The Future of The Mobile Wallet…

Credit cards have revolutionized the way we shop, and changed our world forever. Period. But credit cards were introduced over 50 years ago and continue to be the major way we make purchases wherever we go. I know we have all heard about the excitement around “mobile payment” and how it’s supposedly going to eliminate the credit card and make shopping so much easier for everyone. I don’t necessarily agree with this, though, because right now there are numerous mobile payment methods, and I don’t think any of them are easier than using my good old plastic cards.

First of all, we have a ton of companies who are trying to revolutionize this industry THEIR way. If you think about it, who has the authority, or who is best equipped to change the way we pay for our good and services? The banks, or credit card companies, who currently operate this industry? The phone makers, such as Apple, who make the devices that will replace credit cards? Payment service providers such as Google or PayPal, who will make software to process transactions? Or what about wireless carriers such as AT&T, who operate the networks that these transactions will go through?

Everyone is approaching this a different way, which will not make me clip my cards any time soon.

Everyone is excited about Google Wallet, which officially released yesterday as a public trial. Google Wallet uses near-field communication (NFC) to allow you to simply open the app on your phone, enter your pin and swipe your phone close to a payment terminal to make a transaction. The only problem is that right now it’s only available on the Nexus S on Sprint, using only Mastercards issued by Citi, and only a handful of retailers have the payment terminals to support it. Google will expand the program to more phones, carriers, and credit cards soon, but for now its audience is very limited.

AT&T, Verizon, and T-Mobile have joined forces to create their own mobile payment project, code named Isis. The big three have invested more than $100 million to compete with Google and others and plan to use their huge customer base to entice retailers to go their way.

Visa, which runs the largest credit card network, is not picking sides yet. Visa is talking to Google and others as well as supporting the Isis project. And to hedge their bets, they are also investing in their own mobile payment service, and they will use their strength as a credit card company to get retailers to update their credit card terminals worldwide if necessary.

PayPal is also at the forefront of mobile payment, with many different approaches. PayPal will soon allow you to use your phone to make transactions by bumping other phones (using NFC), entering your phone number into traditional credit card terminals instead of swiping a card, or scaning a barcode with your phone and paying for the item immediately, skipping the checkout process altogether. See the video below for examples of PayPal’s new technologies.

Interestingly, Apple has been pretty quite about mobile payment, but you can bet we will find out soon enough where they stand and what their plans are (the iPhone 4 is not NFC equipped).

The real problem is getting everyone on board and having ONE, standard way of making mobile payments. Then the mobile payment infrastructure (terminals for swiping, bumping or whatever) can be installed and then maybe we can think about throwing away our plastic.

Some companies are not concerned with replacing credit cards at all, though. You’ve probably heard of Square, a company started by Twitter co-founder Jack Dorsey. Square makes a small card reader that attaches to your iPhone or iPad, allowing you to swipe a credit card and quickly take a payment right from your i-device. Square has been VERY successful so far, marketing the device to business people who, for the longest time, could only take cash. It enables everyone from the hot dog stand owner to the limo driver to the mobile handy man to become an official business accepting credit cards. To date, square has shipped more than 500,000 credit card readers and is processing $4 million in mobile payments annually, according to pymnts.com. You can get your free card reader here. Other companies do exactly the same thing as Square, including VeriFone’s PAYware Mobile, iPay, Innerfence and others, with limited success.

Basically, we have heard about mobile payment for years, but we are finally starting to see the industry get serious, and it will be interesting to see what companies and what methods of mobile payment come out on top, stay tuned.

Fell free to leave any questions or comments below!

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Google, Motorola, and the Future of the Smartphone Market

On Monday, Google made a bold move that shook up the smartphone market. Google acquired Motorola’s Mobility division for a whopping $12.5 billion cash. That’s $40 a share, 63% above Motorola Mobility’s closing share price on Friday. So why did Google do this? Motorola not only came with the ability to make amazing smartphone hardware products, but they also have 17,000 patents, which Google now owns.

This gives Google the ability to become a smartphone software and hardware maker, just like Apple with iPhone and iOS and RIM with Blackberry. The smartphone market is a new market that is still developing, kind of like the automobile market once was, and there’s still room for growth. Eventually there will be a few big players in the markets, kind of like Chevy, Ford, and Toyota who dominate the auto market, with smaller players filling niche smartphone markets like BMW and Hummer.

All the companies are figuring out how to survive. Right now, the only big players software-wise are Apple, Google, Microsoft and RIM. Then we have the big hardware makers, Apple making iPhones, RIM making Blackberrys, and then a slew of others making phones running Android (HTC, Samsung, LG, etc.). It seems that vertical integration of hardware and software is the way to go, just by looking at the success of Apple and RIM. This gives companies the ability to control all aspects of the user experience. This control is lost when companies, such as Google, license out their software to hardware makers. Having complete control of the entire user experience is becoming crucial to the success of the smartphone players.

So now that Google has the ability to make their own Google/Motorola phone, how does this change the smartphone landscape? Well for one, it kind of pissed off other hardware makers who use Android, because Motorola phones will undoubtedly have an unfair advantage and will probably make better Android running phones. This means that HTC, Samsung, LG and others might decide to go with different software, such as Microsoft’s Windows Mobile, or HP’s new WebOS.

Second, Google’s acquisition could lead to more hardware-software partnerships making their own brand of smartphones. HP has done this by buying Palm, so they now run Palm’s WebOS on their smartphones and tablets. Nokia’s partnership with Microsoft means that Nokia is building a new phone running Windows Mobile, and there are rumors that Microsoft might just buy Nokia. Then that leaves HTC, Samsung, LG and other either to choose a platform to make smartphones for, or maybe even create their own software platforms.

Can the market really support half a dozen operating systems though? I don’t think so. But eventually I think each company may find their niche, giving the consumer more options. This will also be beneficial for carriers such as AT&T and Verizon, “They are very, very interested in having more than just a two or three horse race,” says Ben Bajarin, a consumer tech analyst at Creative Strategies in an article in Fast Company. “They want to be able to create more custom packages. Maybe leave the iPhone as premium, have some other devices as mid-tier, but then also have low-end devices that are still smart, have access to their services, and still have software and apps.”

But overall, Google’s move should be good for consumers, “Anytime we get that level of competition–it’s healthy for the consumer,” Bajarin says. “The bottom line is that once the market matures, people become very, very particular about what they want, and it becomes about making sure there is a breadth and depth of consumer choices covered. And that’s where we’re moving to.”

Feel free to leave any comments or questions below

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