Atlanta » Here’s the thing about Taka Torimoto: He’s more likely to remember his smartphone than his billfold. And that spells opportunity for a whole raft of new players in the lucrative payments industry.
A 41-year-old technical consultant with an engineering degree from Georgia Tech, Torimoto has paid for fast food with the tap of his phone and sent money just as you would attachments in emails. His father digitally sends the grandkids cash for Christmas. No more checks.
What’s what and who’s who
Mobile payment » a transaction in which the transfer of funds is initiated using a mobile phone, but not by voice.
Point-of-sale purchase » a purchase you make at the counter.
Mobile proximity payment » mobile-generated payments that are made at or within the physical proximity of a store’s point-of-sale terminal.
Mobile peer-to-peer payment » sending money to another individual using a smartphone app; providers include Dwolla, PayPal and Venmo.
Mobile bill payment » a bill payment (for utilities or credit cards, for example) that are authenticated through a mobile handset.
Venmo » a service provided by Braintree, which is owned by PayPal, that allows folks to send cash to Facebook friends and others using a smartphone app and web portal.
PopMoney » a person-to-person payments service provided by bank tech vendor Fiserv. Bank of America, Wells Fargo and Chase customers, among many others, have access.
Square » a Silicon Valley startup that offers a free credit card reader that works with smartphones and tablets.
Stripe » a company that provides online businesses with the means of accepting payments.
PayNearMe » an electronic transaction network that lets folks pay their rent, utility bils and loans, as well as transfer money, buy tickets, make online purchases; it’s available through convienence stores such as 7-Eleven, Family Dollar and ACE.
WePay » A company that maintains digital tools for crowdfunding sites and small businesses, allowing them to receive payments.
PayPal » the e-commerce arm of eBay, which allows people to make online payments and transfer cash to friends using email, phone, text message or Skype.
Braintree » a payment processor, owned by PayPal, that maintains a set of software development tools companies can use to integrate payment capabilities into their apps and online spaces.
Crypto-currencies » a digital medium of exchange that’s difficult to counterfeit because it employs cryptography, a branch of mathematics, for security; Bitcoin is the best known one.
Google Wallet » a service of the search engine giant that allows people to send money by email and tap and pay with certain smartphones.
Sources: Forrester Research, Google, PayPal, DataMonitor, Federal Reserve Bank of Atlanta.
Torimoto’s voice rises with excitement as he talks about the new possibilities. "Payments is one area that is going in so many different directions."
For the first time since the advent of credit cards, there are new ways to pay that don’t involve cash, check or plastic. Most are built on top of the existing payments system, but — courtesy of that hand-held computer in our pockets and purses — offer new vistas for both consumers and tech entrepreneurs.
"It’s clear that the mobile phone is the device that people are going to be using in the future to pay," says David S. Evans, chairman of the Global Economics Group. "It’s not going to be a plastic card."
And whether you’re looking for legacy players or innovators, Atlanta is right in the thick of the action. It’s been a payments hub for half a century, and is well poised to maintain that status.
Inflection point » By 2017, Forrester Research estimates, Americans will spend roughly $90 billion using a smartphone or other handheld device, a more than seven-fold increase from the amount spent in 2012. The firm’s figures include mobile remote commerce; mobile peer to peer payments and remittances; and mobile proximity payments.
Even if its estimate is too optimistic — as projections in this arena have tended to be — the pace at which startups are emerging is already head-spinning: Stripe, PayNearMe and WePay, among more than a thousand others, fueled by billions of dollars in venture capital.
For consumers, mobile payments mean greater convenience and better security. For merchants and banks, they present new opportunities to track you and target sales pitches and rewards to you. And they give tech entrepreneurs a low-cost entry point into the multi-billion dollar payments pipeline.
So why aren’t already living in a post-plastic world?
In part, because everyone involved in the chain — merchants, card issuers, traditional processors, tech innovators and consumers — is looking to maximize how much money they keep at the end of the day. Sometimes, the interests of two or more players align, but often they don’t.
Sorting it out — via market forces and regulation — is likely to make for a period that’s exciting, bewildering, messy and frustrating. And right now, we’re at an inflection point, where what emerged as a handful of novelties is becoming a new way of doing business.
Race to the top » That’s evident in the changes the incumbents are making. Banks, payment networks such as Visa, Mastercard, Discover and Amex, and the tech companies that serve them, such as FIS and Fiserv, are scrambling to keep up.
"In 2014, you’ll see larger payments entities scramble to accelerate the pace of their innovation to catch up to these smaller and more nimble competitors," predicted PayPal president David Marcus, in a blog post.
"Meanwhile, smaller players will scramble to achieve the scale and experience needed to compete in a global business," he wrote. "As a result, billions of dollars will be at play in the payment industry, and 2014 will be a year of game-changing disruption."
Last year, PayPal launched 58 new products, partly because of new threats, according to a recent New York Times report.
And earlier this year the ecommerce arm of eBay announced PayPal Beacon, a Bluetooth device that reads payment information from a smartphone. With that device, someone like a restaurant server would no longer have to take your card away from the table to complete a transaction.
That’s in addition to a partnership with Discover, which lets folks use PayPal in the checkout line at some of the nation’s largest merchants. PayPal has also recently acquired progressive payment processor Braintree, which has regulatory approval to move money nationwide.
It’s marketing its services to mobile-based innovators such as Uber, Airbnb and TaskRabbit, which facilitate transactions between individual sellers and buyers of, respectively, rides, lodging and doers of household errands and other tasks.
And we haven’t even talked yet about Bitcoin and other cryptocurrencies, which operate in a parallel payments universe, completely outside the existing system.
To be sure, some of the innovations won’t stick.Next Page >
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