If you are in the North-East tri-state area and if you have been paying attention to the news, you would’ve noticed some good press being devoted to the roll out of Square in some NYC cabs – 50 to be exact. Cabbies for long have been complaining of price gouging by the payment companies, who take on average 5% in interchange fees on every cab fare paid via a credit card. It turns out that more than 50% of cab fares are paid using credit cards and the 5% in aggregate is a lot of money that goes to payment networks. And that’s 5% less, the cabbie makes on 50% of his fares.
Enter Robin Hood, in the form of Square. Square will charge a flat rate of 2.75% for all credit card transactions, almost cutting down the expense to the cabbie by half (50%). That’s a lot of “50%”’s so far…
And this Square roll out in NYC prompted me to take yet another look at the fast changing mobile payments landscape and write up this update.
There is also an interesting side story that is playing out here and that is the control of the screens. NYC cabs have been outfitted with technology sourced by VeriFone and a company called CMT (Creative Mobile Technologies) that essentially allow them to pipe content to the screens in the back of the cab. With Square proposing to replace these screens with iPads, the fight is not only about payments but also about content. There is money in the content business that mainly is in the form of syndication and advertisements. With iPads, there are additional revenues streams that could be potentially created in the form of gaming, internet sessions etc. So game on, my friends!
That said, there’s a lot is happening in the payments world. There is widespread belief that NFC adoption though quite slow, will prevail. While it is true that eventually, the success or failure of NFC is dependent on the end user, it is also true that at this point NFC is perhaps the only technology that allows (or rather will allow) for end user interactions like no other. Mobile payments is one important aspect of this interaction. Smart posters, couponing, gate check-in’s, train ticketing etc are some other dimensions of NFC use.
Full disclosure – While I am definitely a fan of NFC, I must admit that I have not used NFC. It is my intent to buy a tag soon and put it to some good use.
Ok…back to some updates..
- NFC based ISIS has expanded its scope and has added more financial institutions to its menu. If you recall, this is a MNO led payments paradigm and initially started off as a consortium that consisted of AT&T, Verizon and T-Mobile and Discover. Today, this consortium has expanded to include Chase, Capital One (which recently purchased ING) and Barclay’s Card. ISIS will have access to more than 100 million cardholders. Further, ISIS has locked up deals with the 4 major payment networks that we have come to love – Visa, MasterCard, American Express and Discover. Additionally, it also has inked deals with hardware manufacturers like HTC, LG, Motorola Mobility, Samsung Mobile, RIM and Sony. ISIS will pilot in two cities – Salt Lake City and Austin. I was in Salt Lake City recently and did ask folks there about ISIS. Not surprisingly, not many had heard of it, but they did like the idea.
- In a short span of time, many start ups have sprung up to take advantage of this space and basically give the payment networks a run for their money.
- A NY based start up called Zipmark has a solution that uses the infrastructure used by check clearing services to process checks/payments. The premise here is that we still use the checks to make payments and this technology is a viable alternative to the checkbook. Say, your landlord sends you the rent bill via snail mail or even email. Instead of writing a check, you scan the QR code on the bill and the app automatically sends the payment from your bank account to your landlord for a 1% fee (capped at $5). Your landlords account is funded within 24 hours instead of the 2 to 4 days it takes to clear a check.
- LevelUp is another start up that’s entered this space and this time with a solution that is similar to that of the Starbucks payment solution. The LevelUp app integrates loyalty rewards and deals with payments. The app generates a onetime scan-able QR code during checkout that allows for the user the make a payment using their mobile phone while at the same time getting points or even instant deals. It’s a sort of win-win for the merchant and the user. LevelUp charges 2% interchange fee as compared to the average 3%.
And hear this, it turns out that the 800lb gorilla in the room in the form of PayPal is now on the verge of releasing a Square like solution. Apparently, the reveal is going to happen this Thursday(3/15). Speaking of competition in this space, Intuit has a solution called GoPayments that is Square like. Erply, a startup has a similar solution. So, this market is getting crowded real fast.
I’ll end here for the time being. More updates will follow…