It just goes to show you how much interest there is in mobile proximity payments (physical location mobile commerce, call it what you’d like) that the scoop Bloomberg had on the not-ready-for-primetime Verizon/AT&T/T-Mobile/Discover/Barclaycard initiative has set off so much media speculation. Yes, this initiative could be very big news for mobile commerce.
But as noted by Digital Transaction News, http://www.digitaltransactions.net/newsstory.cfm?newsid=2599 there are lots of hurdles facing the group, not the least of which is convincing merchants to participate. The biggest issues there – capital costs for point of sale terminals and lower card processing costs. The group does have a pressure point they can exploit if they are willing to charge less than Visa, Mastercard and American Express. In addition, the solution would most likely be a closed loop payment system, meaning consumers could only use the consortium’s “card” and not a debit card, general credit card or even a store credit card, such as Target’s or Best Buy’s. In addition, no NFC platform provider has been identified.
To be fair, the group will most likely address all of this speculation when they are ready to announce something concrete. But as we speculate and point out the barriers, it is also a good time to mention that some other types of proximity payment solutions are gaining ground – specifically software-based smartphone solutions.
Moonha/Quantexx/SAP in Germany, FaceCash in U.S.
Two separate mobile commerce initiatives are being trialed or rolled out that seek to enable consumers to use smartphone apps to make proximity payments that bypass NFC chips and hardware and mobile operators altogether. In both cases, merchants would require no capital outlay if they own a computer and use bar code scanners.
In the U.S., FaceCash/ThinkLink is live and ties a user’s bank account to a bar code. Android and iPhone users can download the FaceCash app. The user then goes online to FaceCash and enters their bank account number, social security number and a photo. They transfer funds into FaceCash and then the money is accessible via the barcode stored in the app. Participating merchants can the barcode to debit the account. Seems pretty easy for the consumer, and the allure for merchants is 50% less processing fee per transaction than the major credit card processors.
In Hamburg, Germany, Quantexx and SAP are readying a trial mobile wallet service called Moonha. Any consumer with a camera-equipped smartphone can download the Moonha app. It works similarly to FaceCash – the consumer creates a Moonha account and ties it to an e-money account. Company officials say they will eventually tie it to credit cards as well. The trial appealing because of the broad merchant availability, as it is with the city government of Hamburg, for everything from transit tickets to city-run venues and food vendors.
There are challenges to both FaceCash and Moonha. Smartphone only, signing on merchants, and maybe the biggest hurdle – convincing consumers why they should choose these mobile options. I think that is particularly important when neither at this point offer credit card as an option. Particularly in the U.S., consumers rely on credit card float. But any NFC option faces these same hurdles to a greater and more expensive degree and involve the mobile operators and mobile OEMs.