"Telcos will Compete with Banks"?

Smartphones using encryption and biometrics will enable telecom companies to compete with banks and credit card companies for retail payment transactions, argues Futurist Patrick Dixon. That might not seem to be the way providers of mobile wallet services such as Google, Isis and PayPal are heading. In most cases, all of those providers require the existing payment providers to provide a complete solution. 


But there might be a difference between the ways new contestants side step into a market, and the efforts such firms might make in the future. As many strategists could argue, a common way new firms get into a market is by starting at the "low end," and then, over time, adding more and more capabilities until, at some point, full head to head competition is feasible. 


Rogers, in Canada, provides an example. Rogers is becoming a "bank," though it likely will confine its early efforts only to some highly-focused applications related to its current customer base. But it would require little imagination to suggest that, once successful, additional functions would become attractive. 


With the caveat that predicting the future is an often-perilous undertaking, and that predictions about the future are more often wrong than right, Dixon thinks big things can happen in mobile commerce, mobile payments and shopping. 


Mobile payments could generate commissions of up to EU2 billion a year in countries like France, Germany, Italy and the UK, he says.  Mobile Payments Future

Is PayPal Card Friend or Foe?

Value in mobile ecosystem

In a complicated ecosystem such as retail payments, no legacy contestant can be completely sure that other new participants in the broader ecosystem are complementary or disruptive.

PayPal, already a payment system for e-commerce transactions, has made no secret lately of its ambitions to move into the world of brick-and-mortar commerce. 


And PayPal might worry card issuers more than Google for a couple of reasons. First, Google clearly wants to build a business around advertising. PayPal wants to grow a transaction fee business, even as it works with traditional card issuers. 


Traditional payments typically involve a merchant, acquirer, issuer, and a consumer in the visible parts of the business. But essential roles also are played by the payment network provider as well. 


The roles of merchants and consumers are obvious. "Acquirers" are responsible for aggregating merchants  and enabling merchants to process payments. 


"Issuers" create payment devices for consumers to use (credit and debit cards, for example) and process the transfer of funds from consumer accounts to merchants. 


In the case of credit and debit cards and other electronic forms of payment, a payment network provider, such as Visa or MasterCard, resides between acquirers and issuers to facilitate the transfer of information and funds. 


The mobile payments business adds other potential participants as well, such as handset suppliers, mobile service providers and application providers that create "wallet" systems. That also means other functions such as daily deals services, loyalty program services, local advertising and other functions likely will be part of the ecosystem as well. 


You might argue that PayPal, up this point, has acted as a payment network of sorts, even though it works with existing clearing networks and card issuers. What does not seem completely clear is what it might mean now that PayPal has decided its "wallet" functions will take the form of a plastic card.  

The PayPal Card is a magnetic-striped plastic card that will become available to its base of 100 million active users some time in the first half of 2012.

The unembossed card, which account holders will have to apply for, will carry the PayPal logo on its face, but will bear no other identifying information—no name, no account number. 

Transactions on the card will be protected by a PIN. PayPal will also introduce at the same time a companion payment product it calls “Empty Hands,” a system that will let account holders pay the point of sale by entering a phone number and a PIN.

The card is intended to let users access the funding sources they have stored in their accounts, or digital wallets. These can include credit and debit cards, but also loyalty points, prepaid and gift cards, and demand-deposit accounts. 

Although it looks like a familiar payment card, its magnetic stripe stores encrypted data that lets consumers access a variety of accounts through PayPal. The card will not carry the customer's name or an account number but only the PayPal logo.


Keep in mind that The PayPal card might be viewed merely as an extension of wallet functions PayPal has had for a decade or more, experts say. For example, PayPal has had a MasterCard-branded credit and debit card for years. In that sense, PayPal already has been an issuer in its own right. 


But some in the banking industry will see a threat. "It is another step in PayPal's march to disintermediate" the traditional card companies, says Andy Schmidt, research director for commercial banking and payments at TowerGroup.

PayPal s New Card Is a Trojan Horse for the Consumer Wallet

PayPal Outlines Mobile Payment, Wallet Plans

  PayPal plans

PayPal to Introduce Mobile Payments, Wallet, Promotion Platform

PayPal is introducing a new platform for retailers that includes mobile payment, mobile wallet, advertising and offer functions.

This is a big deal for PayPal and for mobile payments and mobile wallet users and providers.

The PayPal Blog

PayPal To Launch Payment Service Using iPhone