But 1-Click has been slow to expand beyond Amazon's walls. While Amazon offers the convenient checkout service to retail-website builders, competitors are understandably loath to embrace the e-commerce giant's tools.

Now a wiser, bloodier Google has re-entered the fray, taking lessons learned from Amazon and applying them to its own "1-Click" solution for Google Wallet, Instant Buy.

But Google's road to riches won't lie through a button on a website. That's the route it took in traditional Web e-commerce, with its older Google Checkout service, which Wallet replaced after it failed to unseat PayPal and other, more traditional credit-card-processing services. Instead, Google's placing its bet on terrain where it has the upper ground: Android apps and Gmail.

Google announced Google Wallet Instant Buy on Wednesday at its annual I/O conference. Instant Buy, a set of tools for Android developers, is a complement to the Google Wallet API that the company announced last fall. Instant Buy should probably be thought of an evolution of the Wallet API - the older API filled in payment information, while the new version offers a button to "Buy with Google". Instant Buy serves to both authenticate the shopper and actually pay for the purchase, with an intermediary step to confirm. It's a two-click solution the first time a shopper logs in, but then it's down to one if they save their Google login information with the app.

Why is this important? Because buying products via a smartphone can be a brutal experience, requiring dozens of steps to enter payment and shipping information - and users aren't inclined to stick around if they get frustrated. More than 90 percent of mobile users leave a mobile site without buying anything, according to Mike Putnam, vice president of mobile at fashion site RueLala. 

For a merchant, a simple, painless buying experience is a virtual necessity, given the rising numbers of mobile shoppers. Last Cyber Monday, for example, about 11 percent of all purchases were made via smartphone, according to IBM, about 90 percent more than the year before. This year, about 15 percent of all online retail sales will take place via mobile, according to eMarketer. 

But payment buttons aren't exactly new. So how does Googl plan to get an edge? The familiarity and ubiquity of Gmail, for one. Google also added the ability Wednesday to pay by email, clicking a "$" sign to "attach" a few bucks, much like a document or picture. The funds simply go into the recipient's Google Wallet, where they can be redeemed for real money (via a connection with a bank account) or used to buy movies, games and apps from the Play Store.

PayPal and Dwolla, among others, have offered pay-by-email for years. But PayPal and Dwolla don't have one of the most popular email platforms in the world, tacitly encouraging users to send money at the push of a button. That's one of the more important hooks that the new Wallet offers, a Google spokeswoman said. Eventually, it's possible that Google could push Wallet back into the real world - where it first started out, of course. 

What Are The Secrets To Success? Lock-in And Context

In a horse race, a jockey's tools are the whip and blinders. So it is in mobile payments. The most effective way of retaining customers is to eliminate the possibility of going elsewhere. Within the mobile space, the most effective blinder is the app. If you click Amazon's mobile app to buy a router or garden hoe, chances are you're not going anywhere else. Amazon knows that you can shop elsewhere, pay a higher price, and enter your information across all of those dozens of fields - or you can simply stay and buy with one click.

Payments by Amazon, of course, is Amazon's one-click solution, ported to the Web. But check out Payments by Amazon's customer list: the biggest name is probably Ace Hardware. Payments by Amazon offers the same one-click payment that Amazon does, but for the consumer,  without the context of Amazon.com, it's just another provider. And for most merchants, Amazon is the enemy.

Google's hold over the customer is weaker. Within Gmail, users simply don't have the choice to send funds via any other provider, but they can simply use PayPal or Dwolla and send money to the same email address. But what Google offers is what Payments by Amazon can't: context. Within the Play Store, Google is building recommendations for movies, music, and apps, based on your own preferences and what your friends have recommended. 

Payment providers have a number of arrows in their quiver. PayPal offers the ability to pay via its service at retail locations. Dwolla users can pay via Facebook and Twitter. But attendees at Google I/O suspect that the next step is for Google to begin building profiles of real-world purchases, so that if the Gap adopts Google, visitors to its online store will know what their Google+ friends bought. Virtually every other payment provider lacks the social integration that Google includes. 

The idea behind products like Google Wallet—where you could leave your wallet at home and pay for everything by tapping your phone—never really took off. Why? Numerous technical reasons have been suggested—a lack of infrastructure, resistance from financial institutions—but the conversation so far has focused on the problem of paying for things. And paying for things isn't as important as the shopping experience itself, and providing the context for an informed decision that the customer is excited about.

"I’m not saying that there are no advantages to mobile payments," Nick Holland, a former Yankee Group payments analyst, recently wrote. "However, the opportunity for consumer/merchant value addition seems to be less around the transaction and far more around augmenting the retail experience. The mobile payments obsession is missing the point."

And that happy coincidence may well benefit Google.

Photo by Nick Statt for ReadWrite

Under the Wallet name, Google has been mostly selling failure. It's offered a confusing array of payment services—most notably, a way of paying for items in stores by tapping your smartphone to a device on the counter.

That in-store payment service has been, let's say it, an outright disaster. But Google is sticking with Wallet—at least in name—with two new services unveiled Wednesday at Google I/O, its annual developer conference held this week in San Francisco.

The first, Google Wallet Instant Buy, allows developers—the focus of Google's efforts of late—to build Wallet as a checkout option on mobile apps, sparing the agonizing dozens of steps required to input a credit-card number, billing address, and other information needed to buy.

The other, like eBay's PayPal service, lets Google Wallet users send money via email.

Eyes On The Payment Prize

Google has long aimed to become a payments player. It knows that many of its searches drive people to e-commerce sites where they conduct transactions. Handling the actual purchase would give it the ultimate informational signal that an ad is effective.

And Google accepts billions of dollars of payments a year—though mostly from small businesses buying search ads, rather than from transactions in goods and services.

More recently, though, the growing number of Android smartphones has created a base of consumers who have signed up for Google Wallet—whether they realize it or not—in order to buy apps and digital content on the Google Play store.

Google hoped to extend that consumer base into purchases in retail stores, but it made a series of bad choices, from the NFC wireless hardware it insisted on to the executives it chose to oversee the project. (Two have left, and one has taken a new, unspecified assignment within the company.) Very few merchants ended up accepting Google Wallet in stores, and very few consumers ever had access to it.

There were rumors that Google was going to unveil one more run at retail payments at I/O by rolling out a plastic Google Wallet card—essentially a regular credit card, linked to a user's Google Wallet account, for buying things anywhere MasterCard was accepted. But that product reportedly ran into glitches, and the most recent head of Google's payments push, Osama Bedier, left the company.

Back To The Web

By bringing payments back to its Web roots, Google is essentially mimicking the architecture of PayPal. The main reason for offering email payments seems to be feature parity with PayPal. But Google has one big advantage over PayPal—namely, its ability to build Wallet into every Android phone and its hugely popular Gmail service.

Right now, the in-app Wallet checkout feature seems geared for e-commerce on the go, rather than purchases in stores. But it's easy to imagine this new instantiation of Google Wallet getting used in stores, too.

How would this work? Think of how Apple lets you pay for Apple Store purchases with an app, charging a stored credit card. Or how Square lets you buy a coffee by saying your name—no card swipe required. Or how you can get a ride in an Uber town car without having to sign a paper slip.

Could Google help merchants build apps that allow customers to pay for purchases without digging into their pockets—no credit-card swipe or smartphone tap required? This makes the most sense for ordering items ahead of time for pickup. But it would be simple to speed that up. Maybe Google Wallet would generate a virtual gift card that old-fashioned cash registers could scan.

The threat to Google's never-fading payments dreams is that others may get there first. Braintree and Stripe are already popular with app developers, and work on more than just Android. Meanwhile, Square, PayPal, Groupon and others are colonizing retail checkout counters with iPads.

Those rivals should not rest easy, however. Google has shown a stubborn determination to enter the payments business that it hasn't demonstrated with other more experimental projects. And with these latest products, sensibly designed around how developers and consumers actually want payments to happen, it may have finally gotten its cards laid out straight.

Change With Your Coffee

I work from home, but every morning I wake up, take a shower and go straight to work from my local coffee shop. About half of those days I stop at the neighborhood ATM kiosk to grab some cash. Call it quaint, call it archaic, but my local coffee shop only takes hard currency.

The coffee shop, 1369 in Cambridge's Inman Square, is really the only reason I bother using cash at all. 1369 is a little old school, a little hipster. Cash sales were kind of its “thing.” That’s why I was surprised the other day when I ran into 1369’s owner, Josh Gerber, and he told me that the coffee shop was going digital with the Square Register.

To me, this is disruption personified. No longer are we talking about some abstract concept of how smartphones and tablets could change businesses at the local level. We are seeing it in action on a tangible scale on the street, in our neighborhoods and, yes, at our local coffee shops. 

Mobile Reshapes Main Street

Leading the charge in this changing business landscape are companies like Square, PayPal, LevelUp, Intuit, Groupon, Revel and a variety of others. The task these companies have taken on is no easy challenge – each aims to redefine the point of sale and replace one of the most common items for Main Street business: the cash register.

The chosen vehicle to replace the cash register? The iPad.

Call it the iPad-ification of the point of sale or the mobilization of American’s businesses. We are now starting to see distinct results from several years of ecosystem growth and product releases intended to change the way that basic commerce is conducted. 

