As of this week, there is now Apple Pay, Samsung Pay, Android Pay, and, yes, Blackberry Pay on the market. Just kidding on the last one, though BlackBerry Limited (BBRY) did bring back the slider phone this week during MWC. It now seems that tech giants, Apple (APPL), Samsung (005930), and Google (GOOG) all want a major slice of the mobile payments pie, with Samsung and Android’s platforms aiming to expand the reach of contactless mobile payments.
Mobile payments as we know them have been around for a few years, with the introduction of Google Wallet in 2011 that used NFC (Near Field Communicators). However, the concept we think of when we say “mobile payments” is not necessarily the one that has been around since 1997 when Coca-Cola (KO) introduced the ability to pay at vending machines via text message. Since then, mobile payments have changed tremendously with the rise of the smartphone. Our current use of mobile payments is strongly influenced by the use of NFC chips, technology that was also introduced in 1997 by Mobil (now a part of ExxonMobil (XOM)) who accepted contactless payment via a key ring device.
RFID, as the process is called, has been the cornerstone of contactless payment, and since the late 2000s has had a high use rate — at least internationally. In 2014, The New York Times (NYT) reported that contactless payment has been fairly successful in international markets, especially the UK where Barclays (BCS) introduced contactless payments through Barclaycard in 2008. Since then, contactless pay has become the norm in the UK, with over 32.5 million contactless-enabled cards in use today. The adoption rate that the UK has experienced has been the same that other nations have shared, with the exception of the United States. Unfortunately, the major hurdle that contactless payment methods have faced is the United States’ size.
That’s where big tech and startups come in. What better way to popularize a revolutionary payment method to such a large market than through one of the biggest markets in America? As of 2013 smartphones account for 55% of the mobile market in the United States, and as of 2014 Apple and Android led the smartphone distribution, holding 47.7% and 47.6% of the market share, respectively. In 2011, Google took the lead by introducing NFC-based contactless mobile payments with the introduction of Google Wallet, but only few cellphones were equipped with the technology to power the platform. Around the time, Apple was rumored to be looking into producing an NFC chip for its flagship iPhone, but it wasn’t until the iPhone 6, three generations later, introduced Apple Pay.
Today we see the wide acceptance of Apple Pay by several major retailers many of whom are heavily advertising the technology in hopes of increasing small purchases. A report done by MasterCard (MA) in 2012 suggested that contactless payments made it more likely for customers to spend because of the ease. It becomes clear why Apple wanted to get on the contactless payment boat, as it gets .15% cut of the purchases made with its platform. Considering that iPhones account for a little under half of the smartphone market in the United States, its introduction of contactless payment to the mobile world was sure to quickly popularize contactless payments. Apple designed its technology to work with Visa’s (V) PayWave, MasterCard’s PayPass, and American Express’s (AXP) ExpressPay terminals.
With Apple Pay holding Samsung’s feet to the fire, it became obvious why the South Korean tech giant introduced Samsung Pay. Samsung accounted for just about 29% of United States’ smartphone use, but until recently held a larger global market share than Apple. Though Samsung’s platform is set to roll out this summer, it brings a new payment process to the table. Magnetic Secure Transmission (MST) technology was developed by LoopPay, which was acquired by Samsung this past February, and powers the Galaxy’s new payment method. In short, MST allows for the Galaxy S to interact with all forms of payment pads, including legacy devices that are not NFC equipped. This should open the floodgates for mobile contactless payments in the United States, making it easier to pay on demand.
Though NFC, and more recently MST, aims to dominate the future of mobile payments, a cashless future may exist without the use of smartphones. It just appears that smartphones, an already popular market, are the fastest track to popularize payments free of pins or signatures. Startups like Coin and Plastc join PayPal, Venmo and Square in tackling mobile payments not rooted solely on smartphones. Coin and Plastc take on the challenge by producing their own respective hardware designed to create one convenient card to replace all your previous cards. PayPal, Venmo, and Square have made it popular to pay via your phone, computer, or even tablet. While the future of mobile payments is a bit murky as more and more companies want to become the payment method of choice, it has become clear that there is a large market waiting for this. The Owler community following the above companies all believe that there is growth to be seen, and that means a cashless future is in sight.
Follow the companies mentioned in this blog post on Owler:
Blackberry Limited | Apple | Samsung | Google | Coca-Cola | ExxonMobil | New York Times | Barclays | MasterCard | Visa | American Express | LoopPay | Coin | Plastc | PayPal | Venmo | Square