Google Wallet app on their compatible devices.

Google Wallet, which has been around for several years, appears to be the focus of newfound interest from merchants these days.

This week, ChowNow, an online ordering and marketing platform for restaurants, said it has adopted Google Wallet (see story).

Complex ecosystem
Mobile payments are not catching on as quickly as expected but Microsoft’s move into the space lends further credence to the belief that mobile payments will play a significant role once all the pieces are in place.

However, Microsoft is likely to face some challenges in a space where getting it right with the user experience, technology and partnerships can be complex.

The significant hurdles here are one reason why AT&T, Verizon Wireless and T-Mobile USA were not able to make Softcard a success.

“This is complicated stuff to build, requiring a lot of different participants in both the payment and mobile ecosystems to cooperate with each other,” Mr. Peterson said.

“Also the standard for customer experience has been set by Apple for all other players in the space,” he said. “Microsoft needs to meet or beat that experience with their approach.”

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