Square is the leading disruptor. It was the company that made the original card-swiping device for the iPhone and, later, the iPad. With its Square Register software, it introduced one of the first connected point-of-sale solutions. Today, Square took that a step further by announcing the Square Stand, a full replacement for the cash register that holds an iPad, includes a built-in credit-card swiper and allows business to connect cash drawers and receipt printers. The Square Stand, due out in July, is available for pre-order for $299.

Not to be outdone, PayPal announced at the same time a new program called “Cash For Registers” where it will buy old registers from businesses that wish to install PayPal Here, its own iPad-oriented point-of-sale system—and it's waiving payment-processing fees for the rest of the year.

Groupon also unveiled a new iPad-friendly version of its Breadcrumb point-of-sale software today.

Already, Revel Systems uses the iPad and Intuit can install any variety of smartphones or tablets into an effective register replacement. 

Conceptual To Implementation

Four factors are driving the implementation of iPad point-of-sale systems in small and medium-sized businesses:

• Install cost: It is often cheaper to buy an iPad and a couple of accessories that it is to go through a major point-of-sale vendor like Aloha or Micros, whose devices can cost thousands of dollars apiece.
• Interchange: The classic credit-card readers often have a variety of hidden costs for the business. They take a few percentage points of the total sale and often have a monthly fee or minimum that must be reached by the merchant, driving up their take to an effective rate of 3 to 5 percent for many merchants. Square charges interchange of 2.75% with no hidden fees on swiped transactions. A company like LevelUp does not charge interchange, but rather makes money as a marketing and advertising platform, offering incentives to users. 
• Mobile acceptance: A couple of years ago (even last year, when we first noticed the iPad point-of-sale trend), smartphone and tablet adoption were still in relative infancy. That has changed in a big way extraordinarily quickly. In just a few years, smartphones are now the norm. Second and third wave mainstream consumer adopters are now looking at them not as some weird fad but as practical tools for solving problems.
• Ease of use: Anyone can hit a few buttons on an iPad and swipe a credit card. Proprietary register systems pose a training nightmare. 

Square's new Stand product promises to be more durable than the older plug-in card swiper. Square merchants like Blue Bottle were known to stock multiple replacement swipers in case one went bad—but no one wants to fiddle with hardware while customers are waiting.

PayPal is taking a less prescriptive approach than Square's integrated hardware and software, but it too is pushing iPad-based solutions. It rolled out an iPad version of PayPal Here in March, with one nice feature from its parent company, eBay: Merchants can scan barcoded inventory for easy input into the register's list of items for sale.

"The reason the iPad is such a great device is it's touchscreen; you can integrate it with devices like receipt printers; it's relatively affordable," says PayPal president David Marcus. "It's the ideal device."

Marcus says PayPal's seen many merchants upgrade from the smartphone version to the iPad version.

"We just want to accelerate the inevitable," Marcus says of PayPal's move to offer free payment processing to merchants who take it up on the register turn-in offer. The cash register "is a dumb device," he says, that doesn't handle features like loyalty tracking or remote ordering.

At 1369, Gerber knew that he would eventually need to go digital, at least to the bare minimum of accepting credit cards. Yet, the average check at 1369 (or really any other coffee shop) is in the $4-$5 range. When you are processing a lot of small transactions, that interchange rate becomes painful. That is why it is good for businesses when payment processors battle on interchange and lower rates for everybody.

We are now in a phase in the Mobile Revolution where we are seeing concepts become reality. This is not just some startup CEO saying, “I am going to change the world” or a huge gadget manufacturer telling us that this is the next big thing. These are real implementations we can see, feel and touch, in our neighborhoods and at our coffee shops. 

Photo via 1369 Coffee House

Owen Thomas contributed reporting to this story.

No matter where in the world you go, you remain tied to some latitude/longitude position in time and space. This is what makes local media and local commerce so powerful and the reason why real-time, on-demand services delivered via smartphone are becoming so important.

Already, if you're in New York City, you can Uber (on-demand car service) yourself to the airport, eBay Now laundry detergent from Target, Jetsetter Tonight yourself a quick weekend getaway and even Zeel yourself a massage at 10pm before you go to bed.

What A Local-Commerce-Enabled World Would Look Like

Soon enough, location-based platforms will enable us to Uber (or Seamless) a pizza from our favorite Joe's Pizza to enjoy while having a picnic in the park. While you're munching your slice of Joe's in the park, perhaps you might want to simultaneously Zeel yourself a massage too?

Better yet, how about OkCupid/Match Mobile-ing yourself a date with the gal/guy sitting on the bench across from you? If that works out, you may not need that Zeel after all, and you might want to extend the date and OLO (mobile payments/ordering) "Groupon-discounted" theater tickets to a Broadway show. (If nothing else, Groupon CEO Andrew Mason did a phenomenal job making it OK to use a coupon on a first date.)

There will eventually be an Uber for everything local. Consumers will be able to Uber a plumber, Uber a place to live (Airbnb or Zillow style), Uber a ZocDoc, Uber a hairdresser, the list goes on... But all that's only the beginning. Here are four more inevitabilities brought to you by local commerce:

1. Paper becomes obsolete - except maybe toilet paper. The United States Postal Service will also become obsolete - or end up as Amazon's express delivery unit. The telephone companies, traditional print media and direct-mail companies will have no choice but to go green and stop publishing/delivering their printed directories and circulars. Without the USPS, paper checks will also become obsolete.

(See also ReadWrite's coverage of paperless technology.)

2. The arrival of self-service, location-based, deals-on-demand.  In the same way food trucks now use Twitter as a mobile coupon platform, local small businesses like Joe's Pizza will finally adopt Groupon Now's self-service vision. Joe will be able to promote deals to sell off the rest of his pepperoni slices at 3pm when the restaurant is empty. Google, Facebook, Amazon, Apple, etc. will launch (or acquire) self-service, location-based "Deals-on-Demand" direct marketing/couponing platforms.

(See also 5 Reasons Foursquare Is Losing The Social Local Mobile Revolution.)

3. Brick-and-mortar retailers become showrooms. Traditional physical retailers will jump on the local commerce bandwagon and embrace the role of showrooms for online and mobile purchases, or they will go out of business. Retail chains, together with startups like ShopRunner as well as some of the e-commerce giants will begin to make the model work for local retailers. Amazon Locker and Google's Shopping Express and BufferBox will get real showrooms where customers can see and scan items for next day delivery. WalMart, eBay and others will follow suit.

(See also Showrooming: 5 Ways Retailers Can Fight Back.)

4. Cash becomes obsolete. Consumers will (finally) be able to pay for all local products and services by waving or tapping their mobile device. Cash will slowly wither and die.

(For a different opinion, see also Mobile Payments' Cashless Utopia is Not Coming Any Time Soon.)

Joe's Pizza mage courtesy of Rob Young/Flickr.

I saved it. With my iPhone.

I downloaded the Kickstarter funding app from the App Store. With a swipe of a finger, and my mobile Amazon Account, I pledged $10 to help the producer finance a  movie based on the show. On Twitter, I told all my followers to do the same. Then, with a quick status update to my Facebook page, I encouraged my family and friends to do likewise — and to tell everyone they knew to follow suit. All told, it took less than five minutes, and now one of the best network TV series of the past ten years will live again, this time on the big screen. 

The new Veronica Mars movie has been greenlighted, its financing secured, the star — the lovely and talented Kristen Bell — is signed. Nothing to do now but type out a script. I should at least garner a “producer” credit. The Motion Picture Academy is welcome to thank me at next year's Oscar ceremony. 

On second thought, maybe the Academy should fear me. For I did not merely save Veronica Mars, I am leading the charge to destroy the entire film industry as we know it. My weapons? The technology I carry around with with me everyday. A smartphone, an app, cloud services, crowdfunding, social media and online payments. 

Explosions In The Film Industry

The total gross film receipts in the U.S. last year were just under $11 billion. The average box-office take of a Hollywood film was a middling $16.5 million. This does not include international box office receipts, DVD sales, streaming or network television. The world consumes massive quantities of entertainment. Yes, we have a choice in what we watch and when and where but almost no choice, no direct say whatsoever, in what actually gets made, or by whom. This has always been the case — until now. 

Despite its near-universal appeal, there may be no industry that’s more insular, more inexplicable to the very public it appeals to than the film industry. Technology is changing all of this, exploding the industry outward and, finally, fully empowering those who buy the tickets. Yes, technology has radically impacted the industry itself — think amazing special effects, 3D, green screens, post-production wizardry. We can now download or stream our favorite films and TV series to watch them anywhere at any time — legally or otherwise. But until now, we were effectively powerless in what got made.

No longer. Veronica Mars will likely be only among the first of many multi-million-dollar Hollywood flicks that are produced solely because of the efforts of individuals scattered around the world, pledging anywhere from $1 and $10,000, and sharing their enthusiasm on social media. The crowd is no longer simply marketed to, but is now driving what gets made from the start. 

Crowdfunding

Wikipedia defines crowdfunding as "the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations." Rob Thomas, the creator of the original Veronica Mars series, spent years attempting to turn his creation into a film. Until he turned to the crowdfunding platform, Kickstarter, he failed every time. From The New York Times:

In its three seasons on the air “Veronica Mars” was never even one of television’s Top 100 most-watched series, but in its afterlife it has broken new ground. On Wednesday night fans and supporters of that show about a wisecracking young sleuth (played by Kristen Bell) pledged more than $2 million to produce a “Veronica Mars” movie, less than 12 hours after the fund-raising drive was announced on Kickstarter.

