New kids on the block: Six start-ups racing to dominate the mobile payments space
Posted on: 2 June, 2010
Posted by: Thefutureofbanking.org Team
With the increasing ubiquity of the smartphone, a number of new entrants to the payments industry have emerged. Each hopes to challenge the dominance of traditional players by focussing on mobile payment solutions which turn smartphones into hybrid credit, debit and loyalty cards.
The credit-card giants (including Visa) and other traditional members of the payments ecosystem (such as Verifone Systems, Intuit and PayPal) aren’t rolling over yet, but as the payments, location based services and social media worlds collide via the smartphone, it feels like everything’s up for grabs.
1. FaceCash
FaceCash was launched five days ago by Aaron Greenspan, the ex-Harvard grad who settled out of court with Facebook last year over his claims that it was he who originally conceived the social networking system.
Users download the FaceCash application onto iPhone, BlackBerry or Android phones. They then type in their bank account information, Social Security number, and driver’s licence number, and upload their picture. To accept a FaceCash payment, a participating merchant scans the FaceCash barcode on the user’s phone with a scanner. The user’s picture pops up on their computer screen as a security token prior to the retailer approving payment.
FaceCash has been praised for the fact that it has built its own standalone authentication and payments processing technology from scratch. This means it doesn’t need to fight for its share of the transaction with carriers, application developers, banks, merchants or credit card companies.
2. Square
Also launched last month, and a brainchild of Twitter creator, Jack Dorsey.
Square enables anyone to accept credit cards using a tiny white attachment (dongle) and software that can be downloaded to a smart phone. In much the way he launched Twitter, the social-networking site that has grown to more than 100-million users, Dorsey is giving away the Square device. Anyone can sign up for an account at SquareUp.com, and the company will send the device in the mail.
As one of their Twitter followers recently commented: "I can't wait for the day I can pay with a card and the merchant is reminded I don't like onions or mayo. Sounds like a job for @square?"
3. Zong
A mobile payment service used by online gaming and social networking web sites including Facebook, MySpace, Gaia Online, IMVU and Aeria Games (Zong is the mobile payment provider for Facebook Credits). Recently, Dana Stadler, former CTO of Paypal, joined its board of directors, and the company raised $15M of funding in April 2010.
Zong works by enabling users to pay for things, particularly virtual goods online, via direct billing to their mobile phone. In 2009, Zong processed mobile payments for over 10 million unique users worldwide and received the Frost+Sullivan Best Practices Award for product innovation.
4. Boku
A mobile payment solutions provider with significant international reach, following its acquisition last year of competitors Paymo and Mobillcash.
Boku doesn’t require users to have a credit card or bank account to make a micropayment. Instead, users enter their cell phone number on the site, reply to a text message and then all virtual charges are automatically charged to the user’s monthly cell phone bill.
5. Bling Nation
Bling Nation’s mobile payment services connect local financial institutions and businesses, allowing customers to use their mobile phones to tap and pay for purchases and receive text account balance and transaction confirmations at the point of sale.
Users attach a Bling tag to the back of their mobile phone and activate it either in branch or online. To make a purchase, users tap their BlingTag to a business' point of sale device, the Blinger. Bling Nation then automatically debits their account and texts a transaction confirmation to their phone. Users can earn points and discounts from retailers using the system as a loyalty card.
6. Venmo
Initially conceived as a mobile peer-to-peer payment service, users send SMS text messages to Venmo asking it to send payments to their trusted contacts and participating businesses.
A typical Venmo text message might be: "Pay 49.53 to jenny for November utilities" or “Pay 3 to John123 so he can pick me up a coffee on his way into work”. (If the recipient is not a registered Venmo user, then you can just include their mobile phone number within the text.)
But where Venmo shines is in the area of trusted networks, acknowledging that many people have friends and contacts they'd trust enough to take money right out of their wallet. Users can therefore declare a contact “trusted,” and allow them to directly pull from their Venmo account (which in turn pulls from their credit card or bank account) without their confirmation.