This year alone there have been several major developments in the mobile payments space. With Facebook launching its payment feature on messenger, PayPal acquiring Paydiant, and Apple lobbying for mobile payments in D.C., the landscape is rapidly evolving. By 2019, US mobile payments are predicted to grow to $142 billion with both national brands and local merchants. The major shift from physical credit cards to contactless transactions has already begun. We surveyed a few of our portfolio companies in the space to understand why:
Today more and more transactions are happening in flexible, unstructured environments outside of traditional retail point of sale (POS), and payment and financial systems like Flint have set out to simplify the transaction process. Flint has eliminated the need for external hardware. Instead, merchants can accept credit cards by simply using a smartphone camera to scan the card and capture the data needed. They can also send invoices directly from a mobile device to get paid and easily send digital loyalty offers.
“We think that streamlining the payment to loyalty cycle will go a long way in enabling small businesses to be more successful,” said Greg Goldfarb, CEO of Flint. “As Apple Passbook becomes Apple Wallet, it’s inevitable that consumer and big brand adoption will soar. What’s missing is a flexible solution for small businesses. We’ve set out to unlock Apple Wallet offers so everyday small businesses can have a digital presence there.”
While the migration to mobile is overwhelmingly positive on a number of fronts, mobile specific vulnerabilities and attacks are a concern when fostering consumer trust. Only through strong, mobile focused security, of which identity authentication and verification are major components, will the full potential of mobile payments be unleashed. Mobile security and authentication company Payfone is providing a frictionless experience with a suite of network authentication services. Its platform has 300 million identities under management and processes lifecycle events ranging from phone upgrades to reporting lost or stolen phones. These sweeps verify that the person using a mobile phone is the person who owns the underlying bank account.
“Most organizations do not have financial institution size security and fraud teams,” said Rodger Desai, CEO of Payfone. “We’re combining what we learn from the best fraud teams at our bank partners and embed this into our platform to solve these new, mobile specific problems.”
Constant innovation is necessary in order to ensure mobile transactions remain secure and users are being appropriately authenticated. Host Card Emulation (HCE) is a great example of innovation in the space. It creates an exact representation of various electronic identity cards using only software in order to make Near Field Communication (NFC) payments possible. This translates into a secure storage and execution environment for contactless transactions. SimplyTapp is a cloud-based mobile payments company enabling developers to leverage NFC and HCE to add secure and flexible payment functionality to mobile apps.
“We’re the first company to allow open innovation in the mobile card issuing space that has been typically closed off,” said Doug Yeager, CEO of SimplyTapp. “By donating the HCE functionality to the community at large, developers and merchants can deliver innovative solutions that leverage existing POS hardware infrastructure without requiring merchant adoption.”
4. Consumer Value
As the digital and physical worlds continue to converge, mobile payments offer unique value to consumers by facilitating the way they discover and shop for goods and services. Mobile payments organize loyalty cards and offer promotions, positively affecting brand loyalty and broadening consumers’ horizons.
“Mobile offers the opportunity for customers to derive more value from the digital experience that they wouldn’t in the traditional purchasing experience,” said Vijay Doradla, Director at Verizon Ventures. “Having your mobile phone with you at the point of purchase allows a consumer to potentially access relevant offers in real time, and additional discounts that one is either unaware of or are too cumbersome to apply. Physical coupons and offers can be accessed and applied seamlessly.”