Mr. Thomas told fans they had 30 days to raise $2 million for “our shot” at producing a film, adding, “I believe it’s the only one we’ve got.” And by about 9 p.m. that goal was met, with pledges continuing to come in on Day 2.  

The Web, social media, online payment services — and the always-on connectivity our smartphones provide us — are enabling an entirely new form of financing. These technologies are a;sp enabling anyone to pursue their creative vision or build a better mousetrap by appealing not to a skeptical venture capitalis or a cynical producer, but to regular people who may share a similar passion or interest. The technologies we have in our pockets are simultaneously empowering us to both create our visions and fund those whose visions.

A Funding Platform for Creative Projects

For the Veronica Mars project on Kickstarter, fans could pledge from $10 to more than $10,000, with various goodies offered at each level. For $10, the “backer” receives a PDF of the shooting script on the day of the movie’s release. For $10,000, a speaking role was offered.

Of course, Veronica Mars is a project with a built-in core of fans. Not all crowdsourced projects have that kind of juice to get to their funding goals.

But here's how it might work: A budding young filmmaker uses her smartphone to record a two-minute ‘pitch’ that she uploads to YouTube. Enough people react positively that she makes a Kickstarter project — seeking, for example, $1 million to make her movie and another $1 million to help market it. Not easy, but it might just work — even for people who would otherwise have no shot at raising that kind of money.. 

Crowdfunding, cloud services and mobile devices are remaking filmmaking and film financing. But let's not stop at funding Veronica Mars. The audience still doesn't have an financial stake in the creative endeavors we support. What if Veronica Mars turns out to be a blockbuster? Shouldn't I get a piece of those profits? After all, I was an early financial backer. 

It's not like I'm asking to be onstage at the Oscars with Rob Thomas. Although....

Images from Veronica Mars Kickstarter project video.

On the corporate side, everybody wants a slice of the potential multi-billion dollar pie. That's cluttered the mobile payments landscape with so many products and solutions – and no real infrastructure and platforms – that it has actually slowed down the potential acceptance of paying for goods with your smartphone.

Too Many Options

Think about it. Google has its contender in its NFC-based Google Wallet. The mobile carriers their own NFC option called Isis. Square and a variety of competitors have the dongle-based solutions covered. (PayPal has its own copycat dongle – yes, the one that's triangular instead of square.) Visa, MasterCard and American Express all have their own technologies and digital wallets.

Major retailers basically got fed up, said, “screw you” to the rest of the mobile payments industry and started building their own, though so far incredibly vague, mobile wallet. A variety of startups are also trying to sidestep the established players. If you're a retailer, how are you ever going to figure out what to use for the supposed mobile payments revolution?

It's a real mess. Mobile payments has become such a muddied place that it's nearly impossible to see the entire ecosystem or to discern which way to move.

MasterCard Takes The Platform

MasterCard wants to separate itself from all that. Today, at Mobile World Congress in Barcelona, it has announced a new "platform" in the mobile payments race it calls MasterPass.

The effort is an evolution of the PayPass system MasterCard released in the spring of 2012. The goal of MasterPass is to bring together all the different forms of payments that people use to pay for things – cards, digital wallets and the like – and to give retailers one multi-tool option for how to integrate mobile payments.

“We tried to think about the lessons learned at an industry level of what's worked and not worked in the past. We tried to take a hard look at what has been working, where have we seen mobile payment apps really take off,” said Ed Olebe, MasterCard’s group head of MasterPass Services in an interview with ReadWrite. “The way we can envision this working at the greatest scale, and for us this is really about moving into digital. So our ultimate vision with all of this stuff, this is going beyond plastic cards into fully digital payments.”

Offering A MasterPass

MasterPass will have three primary elements:

• Checkout Services: For in-store or online purchases, MasterPass will support NFC, QR Codes or mobile devices at the point-of-sale (the register).
• Connected Wallets: The digital wallet is no longer just a MasterCard PayPass option. MasterPass instead creates a platform where individual banks, retailers and partners can create mobile wallets. In addition to MasterCard, consumers will be able to pair other branded credit and debit cards to the wallet.
• Value Added Services: The kicker in any mobile payments. Users and merchants can get data about the transaction, balances, loyalty programs and real-time alerts. 

“Really what we're doing is we're offering merchants a whole suite of services that allow them to execute checkouts in all manner of different ways to enable them to have what they would call a sort of omni-channel consumer experience,” Olebe said.  

MasterCard envisions MasterPass as a hub-and-spoke type of environment. At the center is MasterPass and its ability to digitize payments and offer application programming interfaces (APIs) and standard structures (such as cryptography and security) for transacting payments. The spokes are MasterCard’s technology partners that build apps and transactional elements such as digital wallets and point-of-sale software for retailers.

For instance, MasterCard is partnering with mFoundry to create digital wallet apps for banks and Verifone that makes point-of-sale hardware and software. These partners can then integrate straight to retailers and services. For instance, if you take a cab in London, the credit card reader is likely made by Verifone. Through these partnerships, MasterCard can extend the platform from the relatively closed solution that was the PayPass wallet project into a platform that connects a variety of retailers, payment methods and technologies.

“We're saying, you choose who you want to work with, you decide what experience you want and we'll plug in to it,” Olebe said. 

Hurdling Traditional Obstacles

Two basic problems have hindered mobile payments adoption: standards and infrastructure. With all the players jostling for position, there are too many standards for merchants and consumers to consider. That, in turn, hinders the development of payment infrastructure, since retailers don't know what equipment to install or what software to deploy.

MasterCard says its discussions with merchants led it to realize that top-down solutions from technology or financial companies won't work. The way forward has to originate within the retailer, after which a company like MasterCard can enable it.

“Our job is to provide services and APIs that even if they make different design choices, they could go forward in a consistent way for that customer,” Olebe said. “We're not telling merchants you have to do it one way. What we're saying is, 'We recognize that two very rational merchants even in the same category can come up with different perspectives on the right kind of tech they want to invest in and the right kind of experience.'”

Which all sounds great. Now to see whether merchants are ready to dance with MasterPass, even if it lets them lead.

We’ve heard it before… this is going to be the year that mobile payments will boom! Both Gartner and Forrester have made strong predictions of mobile growth, with Forrester recently saying that the U.S. mobile payments market will hit $90 billion by 2017, a 48% compound annual growth rate from the $12.8 billion spent in 2012.

But how do we know that 2013 is really the year that “mobile wallets” will finally take off? And what will things look like when mobile payments actually fulfill their promise?

4 Key Indicators Of Mobile Payment Success

Here are four indicators from players across the ecosystem that suggest we will see a global shift in mobile payments this year:

1. A survey of 200 mobile industry executives, developers and insiders conducted by Chetan Sharma Consulting voted mobile payments the top mobile applications and services category for 2013. The survey said mobile payments and commerce will get big in 2013, with Visa, the banks and more established online payment companies like PayPal well positioned to cause disruption in the mobile payments space.
2. Visa Europe claims that in 2013, there will be 40 issuers offering mobile contactless payment services to consumers, and by the end of 2013 around 80 types of smartphones will be certified to carry out contactless payments.
3. A study performed by Shop.org and Forrester research, called the "State of Retailing" found that mobile payments will be essential if retailers wish to remain competitive. 51% of the participating retailers said that their top priority in 2013 had to do with optimization, including mobile payments.
4. China is set to follow U.S. and Asia-Pacific countries to embrace a cashless society as it taps a boom in e-commerce and electronic payments, with mobile payments likely to soar 52.7% annually in 2013. Mobile payments are likely to expand to $17 billion in 2013.

How Will Mobile Payments Work?

So what do all the figures actually mean?

If things continue as predicted, people the world over could very soon end up walking out of the house without their cards and cash. Instead, they'll use their mobile phone to purchase everything from electronics to furniture, from groceries to gas. Sounds pretty cool right?

What’s even more fascinating is how the growing use of mobile and the increased popularity of apps, passbook and mobile payments are combining to create a comprehensive mobile experience that is changing the way consumers interact with brands.

Consider this scenario for early 2014:

• As you walk past your favorite electronics retailer, you get a notification offer pushed into your app offering you 10% off an LCD TV purchase.
• Intrigued, you enter the store, use your phone to do some price comparisons, see a few LCD ads and select the perfect new LCD TV for the Super Bowl.
• After learning your model is out of stock, the salesperson informs you it can be shipped from the warehouse in time for the game, so you order it.
• At the checkout counter you use your phone to access your offer code and loyalty number as well as to pay with your phone. The salesperson asks if you would like to receive product and shipping text alerts and you promptly opt-in.
• You leave the store and quickly confirm your subscription and a short time later receive a text message confirming the purchase and informing you that your order has been received at the warehouse.
• The next day you get an alert informing you your TV has been shipped and a final message informing you the TV has been sent out for delivery.
• Upon delivery you receive your final alert confirming delivery, thanking you for the purchase and a final prompt to text back ‘SERVICE’ should you have any questions for customer service.

What Will It Take?

While all these technologies are available today – SMS, targeted mobile advertising, push notification, passbook and mobile payments - they are rarely coordinated. The whole process never happens as smoothly as laid out in the scenario above. The industry still has a long way to go to create a seamless mobile experience for our customers.

Doing so will require combining data and systems that talk to each other. It will also require coordination and orchestration both within a single channel (i.e. Mobile) as well as across multiple channels (email, SMS, Push, Passbook, mobile ads) to create a positive experience for the recipient and a sale for the retailer.

