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The Green Sheet Online Edition

December 27, 2010 • Issue 10:12:02

Street SmartsSM

Are you awake to mobile payments?

By Ken Musante
Eureka Payments LLC

Pursuing specific market niches enables ISOs to excel. My ISO, Eureka Payments LLC, pursues wireless or mobile merchants. It's a huge market that is not as heavily solicited as other types of merchants.

Additionally, consultative sales can help many mobile merchants save money and increase sales by accepting card transactions.

Research conducted by payment consultancy Aite Group LLC gives credence to the opportunities. In U.S. Mobile Payments: The Time Has Come, Aite predicts U.S. mobile bill payments will reach $214 billion in gross dollar volume in 2015, up from $16 billion in 2010 - that's a cumulative annual growth rate of 247 percent.

As for the United States, Aite Research Director and author of the report Gwenn Bézard said, "Long seen as a laggard in mobile payments, the United States is far more ahead of the curve than perceived. Over the past 12 to 18 months, the United States has begun to move closer to a tipping point that will lead to the popularization of mobile payments."

According to Bézard, factors influencing the growth of mobile payments include rapid consumer adoption of smart phones, carriers' and handset manufacturers' adoption of near field communication (NFC) chips, consumers' continued embrace of mobile commerce and an increase in mobile banking adoption nationally.

But he claims many in the industry remain unaware of this rapid transformation taking place. "Those that have any desire to play a role in this market must wake up now," he wrote.

Mobile push

Granted, much of the growth predicted by Aite will occur through nontraditional mobile payments and innovations that will bypass the card rails. But this activity will increase awareness of and demand for the types of terminals and solutions that we can sell and support.

With the increase in available mobile payment devices, the hardware costs have come down significantly, and wireless providers have improved their coverage so transactions are more reliable, similar to the increased reliability with cell phone coverage. With that in mind, I posted the following on GS Online's MLS Forum:

"One of the areas I have been focusing on is mobile merchants. Though, in many respects, they are similar to storefront merchants, the types of devices and solutions for them are much greater.

They can be served via gateways, stand-alone devices, peripherals that attach to a cell phone or an application on a smart phone itself. Many of these merchants process a lesser amount, yet others process a year's worth of volume in a month's time.

"What has been your experience with mobile merchants? What solution do you most prefer for mobile merchants and why? Do you have a unique niche within this space that you market to? Has this been a profitable niche for you? And what has your experience been with the hardware and software in this space?" CREDITCARDMN responded first. "Mobile payments and mobile wallets are not as far off as many think," he wrote. "Some recent signs I have seen: "Apple eying ViVOtech for purchase and using iTunes accounts to circumnavigate the banks for payment processing."

Here, CREDITCARDMN referenced a blog by Dan Balaban on NFC Times that discusses ViVOtech's assets, including its contactless readers, over-the-air platforms and servers, to deliver and manage coupons and loyalty rewards programs that may be attractive to Apple Inc.

CREDITCARDMN went on to cite a Gizmodo article that discusses an agreement between T-Mobile USA, Verizon Wireless and AT&T to create ISIS - that allows phones to be used for credit or debit card purchases. The three ISIS founders, working with Discover Financial Services and Barclays Bank subsidiary Barcleycard US, claim that, once activated, the phone will be more than just a debit card replacement; with the assistance of NFC technology, the phone will also facilitate contactless rewards, coupons and third-party programs (such as public transit cards).

The carriers expect to roll out ISIS to their combined 200 million customers in targeted geographic markets over the next 18 months. Certainly this is a huge user base, but to succeed they still need to sign up large depositor banks and merchants.

To attract those constituents, ISIS will need to determine the fees to the merchants and the inducement to the banks which, regardless of what you call it, will look a lot like interchange.

Finally, CREDITCARDMN cited a Nov. 16, 2010, Pymnts.com article that reports on the partnership between U.S. Bank, Visa Inc., DeviceFidelity and Monitise PLC to facilitate payments via mobile phones waved in front of Visa PayWave contactless terminals.

