Mobile payments showdown at FortuneTech NFC vs Cloud, Fight!
Posted by Seth PlanckJuly 21st, 2011 at 2:02 PM Filed Under Latest News
Some of the big companies in mobile payments had a mobile payment showdown at FortuneTech
So what happens when you put Verifone, Google, Square, Visa, and Isis on stage together and phrase questions to pit them against each other? Yup, you get a death match, because there’s a potential $4 trillion mobile payments marketplace to conquer and none of these competitors are taking prisoners. Well, aside from Visa that is, who are positioning themselves in cooperation and co-opetition with everyone in the mobile payments space, which will ensure they are part of all winning platforms. The group broke down into a few elements. POS vendor vs Square, Isis vs Google Wallet and Visa who is in competition and cooperation with everyone.
The mobile payments warriors involved:
Michael Abbot, CEO of Isis
Doug Bergeron, CEO of Verifone Systems
John Partridge, President of Visa
Keith Rabois, CEO of Square
Stephanie Tilenius, Google’s Vice President of Commerce and Payments
Guest appearance from Stephen Gillett, Starbucks’ CIO
NFC mobile payments vs Credit Cards showdown
Okay, seconds out round one: Straight out of the gate Square CEO, Keith Rabois, said he felt there was no benefit to NFC and that he expected people to still use credit cards. He pointed out that the technical and business model complexities of NFC and other new payment systems, and said Square’s focus was on solving immediate pain points with “products that just work today.” He blasted NFC-focused pay-by-phone solutions as “adding a new layer for the consumer and merchant on top of a broken system”, pointing at Google stating they make people apply for a separate account to use Google Wallet, which was technically inaccurate. “Pulling out your phone and tapping has absolutely no benefit, and is arguably destructive,” said Rabois. It is not clear how it would be destructive, unless you throw your phone at a local merchant. ”You can use Square card case today, it’s not in a pilot, it’s not in a trial, it just works,” added Rabios. Our takeaway from what Rabios shared was that Square isn’t interested in pursuing NFC mobile payments. However, we don’t understand why because their business model is perfect for the contactless mobile payments technology. When we think of how Square may evolve, we see NFC tablets acting as POS mobile payments systems which is an area the company is uniquely provisioned for. Keith Rabios also added that contactless payment solutions have been available in credit cards for tens years and nobody uses them. Fair point.
Stephanie Tilenius, Google’s Vice President of Commerce and Payments said, “It’s much more than mobile payments payments , it’s bringing a whole e-commerce ecosystem to consumers.” And in fact, NFC is much more than that – it’s a communications protocol that stretches far beyond mobile payments. “This becomes your mobile phone, this becomes your mobile wallet and it also becomes you shopping assistant,” she added. “NFC has proven that it is 40% faster” against using a credit card, and “saves time at the point-of-sale.” Displaying Google’s mobile payments competitive advantage in the mobile payments space Tinenius said, “…We are launching in weeks.” In a rebuttal to Rabois’ statement regarding applying for another card, she added, “You don’t have to get a Google card, you can use any card in your wallet to fund your Google card.” Tilenius said, “There’s huge potential here — it’s like Amazon in 1999.”
In reality, both credit cards and NFC or mobile payments options will coexist for the next few years and merchants and consumers will probably use and accept both. Square has a very innovative approach to creating solutions for consumers and small businesses, but it may have underestimated the power of Google. If Square doesn’t take on NFC mobile payments technology in the next couple of years, it may well find itself in danger of becoming obsolete by the hands of companies like PayPal who are focused on winning both merchants’ and consumers’ hearts and minds and who will use any and all methods of mobile payments to prevail. Google has plumped all its eggs in one basket. In our opinion, it’s the right one for the future, but it will struggle against companies who promote a multi mobile payments platforms. We saw today how fierce the competition is and at the end of the day, that is a positive thing for consumers and merchants.
Mobile payments POS terminal vs mobile payments POS terminal
Square CEO, Keith Rabios was in no frame of mind to mince words today, and we didn’t come away wondering what he really thought. ”You can run your business from a beautiful iPad with just a Square, bypass the need for these ugly cash registers, bypass the need for a credit card terminal, bypass the need for loyalty cards and paper receipts that you throw out anyway,” said Rabios. So, in essence Rabios said that Verifone products are ugly, and perhaps they could stand to receive a little industrial design update. Speaking about NFC mobile payments Keith Rabios commented, “We think it’s a technology in search of a value proposition. We believe that consumers don’t want to use NFC and merchants don’t want to use NFC. For example, this card I have here has had NFC capabilities for almost a decade – it’s a Visa and nobody uses it. 12% of all credit cards in the United States has this functionality and only 10 million transactions per year use it.” Perhaps Rabios has a point, but that point only mobile payments means that contactless credit cards have not taken off in the United States. But the essence of convergence that NFC represents is a different format for the technology and many expect different results in usage, because NFC mobile payments with a phone is tied together with value added software and facilitates you carrying one less item around in your pockets or bags.