It will also require real-time, automated management – so users are contacted only when they're in the market. Nothing would be worse or more inefficient than to have that same individual receive an offer promoting LCD TVs right after they've just bought a new TV.

The good news - again - is that the basic capabilities are here today and that brands and their partners are already developing the strategic know-how to build, manage and orchestrate mobile and multi-channel relationship marketing efforts around mobile payments. There are big rewards waiting for the first companies able to put it all together for their customers.

Different aspects of the payments industry want you to think different things. PayPal wants you to think of mobile payments as when you pay for something on your smartphone through an app or a website. Startups like Square think more along the lines of location-based payments, where you actually use your smartphone to process the transactions. Then there is the ability to transfer funds, pay bills or bank with your smartphones. To the payment processing sector, they all fall under the notion of “mobile payments.”

By this logic, PayPal can claim that it is one of the biggest mobile payment processors in the land, when really, it has next to zero physical infrastructure in existing retail environments. It is looking to change that with its recent NCR deal, but it will take time for the payment processor to create the necessary infrastructure. When PayPal touts its mobile payment numbers, what it is really saying is that it is the transactional arm of mobile commerce – mCommerce – the fledgling little brother to eCommerce, popularized on the Web by Amazon more than a decade ago. 

3 Kinds Of Mobile Payments

In a new report, research firm Forrester has broken down the definition of mobile payments into three categories:

• Mobile proximity payments: In-store or location-based payments with a smartphone to a point of sale. This could include a taxi driver using Square, a burger joint using LevelUp or a gas station using Near Field Communications (NFC) and a payment processor like Google Wallet. 
• Peer-to-peer payments and remittances: Sending money between two people through a mobile device. 
• Mobile remote commerce: Buying an item (digital or physical) through a mobile device from an online retailer. 

Forrester’s broad definition of mobile payments is, “a transaction in which the transfer of funds is initiated using a mobile phone – excluding the 'voice' function of the device.”

When the media talks about mobile payments, it is almost exclusively talking about proximity payments, usually tied to the potential (or lack thereof) of NFC. Mobile commerce is something completely different from actual mobile payments. In 2012, more than 90% of mobile payments (as defined by Forrester) were mCommerce related. 

Forrester notes that mobile payments will reach $90 billion by 2017, a compound annual growth rate of 48% from the $12.8 billion in 2012. Of that $12.8 billion, only 4% were proximity payments ($549 million). Forrester predicts that by 2017 that mCommerce will drop from its current rate of 90% of the overall mobile payments industry to 50% while proximity payments will grow to 45% of the toal ($40.8 billion). 

Getting More Realistic

Forrester’s predictions are more realistic than what we have seen from other research groups. Juniper Research had predicted that mobile payments would be a $670 billion industry by 2015. Granted, Juniper’s prediction took into account other aspects of the payment industry on a global scale, such as direct-to-carrier billing and mobile bill pay along with proximity payments and remote mobile commerce. Still, Juniper predicted exponential growth that was completely unrealistic given the limitations of building mobile payment infrastructure and the chicken-or-egg nature of the digitization of mobile payments. 

When it comes to proximity payments, Forrester notes the standoff between consumers and retailers when it comes to setting up point-of-sale services to pay via smartphone. Consumers do not care to make mobile payments until a significant portion of retailers have the capability - while retailers do not want to set up the capability until a proven number of consumers are willing to pay via their phones. As such, 2013 will be the proving ground for mobile payments with many pilot programs being tested by payment vendors and retailers before true growth starts to ramp up in 2014.

How Much Extra Would You Pay?

Seth Priebatsch, founder of mobile payments startup LevelUp, told me once that he would pay an extra 10% just to pay with his smartphone because, essentially, he thought it was cool. Most (heck, all) consumers are not likely to share that sentiment. Forrester notes three directives that will need to occur for proximity payments to begin accelerating:

1. Increased benefit and convenience
2. The ability for payment systems to scale among retail bases
3. Reduced barrier to entry for early adopters.

Essentially, it should be really easy to pay with your phone and it should be good for you and the merchant.

Cash, plastic cards, checks and other forms of payment are not going away any time soon (well, checks may be on the way out). According to Forrester’s predictions, despite mCommerce and proximity payment rates, mobile payments will be only a drop in the bucket of the overall transaction landscape.

If you were hoping that a mobile-payment-driven cashless utopia would arrive by the end of the decade, you might want to start dreaming about something else.

Top image courtesy Shutterstock.

Why do people buy smartphones and tablets? It is not because they have quad-core processors or super fast LTE connections. People buy mobile devices for what can be done on them. Apps, and the services that run them, are truly the backbone of the mobile industry.

So, we present our top 10 mobile products of the year. To make this list, a product needed to be mobile-Web or -platform enabled. So, no devices (which we ranked earlier this month) or the platforms themselves. 

What made our top 10 in 2012? See the list below.

10. Instagram

No company or service has had a bigger roller coaster year than Instagram. The social photo sharing app released an Android version, had a very public backlash against its Terms of Service and, oh yeah, was acquired by Facebook for nearly a billion dollars. 

Instagram also saw the type of exponential growth that startups can only dream about. It grew by tens of millions of users when it announced its Android app and then added tens of millions more when it was acquired by Facebook. Instagram in 2012 went from a popular iOS photo-sharing app with around 20-25 million registered users to a 100-million-user behemoth that has become synonymous with social photos. 

The elm trees of Central Park, New York City by Dan Rowinski

9. LevelUp

When it comes to mobile payments, we gave Square the No. 1 honor for mobile products in 2011. The dongle-based mobile payments system was truly deserving and we could very easily include it on this list this year. But we are taking this opportunity to highlight another mobile payments startup that is beginning to make waves in the industry and has a ceiling that could lead it to be a major player (or acquisition bait) in 2013 and beyond.

Boston-based LevelUp is an app that uses QR codes to make payments at local merchants using the company’s system. LevelUp will provide retailers with Android smartphones to act as QR code scanners (or Near Field Communications later, if needed) and provides loyalty discounts to consumers. For instance, if you are at Four Burgers in Cambridge, Massachusetts and you pay for the first time with your smartphone on LevelUp, you get a $3 discount on your order. Come enough times and you can “level up” to greater discounts. 

LevelUp has two important factors working in its favor. First is what the company calls “interchange zero.” Interchange zero is the concept that merchants do not have to pay a fee for every transaction made on the system, such as the 2.75% or so that they have to pay through financial processors like Visa or American Express. LevelUp makes its money through the loyalty/advertising sector as opposed to interchange. The other prong in LevelUp’s attack is that it is making significant progress in getting its system into actual retail locations, something that larger companies are having trouble with (right now). As of the beginning of December, LevelUp had 500,000 registered users and had processed two million transactions. That is a drop in sea of the large payments industry, but the model LevelUp is using has significant disruptive potential.

8. Waze

Social… driving. When we first heard of Waze, this seemed like a bad idea. A very bad idea. The last thing we want is for people to be on their phones while in the car. Yet, upon further inspection, Waze is much smarter than just an app that helps you tweet traffic alerts. 

Waze is a background location and turn-by-turn navigation app that works with your friends and the people around you to know where traffic is, where cops might be hiding or where the cheapest gas on your route is. Waze taps the collective consciousness to get you where you are going faster and smarter. 

Waze also saw huge growth in 2012. The Israeli-born, San Francisco-bred company scored a big win when it partnered with Apple as part of its iOS Maps system and has added many users through its expansion to various mobile operating systems.

7. Nuance – Dragon/Swype

Nuance is a repeat offender on this list, mostly because it is very difficult to keep it off. Swype, the typing feature that allows users to input text by swiping letters across the keyboard without taking their fingers off the keyboard, is one of the most addictive features included in many Android devices. Nuance licenses Swype to many mobile manufacturers, such as Samsung.

Nuance has built a neat little business licensing its technology (whether it was built by Nuance or acquired, like Swype was) to mobile manufacturers. Nuance also licenses its speech recognition service to smartphone makers and it is believed to be one of the technology suppliers for Apple’s Siri personal assistant app on the iPhone. 

2013 will bring good things for Nuance as it works on its own voice-controlled personal assistant mobile systems and makes additions to its Swype and Dragon line of products. 

6. Geoloqi

We normally do not like to add products on this list that have been acquired and are now a cog in a larger organization, but Geoloqi deserves its spot as one of the bright startups working to solve many of the problems associated with location services on smartphones and tablets. 

Portland, Ore.-based Geoloqi, which joined Esri this year, provides accurate and granular location services to app developers and manufacturers while still trying to preserve the battery life of a device. Essentially, Geoloqi provides developers with a software developer kit (SDK) that runs its location services in the background of any app in which it is included. The ability to run a data-gathering, persistent background location service without killing battery life cannot be understated. The use cases are vast, from government agencies using apps to track employee locations in the field to helping manage power consumption in your home through your location. 

Geoloqi is one of those companies that most mobile users will never really hear about. But, the old cliché applies, “good technology should be almost indistinguishable from magic.” Well, if you are ever using your phone and it performs and action that say to yourself, “how’d it do that?” There is a good chance a company like Geoloqi is behind it.