The significance of this pilot is that U.S. Bank is one of the first card issuers to employ this technology in the United States. Obviously, U.S. Bank believes consumers are now interested in paying with their phones. As CREDITCARDMN stated, "The banks are displaying increasing concern that they could be pushed out of the mobile wallet market. There are going to be some massive changes coming in the next two years, and everyone will have to adapt."

Other initiatives

BILLPIRTLE joined in with a comment about a specific solution. "There is a new device that I am looking into," he wrote. "It is called a PaySaber, from USAePay. You can place an iPhone into the PaySaber and have the ability to swipe cards and print detailed receipts, but it gets better. You can add an optional bar code scanner and have the PaySaber act as a mobile POS system with inventory and QuickBooks functionality through the USAePay gateway.

If this works like I think it will, it will open many doors for me. For more information: http://www.paysaber.com."

I completely agree with BILLPIRTLE. I have personal experience with and think very highly of the PaySaber. It is very easy for merchants to use. In addition to working with the iPhone, PaySaber works with the iPod Touch as long as you have Wi-Fi access. VeriFone Inc.'s PayWare sleeve is equally easy to use and, although it does not have the bar scanner and immediate cardholder receipt, it costs less.

Again, your iPhone slides into the device and your merchant is instantly enabled. Both devices work in conjunction with a gateway, so even if you do not have an iPhone, you can use your smart phone for keyed transactions, as well as for ease of reconciliation and to allow for emailed receipts. Another innovative solution is eProcessing Network's BT-90 Bluetooth rechargeable MagTek mag stripe reader. It recharges from a standard USB port and is a great low-cost solution that can encrypt and store transactions when cell phone coverage is not available.

DVST8 referenced a Nov. 18, 2010, Kevin Woodward article in PaymentsSource.com. The article discussed PayPal Inc.'s investment in face-to-face transactions enabled by VeriFone's aforementioned PayWare.

The article quoted Laura Chambers, PayPal's Senior Director of Mobile, regarding PayPal's reseller program: she indicated PayPal will work "proactively" with ISOs to promote their mobile strategy.

The article goes on to state, "The agreement also calls for VeriFone to use its PayWare Mobile card encryption sleeve to expand PayPal payment acceptance via mobile phones and to integrate PayPal with online and point of sale environments.

In addition, the terminal maker would promote PayPal and the bump funds transfer function to its reseller channel, and PayPal would market PayWare Mobile to its user base."

Though I am cautious regarding how merchant level salespeople (MLSs) can make money with PayPal, I am pleased the venture between VeriFone and PayPal allows for reseller participation.

Worthy topic

Typically, if I do not get sufficient responses from a Forum post, I'll pull it and replace it with a new one that gets more comments; it's easier to write an article that way. I left this post up despite the limited number of responses because I feel strongly about this specific niche and believe the mobile market is now sufficiently strong to support the marketing needed to attract mobile merchants.

The benefit of the Forum, however, is it supplies diverse viewpoints. As STEVE NORELL reminded us, "I believe that mobile will eventually have its place in our industry but nowhere near what some of the pundits think, and here is why. Every time a new product or service comes along I tend to measure its potential of success as follows:

  • The consumer wants it = high percentage of success
  • The merchant wants it = moderate amount of success
  • The industry wants it = low amount of success

"Just look at the contactless solution with Tap and Go. It tapped and went ... nowhere. I sat at the ETA mid-year meeting two years ago, and that is all the experts could talk about. Well, they are no longer talking about it now."

The difference with mobile payments is there is something in it for everyone; more convenience and access for consumers, additional customers and transactions, along with lower costs for merchants. The industry benefits from increased business and transactions. Mobile is now.

When in doubt, sell something. end of article

Ken Musante is President of Eureka Payments LLC. Contact him by phone at 707-476-0573 or by email at kenm@eurekapayments.com. For more information, visit www.eurekapayments.com.

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