Square & Starbucks
Square, a mobile card reading and payment company, announced a big partnership with Starbucks, giving it access to nearly 7,000 locations and millions of loyal Starbucks customers, and instant legitimacy as a national mobile payments player. It could get really interesting if Starbucks integrates their prepaid card/loyalty program that has processed 2.4 billion transactions worth $10.2 billion from 2006 to July 1st of this year.
PayPal & Discover
PayPal, the long-time market leader in on-line payments, and Discover expanded their relationship this month in an agreement that will allow PayPal’s mobile wallet to be accepted at more than seven million merchants though Discover’s network starting in the spring of 2013.
Updated Google Wallet
Google released plans for an updated version of its cloud-based wallet. Notable enhancements include the full integration of offers, payments and loyalty programs (?) to the platform. For example, merchants can send shopper’s real-time coupons based on GPS location or use I.D. verification to allow consumers to check into flights. Although the full version of the wallet is limited to select carriers and phones with near field communications, the platform’s ability to carry cards from multiple issuers could be a key competitive advantage.
Target, Wal-Mart, 7-Eleven, Best Buy, CVS...MCX
To gain some control over the future of the payments system, a number of leading merchants announced the formation of Merchant Customer Exchange (MCX). MCX is a consortium of leading merchants including 7-Eleven, Alon, Best Buy, CVS, Darden, HMS, HyVee, Lowe’s, Michaels, Publix, Sears, Shell, Sunco, Target and Walmart working to develop a mobile application for payments and promotions.
Speculation of Apple Entering the Market
Apple will be launching their new mobile operating system iOS 6 later this month that will include an application called Passbook. Passbook will allow users to store loyalty cards, movie tickets, gift cards, coupons, etc. all in one place on their iPhone. Many within the industry see this as a first step into payments and rumors are starting to circulate about where Apple will take the payment process in the future. During their developer conference in June, Apple announced it has 400 million active iTunes accounts with credit cards. Given that iTunes is already linked to mobile devices like the iPhone, iPod and iPad, Apple would have a dominant foothold should they decide to enter the market.
As you can see, the mobile payments market is moving quickly with just these major announcements in August alone. While we may have missed some other announcements, it is easy to see how these companies will begin to transform the way payments are handled. As you begin to think about your planning session, you may want to consider the following questions:
- How fast is the transition to mobile payments going to be?
- Which platform(s) will become the standard?
- If it’s a merchant controlled platform, how will they get financial institutions and mobile service providers to participate?
- If it’s a non-merchant controlled platform, how will they entice merchants to participate?
- How can financial institutions avoid being disintermediated? What will be the impact on interchange income?