5. Lookout

If we saw anything in 2012, it was that the proliferation of mobile devices is changing the nature of computing on a vast, accelerating scale. Well, with any industry-changing event, the good comes with the bad. In this case, the bad is the pace and volume of mobile malware in the smartphone ecosystem looking to steal your data and cost you money. This is especially true for Android, but if you have an Internet connection with your cellphone, you are not immune from spam, scams and viruses. 

A variety of companies are working to tackle the mobile malware problem. Kaspersky Labs, Sophos, Bitdefender, Symantec and others are all on the forefront of research and defense against malicious hackers. But, for the second year in a row, we think that Lookout is one of the best companies working on preventing and detecting mobile malware. 

Lookout updated its Android app in September and added several new features. The app will scan all of your apps looking for vulnerabilities in your system. In and of itself, that is not really profound. Add Lookout’s ability to find your phone (even your iPhone) anywhere you may lose it, scan all your apps to determine what permissions they can use to share your personal information, institute Safe Browsing in Chrome for Android and backup just about every piece of data on your device, and you have one of the most comprehensive and powerful mobile security services available.

4. Chrome for Android/iOS

If we have to pick just one mobile browser, it has to be Chrome. Dolphin, Opera and Firefox for Android are all worthy candidates, but the Chrome browser for iOS and Android from Google is the best of the best. 

Chrome for iOS and Android brings all the great features that you expect from Chrome on your PC. It is fast, remembers your history and has a robust bookmarking capability. The best feature is the ability to sign in to your Google account and sync your Chrome browser across all of your devices, remembering pages that you may have visited on your Android smartphone, iPad or PC. This cross-platform sync is not unique to Chrome, but now that you can tie your browser to your Google account across any type of computing platform you might use, the ease and benefit of using Chrome is apparent. 

3. Evernote

When Evernote landed $50 million in funding in July 2011, the startup’s CEO Phil Libin said that he thinks his company can last for 100 years. 

We’re inclined to believe him. 

Evernote Toolbar Widget for Android

If you are an Android user, there is a pretty good likelihood that you have downloaded and installed the Evernote Toolbar Widget… and cannot live without it. If you are a copious note taker on your mobile device, Evernote is one of the best apps you can find to take photos, audio files, save articles or just jot down thoughts and sync it to the cloud. If we think of the factors driving new era of computing – mobile and cloud – Evernote is the undisputed thought leader in the personalized cloud productivity space. 

2. Spotify

Whenever I ask people about apps they cannot live without, I get a fairly short list: Maps (usually Google’s variety), email, Twitter, Facebook, Zite/Flipboard, Instagram (or some type of photo app) and maybe something specialized to a person’s specific interest, like RunKeeper or Strava Cycling. Those who have been indoctrinated also add one app that may slip off a casual user’s list.

Spotify.

The cloud-based music streaming service engenders such loyalty among its users that many of them have trouble remembering a life before the ability to look up just about any song they want and stream it immediately, from anywhere. It also allows users to save files locally, has a Pandora-like radio streaming service, can be social or anti-social per the user’s preference and generally has any song you are looking for (yet, for some reason, a surprising paucity of Hootie And The Blowfish).

  Spotify Widget

Spotify and streaming services like Pandora, TuneIn, Rdio and the rest of its ilk are also causing a subtle shift in how people buy and manage their mobile phones. For instance, the Apple iPhone has long come in three storage sizes: 16 GB, 32 GB and 64 GB. Apple has built a very robust business on this tiered-pricing model. But, as more people move to streaming services for audio and video, the need for extra storage for media purposes is lessened. The priority then falls on the amount of data and speed you can get from your carrier. These services are changing user spending behavior and Spotify is leading the charge. 

1. Google Now

You have heard of artificial intelligence. Chances are, you probably do not quite know what that means in its entirety. True artificial intelligence (robots that are as smart as humans and can think and behave on their own) may never become a reality, but Google is trying its darndest to give us the smartest kinds of computer intelligence, straight into our pockets. 

Google Now has the ability to know where you are, what you are doing and then give you help along the way. Leaving on your morning commute? Now will detect traffic and give you an alternate route, if desired. Its Card-based system can hold your boarding pass, local weather, reservations, events, appointments and meetings or the score of your favorite sports team. What makes Now special is that it has the machine learning Google is known for, the cloud to sync its information anytime, anywhere and the information intelligence that is unique to Google’s approach to the world. 

Now should just be getting started. Google ramped up its team in 2011 to work on Now, making it a priority within the company. In successive versions of Android, Now should become smarter, more intuitive and more able to serve your needs no matter what you are doing. 

Lead image courtesy of Shutterstock.

It is impossible to do a year-end review of the mobile ecosystem and not mention the thermonuclear patent wars. Patents are the story of the year in mobile - with billion dollar lawsuits, injunctions, cease-and-desist letters and patent trolls all marching us down the road to chaos.

Samsung and Apple have battled patent lawsuits across the globe to dramatic (and something amusing) results. Apple won a $1.05 billion California jury settlement from Samsung in August based on copying of functional and design patents by many of Samsung’s older products. Samsung is, of course, appealing -  and there is a good chance that it might get either a retrial or a significant reduction in how much it has to pay Apple. 

The funniest quirk in the global patent battle this year came when a judge in the United Kingdom ruled in favor of Samsung that it did not copy Apple’s iPad design. Since Apple had brought the lawsuit and had allegedly damaged Samsung’s good name, the judge forced a public apology (of sorts) from Apple on its UK website and in major British media. 

Apple also brought patent cases against the likes of HTC (getting injunctions against the HTC One X in May) and Motorola. Nokia and Research In Motion have fought their own patent battles and Microsoft does whatever it possibly can to make partnerships with the other players, either to avoid paying licensing fees itself or to garner them from other manufacturers. 

The patent wars have spun so far out of control that even the hardcore patent pundits have a hard time tracking of all the cases in the world. A major reason for this are the patent trolls, companies that own and control patents but do not actually produce anything. All they do is sue companies who may or may not violate their portfolio full of patents purchased from other companies. This practice, along with the major lawsuits between major manufacturers, will no doubt continue into 2013 and beyond. Apple already has a lawsuit pending against Samsung for its latest round of products, scheduled for court in 2014. 

Mobile Payments Got Stuck In Neutral

2012 was supposed to be the year that mobile payments became mainstream. With services like Google Wallet, Square’s card reader and point-of-sale system, and Near Field Communications platforms like Isis from the mobile carriers, legions of shoppers were supposed to be replacing cash and credit cards at retail stores in favor of paying with their smartphones. 

That did not happen.

NFC is soon to become synonymous with “technology that does not solve a problem” when it comes to mobile payments. The ability to pay with a tap from your smartphone to a register seems cool, but there are plenty of technologies that seem cool but do not actually eliminate a problem. The standard system of cash and plastic credit/debit cards is so firmly entrenched in the American transactional society that it will extraordinarily difficult to replace. Just saying, “Hey, now you can pay just by tapping your phone,” is unlikely to be enough.

That is if we ever reach the point where NFC terminals become ubiquitous and culturally accepted. For now, the big players in NFC cannot seem to get out of their own ways, with companies like Verizon exiling services like the Google Wallet from the carrier’s Android phones because of dubious claims of hardware security. As ReadWrite mentioned several times this year, the top end of the mobile payments market is chaos because all of the big players want to own as much of it as they can - and are not willing to cede control to another power player. As the transaction companies like MasterCard and Visa know, the companies that control the transactional flow of money create a lot of power for themselves in the American economy. 

What traction 2012 did see in mobile payments came from companies building infrastructure at the brick-and-mortar retail level right now, not in some theoretical future. That means that companies like Square, LevelUp, Dwolla and others may be putting themselves in a position to succeed when the market finally matures.

But there's something big holding them back: The problem of scale.

A small company like LevelUp can do only so much with its limited resources. In the long run, the billion dollar behemoths will likely dominate mobile payments because only they can scale in meaningful ways. They just need to actually start doing it.

Security Concerns Grew

It had to happen, right? You did not think that a new revolution in human computer interaction would take place and the malware authors of the world would just ignore it? Spammers, virus makers, malware enthusiasts and their ilk go where the money and eyeballs are. And in 2012, that meant mobile. 

According to mobile security firm Lookout, the global infection rate for mobile malware sat at 1% as of October 2012. That might not seem like a lot, but 2012 saw smartphones reach a billion users. Do the math: If 1% of a billion smartphones have malware, that means 10 million smartphones are infected worldwide. (Note, Lookout’s numbers account only for Android.)

If I was a malware writer, I would call that a pretty good start.

Security firm Kaspersky Labs noted nearly 9,000 new Android malware attacks in the third quarter of 2012. And that was actually down from nearly 14,000 in the second quarter - after three quarters of significant growth. We are now talking about serious volumes of malware that can and will become a dangerous problem for both consumers and enterprises. 

Asia and Eastern Europe - especially Russia and coastal China, long hotbeds for malware makers - see the highest infection rates of mobile malware, at an astonishing 30% rate in some areas. The U.S. does not escape though, with a smartphone malware infection rate of 0.4% For a baseline comparison, if 0.4% of Android smartphones in the U.S are infected with malware, that means that about 362,000 smartphones in America have malware. 

Mobile malware arrives in many forms:

1. App-based malware comes from giving apps certain permissions to access data in a smartphone
2. Mobile-Web-based infections come through URL redirection (an old Web ploy repurposed for the smartphone world)
3. Texting-based malware takes hold when an SMS text message signs you up for premium texting services (called “Toll Fraud”)
4. Completely inadvertently when an app is not secured by its publisher and a hacker strong arms its way into an unknown vulnerability.

