The mobile payments revolution

Ten years ago, when I was running a computer support business, we spent a lot of time trying to find a mobile payment service for our on-site technicians to process payments.

At the time there were plenty of options, but they were all expensive, asking 6% in merchant fees at a time when our bank merchant facility charged us 2.75% to accept Mastercard, Visa or Bankcard. Interestingly, the cut the mobile providers wanted to take was the same commission as American Express and Diners Club.
 
We’d long before decided Diners and Amex were too expensive and it was easy to make the same decision about mobile payments. The technicians were given a manual card swipe to carry around and they phoned through authorisations. It was messy and time consuming but a lot cheaper than the (then) high-tech alternatives.
 
Given that history, I was keen to get along to the Australian Information Industry Association’s “Mobile Payments – Cooperate, Collaborate, or Abdicate” breakfast panel held in Sydney last week, to see what has changed in the mobile payments space.
 
The rise of smartphones – and the developing SoLoMo trend among consumers – which brings together social, local and mobile technologies – should have meant the era of online payments should have arrived, and it’s puzzling why it hasn’t happened.
 
It isn’t for a shortage of operators; one of the panel members, Oliver Weidlich of Sydney’s Mobile Experience mentioned a number of services, such as Square, developed by one of Twitter’s founders, that are changing mobile payment overseas.
 
Interestingly, it was the audience questions that gave the answers to why online payments haven’t taken off in Australia. The key question from the floor was – “Which authority handles disputes should a phone be lost or stolen?”
 
As a customer, one hopes it’s the bank that takes responsibility, as the idea of a telco – particularly their mobile phone divisions with their attitude towards billing customers – having control over your credit card or bank account would make most consumers’ blood run cold.
 
The point was well made though as it saw the panel’s bank, telco and credit card representatives all ruminating over the question of “who owns the customer?”
 
Oddly, while they argue about whose property the customer is, all of them may lose out. While services like Square and built-in payment features on social media and mobile apps such as Foursquare or Red Laser may take a slice of the market, there is a bigger competitor already making huge inroads.
 
The day before the AIIA event, internet payment giant PayPal announced a series of deals with various group buying sites and online applications. Their press release pointed out PayPal’s mobile payments (or mCommerce as they call it) is growing at over 400% a year.
 
While it may be incorrect to say PayPal were the elephant in the room at the online payments breakfast, it isn’t unfair to say Big Ears was just outside scoffing the morning tea while the incumbents argued about who would have first dibs on clipping the tickets of both merchants and customers.
 
It’s too early to say the banks, or the telcos, have lost the market, but players like PayPal, Google (with their wallet service) and possibly even Apple (should a Near Field Communication (NFC) equipped iPhone appear in the near future) are going to make the mobile payment sector far more interesting and competitive.
 
For businesses, we need to keep a close eye on the mobile payments market, as it is promising to offer a lot more options in banking and transactions than what we’ve been used to in recent years.

The days of 6% merchant fees are well and truly over.

Paul Wallbank is one of Australia’s leading experts on how industries and societies are changing in this connected, globalised era. When he isn’t explaining technology issues, he helps businesses and community organisations find opportunities in the new economy.