“We have a presence at 5 million out of the 7 million places that you can use a card today,” said Doug Bergeron, CEO of Verifone Systems. “In the rest of the world that has gone EMV and chip and PIN in some cases, we have an even more impressive market presence.” And like it or not, Verifone are the 100-pound gorilla in the POS terminal space. “It’s just the U.S. and sub-Saharan Africa left clinging on,” he said about the lack of support for chip and PIN. ”Visa, Isis and Google want to move NFC or mobile payments to the brick and mortar world, we’re a natural guy to go to, because we can accelerate and proliferate this mobile payments capability in a coexistent way,” he added. Again, Bergeron was pragmatic and shows that Verifone understands which link in the chain they represent. ” I think mobile payments have been overblown,” said Bergeron and added, “The NFC capability will help bind that data to a consumer, to a merchant,” explaining the data collection advantages of NFC mobile payments for consumers and merchants alike. “I think this notion that you have to rip out all this old plumbing and put in new plumbing has been way overblown. The fact is point-of-sale systems get upgraded every few years. It’s going to take that cycle to get all of the smartphones equipped with NFC,” Doug Bergeron commented.
Verdict: Verifone win
Verifone has current merchant and payment forms covered and are also transitioning retailers to contactless and mobile payments capability. Its approach is one that supports all forms of payments and yet it sees the value in NFC mobile payments and accepts how big a part of the future of payments it represents. Again, for some reason that escapes us at this point, Square is swimming against the current, debunking NFC mobile payments as a distraction. To use a Square product you have to enter their vision of an ecosystem, which cuts out a little choice. NFC Rumors loves the Square products and philosophy of improving payment systems, however, Verifone has a plan to get the world NFC-enabled which doesn’t call for radical changes today. Verifone wins, all they have to do now is make some mobile payment friendly, beautiful products.
Google Wallet vs Isis
The next step is to win over the banks, Isis CEO, Michael Abbott said. “As you evolve this ecosystem, the banks want to know what’s in it for them,” he shared. “They own these customers.” This perhaps illustrates the biggest difference in the two approaches and business models between the companies. Google is consumer and merchant focused, its model relies on end consumers driving merchants to update and accept new mobile payments methods. Out of the two models it is the truest capitalist approach as like pretty much every other Google product, it allows consumers to have tools that then in turn drive the market. Isis, on the other hand, sees the banks as owning their customers and that getting support from banks as being critical to success. This isn’t exactly correct because Visa has banks signing up in droves to be part of their mobile wallet, and by the very nature of the models that both Visa and Mastercard have set up remains ubiquitous for anyone that carries a Visa or MasterCard mobile payments product . Many aspects of the Isis mobile payments model are still vague. We know they intend to act as a TSM but remain unclear on whether this means that they can be bypassed entirely by card issuers and other mobile wallets to be able to run on Isis telco’s networks. They may have had some big card issuers sign up, but the battle with other mobile wallets still loom and success is not assured for Isis. Google’s product currently only has Citi and MasterCard behind it and that is surely a weakness that would prevent customers with Visa cards using its system outside of the prepaid GCard, but Google has the good will of the people on its side and an open platform that welcomes all card issuers with no fees which is attractive.
Verdict: Fight postponed, rescheduled for open market battle in 2012
At the moment, it is unclear who will prevail: Google, Isis or another mobile wallet. What is clear is that Isis is a B2B operation that views consumer wants and needs as being taken care of if businesses can be converted. Google, on the other hand, has the consumer at the heart of its model. Which will win? Only time will tell.
Visa vs Every other solution
John Partridge, President of Visa, said the company licensed its system out and supported ”open mobile payments ecosystems ” and “co-opetition.” Visa sees itself as the foundation of the industry and Partridge said, “Consumers will decide, and quite frankly merchants will decide the future of this system in a broader sense.” Partridge hit the nail on the head when he said, “What we found was, mobile payments consumer s want choice,” and “The way to win is with an open ecosystem,” taking into account that different card issuers exist, different phone manufacturers exist and different OS’ on phones are pervasive. “Our strategy is what I’ll call stable co-opetition.” Visa sees payments on a grander scale taking into account e-commerce, M-commerce and wants its mobile payments, mobile wallet to be able to handle everything.
Verdict: Visa win
Visa can’t lose, it will take part in projects with all mobile payments oncomers and not turn down any viable project. At that same time, it will develop its own mobile wallet for mobile payments and take an enormous chunk of the marketplace. Visa usurps any other mobile wallet by the very fact it is truly ubiquitous and is already integrated into every aspect of the marketplace. The only people that can upset Visa’s way to more riches is MasterCard, Discover and Amex, and the dark horse mobile payments PayPal which does pose a clear and present threat to Visa.
See the whole debate in the video below.
To finish off, the best comment came from somebody who was not even on the panel. Stephen Gillett, Starbucks’ CIO, offered up an interesting fact: “It takes an average of 40 minutes to realize you’ve lost your wallet,” he said. “If you’ve lost your phone, it takes an average of 5 minutes to realize it.”
If there was an overall winner in this sparring match, it was the consumer. These companies are about to mobile payments engage in a friendly and not so friendly fight where they will all have to compete to win dominant positions within this emerging industry. As long as Isis is an actual open ecosystem where competitor products can exist, we see that all is fair in business when it benefits the consumer in the mobile payments space.