Businesses have to be sure that their data is secured, but this is a problem for consumers as well.  Many people keep some of their most sensitive information on their smartphones. And when mobile payments finally do ramp up, mobile security will become even more critical.

Mobile malware reached maturity in 2012, like many other things in the mobile industry. Lookout predicts that 18 million Android smartphones will be infected with malware from the start of 2012 to the end of 2013. The epic battle between security and malware makers will continue to grow more intense in 2013.

Wednesday's update to Google Now adds functionality similar to the new Passbook in iOS, and this is a key point of competition. You may not use them yet, but these scannable passes are going to be everywhere, and you're going to want the phone that handles them the best.

Mobile platforms compete on convenience. Now that Android and iOS are both highly refined, the choice between them comes down to which one fits more seamlessly into your everyday life. Passbook, which came out with iOS 6 this year, was the first feature of iOS that stepped into the realm of check-in and check-out at real-world businesses, a transaction that's becoming more digitized all the time.

Many Android phones already had near-field communication (NFC) built in, which can handle that task among others. Apple never bothered with a hardware solution for that. It seems to think that if tickets, coupons, vouchers and such can be securely delivered to the phone, but it's all software, it no longer matters what phone a person is using. Google seems to be coming around to that idea.

The new Google Now feature has barcodes only for flights (starting with United Airlines), but it's a natural place to put passes of all kinds.

The really cool part about Google Now's feature is that it can use your phone's location to automatically pull up the boarding pass when you're at the airport. Passbook can do that, too. But Google Now is more proactive about reminding users of things like appointments and alerts than iOS is, so it's more expected behavior on Android.

This reminds me of the geofencing in Square Wallet, which blows my mind every time. Square has built its app to wake up when you approach the location of a business you frequent, so your Square tab opens automatically and closes when you leave. You don't even have to take your phone out of your pocket. That is convenience.

Beyond passes, Google would love for us to pay for things directly with Google Wallet. Square would like us to pay with Square Wallet. Apple hasn't yet turned its huge collection of credit cards into a real-world payment system, but I'm convinced it will.

The smartphone is becoming an increasingly critical ticket to real-world experiences. Whether one platform figures it out and locks it up, or we end up using different services for different things, the most convenient mobile passes and payments will win.

Correction: This article originally stated that Passbook was not location-aware, but it is, in fact. Thanks to readers for the correction.

Lead image courtesy of Shutterstock.

Well, almost.

No Momentum For Big Mobile Payments Players

The companies with the biggest vested interests in mobile payments are all multi-billion-dollar, publicly traded behemoths. This group includes the payment processors like Visa, MasterCard and American Express as well as giant technology companies like Apple, Google and PayPal. The banks of the world do not want to be left out in the cold to become the “dumb pipes” of the payment industry (places where money is merely stored and transferred). And the mobile carriers - Verizon, AT&T, Sprint and T-Mobile - want their slice of the mobile payments pie. Every one of those companies has some derivation of a mobile payments system that could be seen as ill-conceived (PayPal), immature and un-deployed (Isis from the carriers), stuck in the maelstrom of competing interests (Isis as well as Google Wallet) or illogical (various mobile payments systems from the payment processors). When it comes to the top of the so-called mobile payments market, there are too many moving parts, too many squabbles and not enough infrastructure or actual solutions. 

But the very mess being created by the big boys in mobile payments is opening opportunities for fast- moving startups that understand that the best way to make mobile payments work is to place their services inside as many physical retail spaces as possible. Right now. Not preparing for some theoretical future where everything is all of a sudden ripe for success.

The leaders in the mobile payments space are not MasterCard or Google. The real leaders are little startups like Square, ShopKeep, Dwolla and LevelUp. These companies see an opportunity and are rushing to fill it, leaving behind the big bureaucracy and striking real partnerships with real business.

LevelUp's Small-Time Approach

LevelUp is a good example of a small mobile payments provider creating traction at the bottom of the market. The Boston-based startup (which is a derivative of social location app SCVNGR) provides QR-code-based payments for local merchants by providing businesses with Android-smartphones to act as scanners that process payments from the LevelUp smartphone app. It now has 500,000 users and just completed its first 2 million transactions. Those numbers are small potatoes compared to the big payment processors, but in many ways LevelUp is the bellwether for the progress of the mobile payments industry in the United States. 

LevelUp thinks outside the box, thinks big thoughts, makes significant partnerships, and perhaps most importantly, actually finds its way into actual businesses. LevelUp has expanded to several cities in the U.S. and its growth is accelerating. It took LevelUp 424 days to reach its first million transactions and about 100 days to reach the next million. Unlike the big payment processors (or even startups like Square), LevelUp does not charge an interchange fee (taking a percentage of each transaction) for every payment it makes. LevelUp makes money by offering deals to consumers within the app. For instance, the app will take $3 off your burger the first time you visit a restaurant and pay with LevelUp. You come back enough times and pay with the app and you get better rewards. Fundamentally, it is an advertising and data business model that LevelUp believes will be central to the future of mobile payments.  

LevelUp has gone from an app that makes payments to a platform that provides payment capabilities. In addition to its apps on iOS, Android and the mobile Web, it also partners with companies that wish to have a mobile payments presence themselves. These custom-branded mobile payments apps can be used by merchants to provide deals to its customers as well as process the transactions themselves. LevelUp says that it has sold many of these custom-branded mobile payments apps but so far it has announced only one, with Washington, DC-based eatery Sweetgreen. 

The startup is now looking to expand, announcing on Wednesday a partnership with a mid-tier bank – First Trade Union Bank – to create a mobile payments app for its customers. The app will integrate First Trade Union banking features with LevelUp’s payment and loyalty functions to provide an app that will likely be able to check your balance and make a payment at the same time.

At first blush, this may seem like a shrug-worthy event for both LevelUp and First Trade Union. A middling startup and a middling bank just made an app. Great. So what?

Tackling Mobile Payments Without The Innovators Dilemma

The fact of the matter is that LevelUp and its kin (Square, ShopKeep etc.) are going after a key segment of the American retail market – small businesses and small banks that make up a giant swath of the American economy. One bank or one eatery chain may seem small compared to Visa or MasterCard’s footprint, but when you put all of those pieces together they can become a powerful force. And one that the biggest so-called players are not penetrating while they argue amongst themselves and wait for inertia to begin moving in their direction.

“In my opinion it's not just that they're big and thus slow, it's that they have the mother of all innovator's dilemma's. They all make money in the wrong ways (and huge sums of it) so taking advantage of this new market is really tricky. My belief is that mobile payments and the next-gen of [point-of-sale systems] are all driven by data and advertising,” said SCVNGR and LevelUp founder Seth Priebatsch. 

The innovator’s dilemma, as far as the payment processors go, is a big one. American Express, Visa and MasterCard want to move aggressively into the emerging mobile payments industry - but cannot do so without significantly disrupting their existing business models. That's why they seem to drag their feet - and force the rest of the payments industry get down on their knees and crawl with them. Companies like Google are blocked because they are forced to deal other companies’ innovators dilemma and do not have the resources or motivation to attack the bottom of the retail industry piecemeal the way Square or LevelUp do. 

“It's easy for me, ShopKeep, CloverOS to go after that because we don't make any money off of anything else and so forgoing those other rev streams is easy. But for [American Express], giving up $10 billion in interchange is too tough a pill to swallow on a gamble that data/advertising is a bigger market. For Isis, their parents make money off of data and wireless plans, so it's just not a key priority or easy thing to shift the model to be competitive in the new mobile payments space,” Priebatsch said. 

Eventually, the large companies will get their act together and make a concerted push towards actual, ubiquitous mobile-payment solutions on the ground level. But that process is taking longer than many pundits and consumers hoped it would. In the meantime, the startups of the mobile payments world are taking advantage. 

Lead image courtesy of Shutterstock.

ReadWrite's Michael Singer explains how online payment services are evolving to include mobile wallets that give you unprecedented flexibility when shopping at major retailers and small businesses. Get a walk through on using your mobile phone and PIN - or an associated PayPal card - to pay quickly and conveniently without having to share your financial information with retailers. Plus, learn how to get the deals and discounts you want automatically applied to your account.

It might be time to leave your wallet - and your cash - at home.

As the world moves at the speed of technology, the way you pay for it all needs to be fast, secure and broadly available. PayPal has been filling that role online for more than a decade.

Initially launched as a way to let people pay for goods and services online without sharing your credit card information, PayPal has expanded its range of Internet financial services to let people not just pay online with PayPal, but now in stores and via their phones. As currencies continue to go digital, PayPal is helping lead the way toward the digital wallet - and beyond.

Available Wherever You Are

Sheer breadth of availability is one of PayPal's most alluring but most overlooked features. The service is available in 190 countries and supports payments in 25 different currencies. Millions of merchants in the U.S. and globally accept PayPal. PayPal is also widely accepted by millions of active users, making it a safe bet that you or someone you know has a PayPal account.

But that's only part of the story. Users can also download the PayPal app for mobile phones or tablets to help manage account and receive deals. They can also conveniently make purchases using PayPal when shopping via mobile phone. Thinking about that new set of skis while you're on the beach? PayPal can help make that happen.

