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Phone-y payments

Apple’s system is likely to remain limited to Apple’s shops and online stores, though there’s no reason why it shouldn’t be expanded to support other retailers. Its Passbook app, introduced as a place to keep virtual tickets and vouchers, is a logical place to start extending the service. PayPal has already started, albeit in a small way. Its own app, PayPal InStore, allows gents to charge the cost of their new Thomas Pink shirts straight to their account. Ladies buying glad-rags from one of Aurora Fashion’s Oasis, Coast, Warehouse and Karen Millen outlets can do the same. In the US, it numbers Home Depot among its retail partners. It’s talking to other retailers too, the company says.

PayPal's InStore app allows you to pay for clobber by cellphone

PayPal’s presence is small, but growing and, perhaps more importantly, has the brand recognition to become a big player in the mobile payments business. A recent survey of US consumers carried out by comScore, a pollster, found that 48 per cent of smartphone owning respondents who have used e-payment technology have done so using PayPal. Google, the nearest of PayPal’s rivals, on the table was used by a mere eight per cent of respondents.

Google’s Wallet app is geared more toward NFC-based tap-to-pay systems, an area in which MasterCard itself has already dabbled, with its PayPass system and a wallet app of its own. Number three on the comScore list, PayPass was used by only three per cent of respondents.

As Apple, PayPal and others have shown, paying for goods with a phone doesn’t necessarily require near-field wireless communications, and MasterCard makes it clear that MasterPass, which is a kind of second-generation PayPass Wallet, can present on-screen QR-style codes that vendors’ own systems can read and accept as payment. Apple’s Passbook app uses QR codes for voucher payments; PayPal’s uses barcodes.

Better latté than never

It’s a method that is proving popular. Earlier this month, Starbucks, a coffee seller, said its mobile payments system now attracts 2.1 million transactions a week - about five per cent of all its sales transactions in US stores - as beverage buyers present their QR-style code-showing Android and iOS apps instead of loose change.

MasterPass is set to launch in the UK in the summer, with Argos and Boots already saying they will accept MasterPass payments. It says it expects all vendors who current accept MasterCard payments to be accepting MasterPass too by 2016. Banks Santander and Citi have given the service their approval, and are likely to be among the first UK card issuers to support it. MasterCard’s list of MasterPass-backing banks doesn’t yet include the UK’s biggest high street retail banks, though punters are keener on retailer-issued credit cards these days. According to Datamonitor, a market watcher, 41 per cent of card holders on average report that they use their retailer-branded credit card “all of the time”; the equivalent figure for bank-branded cards is just 20 per cent.

MasterPass will support NFC tap-to-pay technology as well as QR codes

Visa is also preparing a pay-by-phone service, called V.me, though its UK launch has been delayed from a planned autumn 2012 roll-out to the summer of 2013. Like MasterPass, V.me will be provided to users through card issuers’ own wallet apps and should go beyond NFC, which it tackled with its Paywave initiative.

MasterCard says its wallet is “open” to allow users to include credit, debit and store cards affiliated to other networks, but it remains to be seen whether this will work in practice - will they suppport it? So far it has only mentioned Maestro, the debit card system it owns. A real wallet can contain cards from a variety of issuers tied to various networks. To do this with e-payment services requires the rigid definition and application of standards.

All of which perhaps favours firms like Apple, PayPal and Google who have no need to protect and present merchant and card issuer brands the way MasterCard and Visa do. For these services, the payment card is merely a means to an end not their raison d’etre. ®

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