Monday, January 25, 2010

Are Mobile Payments the Next Big Thing?

Forget all this business about credit cards (What You Need to Know About the CARD Act), debit cards (What the Fed's New Overdraft Rules Don't Do) and gift cards (Fed Targets Gift Cards). Here comes mobile payments! Mobile what? At least that is what I said to myself when Jim Chen sent me a link to a CBS article The Mobile Triple Threat (Jan. 22, 2010). Perhaps I've just been in denial that this was coming down the pipeline for real (or too busy complaining about the drawbacks of debit cards). Without knowning more, I found myself reacting "don't even think about doing this . . ." Well, perhaps that is a tad harsh. Merchants are serious about opening this door as handheld phones and readers have increasing amounts of applications for them. And, tighter credit and debit card rules couldn't hurt their motivation either, right?

The whole idea here is that the consumer could be in a store looking at merchandise and not only do research on the product using their mobile device, but also check inventory and make payment for the product (by a charge to their cell phone bill). Other possibilities include small credit card terminals that small merchants could plug into their own mobile device in order to run a customer's credit card (See, Twitter Co-Founder Tackles Mobile Payments). Pretty cool and technically beyond my expertise (See, Discover: Contactless Payment Sticker Users Inadvertently Crippling Performance). But . . . payments wise, this presents the same (and more) problems than consumers just paying at the register with their credit or debit cards. Surely, there are issues about how well the application transfers money and what to do about errors. One would hate to be walking through Best Buy with your phone in your pocket and accidentally purchase several televisions. Moreover, the risk of credit card data being misused or misappropriated is already a problem without the involvement of mobile devices. Poor reliability and speed follow along as potential pitfalls.

Apparently, Paypal, Google and Amazon already have mobile payments capability, so mobile payments appear to be upon us. Mobile payments companies are beginning to receive funding for their ventures, so this will be an area to watch develop (Mobile Payments Startup Boku Lands $25 million). Always a big question regarding payment methods is the cost associated with its use and disclosure to consumers. For me, it will be a while before I pay using my phone.


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