Thinking beyond the browser, PayPal has launched an effort to make itself available in other venues. The service can already be used offline at such stores as Jamba Juice, Home Depot, Abercrombie & Fitch and Foot Locker. 

While shopping at a store that supports PayPal, you can make your purchase in a couple of ways. First, you can type in your mobile phone number and your PayPal PIN to complete the transaction. You can also swipe your PayPal card. It's automatically attached to your digital wallet.

For coupon fans, PayPal has also eliminated the need to clip and carry paper coupons - PayPal sends you relevant coupons for you to choose which ones you want to save to your account, then, they're automatically applied when you make a purchase using PayPal. With PayPal, all your debit and credit cards, money and bank accounts are stored in one virtual location, giving you the flexibility to pay with the card or account of your choice. You can also set up your PayPal account to link your favorite loyalty cards. When you pay with PayPal, you still get your miles, rewards, or even cash back.

Security Where It Counts

PayPal is not a bank, but since it's been the financial platform of choice of eBay for more than a decade, PayPal's security and privacy systems have been battle tested. PayPal keeps your financial information private and protected when you shop. You never have to give out your financial details to merchants or sellers - because they are secure inside PayPal.

To pay with PayPal online, you need only your email address and a password. When paying offline, you need either a mobile phone and a PIN, or a card that is linked directly to your PayPal account. Either way, you don’t have to retype and share your sensitive information at various merchants. Rest assured, this takes nearly all of the security risk out of shopping. PayPal also includes a stringent fraud protection program that protects shoppers from any unsolicited financial transactions.

You can also receive payments through PayPal. If friends or family owe you money - or if you're collecting funds from various people to pitch in on a gift - they can send you the money via PayPal. All they need is your email address linked to your PayPal account. Even better news is that it's very fast - as soon as the money is sent, it is available for the recipient to use. Unlike waiting for a check to clear or your account to be credited by a card company, you don't have to wait for funds to be reflected in your account with PayPal.

Innovation For E-Commerce - Moving It To Offline

PayPal offers multiple offline solutions depending on the size of the merchant to accommodate their needs. For example, PayPal Here offers solutions for small merchants that don’t have a permanent location, such as home remodelers, caterers, make- up artists, booths at a farmer’s market, etc. PayPal also has a mobile check in solution for small to midsize merchants that do have a storefront and need inventory management - but don't need the full integration mentioned above where consumers pay using mobile phone and PIN or with a card.

In these smaller stores, customers can pay through the PayPal app on their smartphones by “checking in” to the store through the app. The customer’s photo pops up on the cashier’s screen and when they’re ready to pay, the cashier uses the photo to verify identity, taps on it, and the transaction is automatically paid through the customer’s PayPal account. No cash or credit cards ever trade hands.  

The company has fine-tuned its financial services to accept payment methods such as bank deposits, checks and money orders, escrow payments and credit cards. Instead of using embedded chips in credit cards to authenticate, PayPal relies on cloud-computing services to secure information and provide always-on access to finances.

As the world becomes more digitized, a fast, secure and broadly available financial system is increasingly critical. PayPal is in a unique position to deliver that functionality and help digital wallets become the de-facto standard for even basic transactions. And the new payment options can only help shoppers by making it easier to buy what they want, when they want, where they want, and how they want.

As expected, online sales, purchases and deals were much bigger for Thanksgiving, Black Friday and now Cyber Monday than they were a year ago. Also as expected, people are turning more to their smartphones and tablets more and more for their shopping experiences. 

It seems like we have heard this story before. 

Oh right, we have.

The Song Remains The Same

From a reporter's perspective, few things are more infuriating than writing basically the same damn stories year after year after year: "Online shopping is super popular this year, way more popular than last year! Now look! More people are using their smartphones to shop too!"

There is a Thanksgiving glutton’s amount of data surrounding the increase in online sales and mobile shopping this year. PayPal and its parent eBay tout that eBay saw a 153% increase in mobile volume transaction on Black Friday with PayPal seeing a 193% in mobile payment volume that day. It is interesting to note what PayPal considers a “mobile payment” since the company is only now building out its presence in brick-and-mortar retail spaces. The “Pay with PayPal” button has long been on many e-commerce websites, but if this counts as mobile payment volume, then there is little difference between shopping using your smartphone or tablet and using your PC. One way or another you are using a device to connect to the Internet and shop. A PayPal spokesperson notes that the company considers a mobile payment to be, “any payment made on a mobile device, including tablets.”

According to IBM Digital Analytics Benchmark, shoppers in the United States took advantage of early promotions this year, constituting a 21% increase in online sales over 2011. The one-fifth growth in online shopping is impressive, indeed, but not surprising or jaw dropping. For years we have watched people turn to the Web for deals and shopping - it would be shocking only if those online and mobile sales numbers dropped.

IBM notes that mobile sales reached 16% this year, up[ from9.8% for 2011. Nearly 24% of consumers used a mobile device to visit a retailer's online website this year, compared to 14.3% last year. The iPad generated more traffic than any other tablet or smartphone, reaching 10% of online shopping and 88.3% of all tablet shopping traffic. The Barnes & Noble Nook was second, with 3.1% of volume, ahead of the Kindle Fire at 2.4%. Those numbers likely discount Amazon’s own internal data of people using Fire tablets to shop specifically on Amazon as opposed to traffic to retailers’ websites. 

"Showrooming" Still Zooming

The buzz phrases that we saw take root during the 2011 shopping season have grown proportionately with the rise of mobile usage in 2012. “Showrooming,” the act of looking up prices from your smartphone when at a physical retail space, has grown significantly this year. IBM notes that 58% of consumers used smartphones on Black Friday (41% used tablets) to shop. It is likely that many of those consumers were using their smartphones to shop while standing inside a brick-and-mortar store, checking prices online against what was posted on the shelf.

The concept of “couch commerce” has also taken off in the past two years. This is usually specifically tablet-related as consumers use their slates to peruse deals from their couch, often on Thanksgiving Day itself. Several research studies and surveys have been conducted, by Pew among others, studying how people use their tablets on a day-to-day basis. The consensus has been that tablets are considered to be the quintessential couch device as people interact with news, media, games, social and other activities from their couches. It is then understandable that people would shop from their couches with their tablets as well. 

Fundamentally, what we are seeing from all of this Black Friday (and probably Cyber Monday) shopping data is that people are performing the same activities they historically would, just from a different device. As the Digital Age and the Mobile Revolution collide, we see more services (such as apps, mobile-specific websites, price checkers, shopping companions and deals sites) converge and grow. 

Deja Vu All Over Again

Here's the thing. A year from now, when the 2013 Holiday shopping season rolls around, we are going to be bombarded with the exact same types of stories about changing consumer behavior and growth statistics. The bottom line is that better tools for consumers make for more savvy shoppers. A high tide raises all boats, as the saying goes. 

Did you use your smartphone or tablet to augment your shopping experience this year? If not yet, are you planning to? How so? Let us know in the comments.

Top image: Breakdown of mobile shopping by device courtesy of IBM. 

While paying with cash or credit cards won't go out of fashion anytime soon, but they're getting some serious competition. Online payments and e-wallets are about to shape not only how, but where and when we buy things. Even more important, they will give consumers the power to choose the payment methods that work to their advantage.

Catching Up To The Future

Advanced payment systems are not a new concept. Science fiction writers like Arthur C. Clarke and Ray Bradbury predicted electronic commerce and futuristic payment systems long before they existed. Both men pointed to a time when people and machines come together, exposing the possibilities of individual identity within a larger ecosystem.

In 1974, Clarke predicted personal computers, the Internet and online banking. Bradbury's Guy Montag from "Fahrenheit 451" used an ATM years before they were invented.

Today, futurists today like Ray Kurzweil opine about the "Eternal E-Customer" offering tantalizing glimpses of how devices and people combine in symbiotic relationships. Take the world's current fascination with smartphones. The fact that we can check our bank balance, pay for groceries and give our kids their allowance all with one small device that we carry around with us all day, indicates the intense desire for a simple, portable and personal way to interact with our finances.

What's Possible Now

A variety of companies and industries have been working hard to transform online and mobile systems. The larger credit card issuers have recreated their services online, while companies like PayPal transcend the traditional approaches to online payment. Mobile device makers, telecom carriers and others are now weighing in, with the likes of Google Wallet, Apple Passbook, ISIS Mobile Commerce (a collaboration between AT&T, Verizon, and T-Mobile), and Visa's E-Wallet making the most noise.

As more providers enter the fray, the benefits to consumers become clearer, including electronic coupons, discounts and reduced fees. In the U.S. alone, the redemption value of “deal-a-day” offers – offers distributed via digital channels that typically expire within a few days – will reach $3.9 billion by 2015, according to a McKinsey research report. These coupons are partially a result of brand loyalty, according to Jip de Lange, a consultant at Innopay.

"We see payment methods that were originally offered online are now being offered in offline contexts as well, as the PoS [point of sale] terminal functions basically as Internet-enabled device," de Lange wrote in the Ecommerce Europe: Online Payments 2012 report. "This move not only secures growth potential for years to come, but also increases the relevance of these payment methods as they become part of consumers’ day-to-day routine."

Uneven Progress

Many governments are already moving toward supporting online payment systems. The U.S. Government's Pay.gov service lets citizens pay and be paid by the government using online accounts. People in Latin America, China, India and Africa are even more likely to incorporate mobile devices in their online payment transactions. Europeans trend toward using online accounts for shopping the Internet, with 58% having done so in 2011, Ecommerce Europe notes.

