Mobile payments go proprietary

We've long been promised a standardized, universal mobile payment platform. As device makers, banks, and others squabble, retailers are quietly taking matters into their own hands.

I remember the first time I read about the future of mobile payments. The article suggested that we were months away from a mobile payment solution, where a consumer could whip out his or her mobile device, and quickly and painlessly authorize payment for everything from train tickets to vending machines. While an article like this might seem like it could be a few weeks or months old, it was nearly a decade ago that I read about how Nokia was suggesting Bluetooth and nearly ubiquitous mobile phones would be the technological duo that retired credit cards and wads of cash for good. Obviously that dream did not come true, and over a decade later we're hearing the exact same claims, although smartphones, near-field communications (NFC), and Google (among others) have replaced dumb phones, Bluetooth, and Nokia. The one major difference, however, is that many retailers and merchants are taking matters into their own hands.

Mobile payments, while the big guys squabble on

Most analysts thought NFC, or near-field communications technology, would be the final missing piece in the mobile payment puzzle. The technology allows a physical device like a smartphone or even a smart watch to securely transmit data over short distances. Tap your phone on a reader, enter a password, and your payment is made. However, NFC was bedeviled by the usual chicken and egg problem of limited devices supporting the technology and limited readers, as well as a mobile payments stalemate of sorts.

Perhaps the only thing the "usual suspects" of credit card issuers, merchant banks, and device makers can agree on is that mobile payments is a potential goldmine, and whoever "owns" the technology stands to strike it rich. Therefore no one wants to risk backing someone else's technology. However, while the entities that should be leading mobile payments erect barriers and propose conflicting technologies, merchants from Starbucks to a raft of startups have begun accepting payments from mobile phones, facilitated with technologies that already exist.

The new mobile wallet

Consider for a moment that the infrastructure to support cashless payment already exists in the form of credit card processing. Furthermore, technologies to support payment without physically presenting a credit card have been the backbone of e-commerce for nearly 20 years. Most companies that are now accepting mobile payments have simply leveraged these existing technologies, and rather than fulfilling an order from a warehouse, have the smiling cashier in front of you fulfill the transaction.

While tech and banking titans lament the lack of terminals supporting NFC at retail locations, savvy merchants are realizing that ubiquitous mobile networks can eliminate the need for a local terminal, and as long as communications with a retail site can occur in near real-time, authorization of a stored credit card can occur thousands of miles away from the actual retail location.

A little help from your friends

If you begin investigating mobile payments, it's easy to rapidly become bogged down in the details of everything from card-not-present fees to PCI (Payment Card Industry) compliance. However, just as in most areas of mobility, third parties have sprung up to handle most of these issues at commodity pricing. Rather than building secure credit card storage or trying to unravel device-specific "vault" technologies, there are third parties that will happily store payment information and handle these nuances. Just as e-commerce can be facilitated with minimal internal IT input, so too can a mobile payment solution be built by integrating third party components. Even for the smallest businesses, companies like Swipe can be integrated into a mobile payment solution that lets your customers pay for goods at your business. On a larger scale, merchant banks and major payment processors are waking up to these possibilities, and have realized that if they don't provide these types of services using existing technologies, someone else gladly will.

Until recently, it has been safe to ignore mobile payments and wait for a standardized, universal solution to be adopted. While this solution still doesn't exist, if your business could benefit from this technology it's no longer out of reach, even for smaller companies. Enabling mobile payments will require some work and creative integration on your part, but it's no longer an unfathomably daunting task best left to the "big guys."


Patrick Gray works for a global Fortune 500 consulting and IT services company and is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companion e-book The Breakthrough CIO's Companion. He has spent ...


Lack of an agreed technical standard is not the only thing holding mobile payments back.   Security is probably a bigger factor.   Every week we hear about a new case of some company's customer database or credit-card system being hacked.   Both of my credit cards have had to be replaced more than once because big national retailers got hacked into.   And while I didn't lose any money in the process, I lost lots of time making sure that companies I did regular business with got the new credit card numbers.

So now I have a special credit card I only use for web and e-payments, and I have it set up so I have to personally pre-authorize every payment on it.     It's a pain and major inconvenience but it adds another layer of protection.   Unfortunately it also means I'm not going to go to the trouble of doing that just to make a quick impulse buy at a vending machine or coffee shop.

If the retail industry -  both brick and mortar and e-commerce - don't get their act together on security they will find that many customers, like me, will be buying less and less


@inet32, the security problems you describe exist regardless of payment platform, mobile or otherwise. IMO, that's not what's holding mobile payments back at all. In fact, payments using NFC (mobile or card-embedded chip) would be much safer than using your regular credit card that you'd typically use!

NFC readetrs have been around for years now in many major retail locations, like CVS, McDonald's & others. I've had credit cards for years that have NFC chips in them & use them where I can. The nice part about NFC payments is that, just like chip & PIN, they generate a one-time use CC # so it doesn't matter if someone gets it or not - it can't be used again!

The real holdup is that 3 of the major wireless providers (AT&T/T-Mo/Verizon) have conspired & colluded to keep Google out of that business as a first-mover. As long as those 3 block ready access to mobile payments, it's not going to take off. I'm interested to see what happens as Android KitKat & beyond get more penetration because mobile payments don't require the cooperation of those 3. I know that I personally will be very glad to be able to use NFC payments without my mobile carrier Big Brother saying I'm not allowed unless I use *their* app!

Editor's Picks