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Mobile Payment – Industry Analysis

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Mobile Payment Industry

Since the rise of the smartphone in the early 2000’s the mobile web, apps, digital wallets, and mobile payment solutions have exploded in growth. As consumers move towards easier, faster and convenient solutions an enormous opportunity has opened for mobile payment solutions. There are several large companies already tapping this market. This industry is brand new and still in the early growth stages. There are going to be many opportunities to invest in this industry and see significant growth over the next several years.

mobile payment
Photo Credit: Tele Arabia

Industry Trends

Google Trends
The following graph represents search volumes for mobile payment since 2004. This graph includes every instance mobile payment appeared in a search query on Google. It is based on a 1-100 scale with 100 being peak search interest. In May of 2013 mobile payments was searched its highest ever relative to any other period in time. While this graph may not sell you on investing in the mobile payment companies it certainly shows the interest it is generating.

mobile payment trends

Industry Performance & Usage Stats
Mobile payments have seen a rapid increase over the past few years and are projected to increase even more over the next decade. With the continued adoption of smartphones by more and more consumers, an increase in payments by mobile seem inevitable. A Forrester Research study conducted in January of this year “forecasts that US mobile payments will reach $90 billion in 2017, a 48% compound annual growth rate from the 12.8 billion spent in 2012”.


NFC (near field communication) allows mobile devices to establish a 2 way radio communication with each other by touching them or bringing them into close proximity with each other. NFC allows smartphones to exchange data with each other wirelessly; simply by tapping devices together (both must have an NFC chip). The commercial for the Samsung Galaxy S3 is using NFC technology when the people touch their phones together to share pictures. Companies such as Google Wallet and ISIS have begun to use this technology to develop mobile wallets.

Card Readers
Companies such as Intuit and Square are using card readers that plug directly into a smartphone or tablet. The card readers are able to read the magnetic strip on a credit card in order to process a transaction. Using the card reader (most companies provide free devices) along with an application (app) business owners can accept major credit card payments on their mobile devices.

Large Industry Players

There are a number of large cap companies who are experimenting with mobile payment technologies.

    • Google Wallet – allows people to store credit cards, debit cards, gift cards and loyalty cards on theirgoogle wallet mobile payment smartphone. By using NFC technology this allows people to send and receive payments directly on a mobile device. As a measure of security the user must have their smartphone in close proximity (10 centimeters or less) from a PayPass enabled terminal. Each time a user wishes to use their Google Wallet to make a payment they must enter their PIN number. Once the transaction is complete the NFC antenna turns off. It is currently a free service and Google plans on monetizing it by offering sponsored ads.


    • isis mobile paymentISIS – is a joint venture between AT&T, Verizon and T-Mobile. Similar to Google Wallet, ISIS uses NFC technology for making and receiving payments. ISIS has lined up deals with 4 major credit card providers Visa, MasterCard, American Express, and Discover. Users are also able to store loyalty cards and promotions in their ISIS wallet.To make their transaction secure ISIS requires the user to enter a PIN number before every transaction. ISIS also constantly changes the security codes on stored credit cards to prevent counterfeiting. At anytime you can call your wireless carrier or visit their website to freeze your account in the event of a lost or device.


    • PayPal – PayPal which is owned by eBay was one of the first payment systems that could be used by mobile devices and computers for payment. PayPal makes money by charging a fee for each transaction. It operates in 190 countries with over 100 million active accounts. To use PayPal a person must register with the service and load money into an account. They can then remove or add money to their account from their bank or credit card. For additional security PayPal added a security key in early 2006 where users could choose to create a 6 digit number to access their account.


  • Chase QuickPay – Allows people to transfer money to each other directly from their bank account. You do not need to be a chase customer to use Chase QuickPay, however, at least one person (either the sender or the receiver) must have a Chase Bank account. To register you simply need a valid email address and a U.S. bank account. There are additional features for users who have a Chase Bank account. Users with a Chase Bank account can send email requests for payments, see their history, manage and pay their bills, and more. This is currently a free service.


New Start Ups

    • Dwolla – securely connects bank accounts and allows people to send or receive mobile payments. The company charges a flat rate of $0.25 per transaction. Dwolla also allows users to purchase and sell Bitcoin (on certain exchanges) using their Dwolla account. This feature has increased its interest among users of Bitcoin currency. In late 2011 Dwolla added a feature that allows for instantaneous transaction instead of Automated Clearing House 2-3 day transactions.

dwolla mobile payment

    • square mobile paymentSquare – Square got its name for the shape of its card reader as well as referring to the expression “are we square?” Square allows merchants to accept credit cards directly on their mobile devices and tablet. By plugging in the Square card reader into their phone and installing the application business owners can accept payments anywhere. Square charges a 2.75% transaction fee or offers a flat rate fee of $275.00 a month for up to $250,000 in transactions per year. If the business accepts more than $250,000 then they are charged 2.75% for every transaction after they surpassed the limit.In order to capture a larger market share Square introduced its card reader to business owners first to get them to adopt to the product. In the near future Square plans on adding a system for users to make transactions with each other to make and receive payments. By focusing on one group at a time Square hopes to be able to reach critical mass.


Promising Companies

There are a number of promising new companies entering the mobile payment industry. Some of them are still too small for a potential investment. However, a few good years could change that very quickly. These small companies are on the radar for mobile payment solutions and have a promising product that could become a household name in the near future.

Some companies to look for in the next few quarters:

      • Braintree – Helps vendors get paid quickly and efficiently without hassle. They charge 2.9% plus $0.30 per transaction. What really stands out about this company is the clients they are currently working with. They have had a great year to date and have a impressive list of reputable clients making recommendations. With Braintree companies can set up recurring billing, secure storage, and processing of all major credit cards.

braintree mobile payment

venmo mobile payment

      • Venmo – allows people to pay their friends easily. Users can select a friend they want to pay from their phone, Facebook or email contacts and send a message with the amount and even a description. There is a 3% fee for every transaction. For security the company uses data encryption and even backs the customer by protecting them from any unauthorized transactions. Customers who store money in a Venmo account do not have to pay the 3% transaction fee.

Future of The Mobile Payment Industry

While this industry is still in the early stages and companies are still lobbying for market share there are many opportunities for businesses to create a better product. Last year I worked on creating my own mobile payment solution and it was evident that this industry still does not have a clear winner. As consumers become more comfortable with the technology and discover practical uses products such as Google Wallet and ISIS should become much more widely used and accepted by the masses. By looking at Google Trends, overall industry revenue & growth you can see that mobile payments are becoming wildly popular. While I personally believe we are still a few years away from ditching plastic credit cards and paper money the companies covered in this article are certainly starting to figure out best use cases and applications for their products.

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