Not all online payment technologies will emerge at once, and not all will eventually succeeed. Researchers at Gartner estimate that Near Field Communications (NFC) is at least five years away from mass adoption. In the meantime, security concerns and the lack of immediate adoption is making many companies disillusioned with aspects of NFC as a payment method: Google is all in, while Apple and PayPal are not.

Perceptions of security and privacy remain key issues for all online and mobile payment systems. A recent study by Edgar, Dunn & Company and sponsored by MasterCard noted that the lingering negative public opinion associated with online payments is hindering broader adoption.

Even as the industry finds ways to address these issues, experts agree that the potential benefits are too great to ignore. So just about every company in the financial industry is doing what it can to explore the concept with early adopters and build products that will eventually appeal to everyone.

Toward A New Normal

A $5 bill in your pocket may not buy much these days, but it still comes in handy when you want to leave a tip or buy a bag of fruit at the farmer's market. The need for cash will be around for a long time, but over time it's likely to become the exception rather than the rule.

The ascendancy of mobile and online payments will be clear when we stop talking about "online payments" and "mobile payments" as something different or exotic, noted Innopay's de Lange in his report. It will just be another way to buy stuff:

"The world is becoming more and more ‘e.’ So the merger of offline and online is basically the disappearing of the first and the latter taking over. In a few years’ time, we will not be writing about e-payments or online payments because it will no longer be a meaningful category. We do still recognize channels and contexts and online payments will diversify to cater for all these channels and contexts."

As buyers and sellers become more and more comfortable with the online and mobile payments, the more likely they will reach for their digital wallets over their real ones. Without even noticing that they're doing anything noteworthy.

The first time I got a check for mowing the neighbor's lawn, I was faced with a vexing problem. "What should I do with this slip of paper that I can't directly take to the store?"

What an inconvenience to have to go the bank and deposit the check and wait for it to clear before spending my earnings!

Thankfully, the way we exchange funds keeps getting simpler and more convenient. New technologies and social changes are driving the development of new payment systems that can make all kinds of financial transfers easier, faster, and more ubiquitous than ever before.

Online payments may be the most truly portable and personal of all - but they're still only a small part of the larger financial environment. Why haven't they become completely mainstream?

The Only Thing We Have To Fear…

Online transaction authentication firm Entersekt's 2012 survey of online banking and purchasing found consumers remain split about carrying out online transactions on their mobile devices. Men are more inclined to participate (32%) than women (25%).

The big thing holding back further evolution of online payments seems to be fear. "In today's world, consumers are not only aware that fraud exists, but many have either experienced it personally, or know someone that has," wrote Enterseck's CEO Schalk Nolte. "This criminality impacts all of us through increased insurance, increased prices, and increased hassle. However, what I think is interesting and actually quite comforting, is that people are happy to be inconvenienced if it means they're better protected."

Clearly, people need to feel comfortable using online banking and payments. But what will it take to make that happen?

Technology is part of the answer, especially encryption methodologies strong enough to keep out hackers without overly delaying transactions. Merchants and banks today exchange SSL (Secure Socket Layer) encryption protocols in less than three seconds, allowing for fast funds transfers. The residual authorization and payment settlements may take as long as three days.

Doing The Mobile Math

The spread of mobile devices are another key contributor to the growth in online payment transactions, according to a 2012 report by Ecommerce Europe (PDF). Some forecasts indicate that due to the rapid adoption of smartphones, by the end of 2013, 12.5% of all e-commerce transactions will be mobile.

"It needs to be stressed, however, that such prospects will not materialize unless online payment services providers keep constant track of market trends, consumer demands and competition in this challenging market environment," Ulric Jerome, with Ecommerce Europe, said in the report.

Established financial services companies have not ignored the inroads from online payment providers - and they are essential to full adoption of these services. Banks, credit card issuers and other financial institutions are focusing efforts on customer satisfaction by supporting online and mobile devices. Ecommerce Europe suggests the next step for banks is to establish competitive online payment systems.

What Next?

As the number of people using online payments continues to grow, social factors are becoming just as important as the technology. Consumers are more likely to adopt new methods of currency exchange when they feel that everyone else is doing it too.

Achieving critical mass is, well… critical. Findings by researchers Andrew J. Setterstrom and J. Michael Pearson of Southern Illinois University at Carbondale suggest social influences affect people's purchase decisions - as well as their online gaming behavior - in complex ways.

"While micro-level influences, such as attitude, arguably serve as the best predictors of [willingness to pay], we found that macro-level social influence, in the form of reputation, played the greatest role in affecting the formation of individual attitudes and behaviors," Setterstrom and Pearson wrote.

Bottom line: The more people hear and see online payment systems in action, the more they will want to try them for themselves. In the meantime, only the bold are willing to go first.

Image courtesy of Shutterstock.

Imagine yourself in line at the local coffee shop. You're getting impatient because there are nearly a dozen people ahead of you before you can order your morning wake-up call. Suddenly, the line starts moving faster. It's not that the barista has six arms; it's that a few customers are speeding things up paying by waving their smartphones in front of a scanner.

Later that day, you stop by a colleague's desk when he tells you to hang on for a second while he pays his mortgage, electric bill, phone bill and car payment. You think you'll both be late for a meeting, but a few clicks of the mouse on a single website and the payments are complete and you're ready to go.

After work, you attend your kid's PTA meeting. As in many school districts, funds are pretty tight. To help, the principal asks parents and school supporters to sign up online for electronic Scrip programs with the local grocery store.

On your way home, you stop off at Home Depot to pick up a new doorknob to replace the broken one that's been bugging you for months. It's getting late, so it's nice that you can pay simply by entering your mobile phone number and PIN code - without ever having to pull out your wallet. 

That night before bed, your son is playing his favorite video game, when he shows off a new avatar he purchased right in the game with tokens using his online account.

Time To Throw Away Your Wallet?

These are but a few examples of transactions that historically would have required cash, checks or credit cards. Whether using a PC or a smartphone, more customers than ever can now purchase goods and services online, pay in a retail location or transfer money without ever touching their wallet.

While it's not yet time to throw away your wallet, more people than ever are using e-wallets or "stored value" cards as a convenient one-step way to pay. A 2012 Pew Internet and American Life Project report found these digital accounts allow customers to also transfer money, purchase goods, and engage in other types of financial transactions. By 2020, 65% of people are expected to have embraced the use of smart-device swiping for completing their purchases, nearly eliminating the need for cash or credit cards. Not surprisingly, younger shoppers are already more comfortable with the technology.

Don't worry, though, the arrival of digital payments doesn't spell the end of other payment methods. “When credit cards arrived, checks did not disappear, and neither did money,” said Amber Case, anthropologist and CEO of Geoloqi, a company that creates location-based software. “There are [currently] three main methods of payment. If another method of payment is added, we will likely have four methods of payment and retailers and businesses must accept another form of payment. Some systems may emerge that use completely smart payments, but there will still be other forms of payment available.”

These e-payment systems are expected to further online spending. Customers would spend $109.8 billion annually if offered a "no credit card required" way to pay online and at merchants, according to a 2011 Javelin Strategy and Research report. Four out of five of those surveyed in the same report said they would spend more online if they considered credit cards safer and had payment alternatives.

Getting Over The Fear Factor

Even as the use of electronic payment systems and e-wallets grow, some customers have legitimate concerns - mostly concerning security.

Recent accusations of cyber attacks on U.S. banks by the Iranian government, as well as high-profile hacking incidents such as the publishing of more than 400,000 credit cards online by a Saudi hacker, do little to ease customer fears that their digital wallets could get cleaned out.

For customers to confidently adopt these new payment methods, currency systems need to resolve safety, security and privacy issues, and just as important, remove the perception of risk. “There will always be people who are concerned with the security of their transactions,” wrote Laura Lee Dooley, a strategist for the World Resources Institute in the Pew Internet report. “So the concern of someone hacking into your financial flows will continue to grow, and personal security and device-tracking companies will become an integral and major component of the marketplace.” On the other hand, Lee Dooley also noted that consumers’ fears offers opportunties for businesses to succeed by solving these problems.

Putting Customers In Control

As the future of electronic payments plays out, customers will ultimately determine which systems survive and prosper.

“I already see the growing use of digital monetary transactions in my world," said Jon Lebkowsky, president of the Electronic Frontier Foundation-Austin in Austin, Texas. "There are some serious discussions of alternate forms of currency, growing in volume as economies seem increasingly shaky. I suspect there'll be innovation here - evolution not just of the medium of exchange but also of the value it represents.”

The technology innovations are already coming fast and furious. Person-to-person (P2P) payments can let you send funds to a friend. Retail POS (point-of-sale) systems can be activated using smartphones, merchant cards linked to your digital wallet or online checkout. Mobile checkin lets you connect with a store via a mobile app, sending your picture to the cashier's screen for identification and letting you pay directly from an online account. Near Field Communications (NFC) allows you to wave your smartphone over a scanner to pay for a cup of coffee.

A similar method currently being tested involves transitioning payments between the accounts of individuals - or Account-to-Account (A2A) transactions. These low-cost transfers could go viral as smartphones users increase their use of short-range file transfers. This so called "bumping" lets smartphones make payments to merchants - or to each other, simply by touching the devices together.

What could be easier than that?

Image courtesy of Shutterstock.