Mobile Payments Space Grows Ever More Crowded
Tony is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There is perhaps no segment of the technology sector that is more crowded or more confusing for both investors and consumers than the mobile payments or mobile wallet industry. Already well-known names such as Google Wallet, Ebay's PayPal, Isis – backed by telecom companies like Verizon and AT&T – and the credit card companies have staked their claim in the space. Now we have even more entrants.....
Some of the largest U.S. retailers including Walmart (NYSE: WMT), Target (NYSE: TGT) and Best Buy (NYSE: BBY) announced plans this past week to create a joint mobile wallet service called Merchant Customer Exchange (MCX). MCX is a rare example of cooperation among these giant retailers and indicates the high level of concern they have about being charged high transaction fees, cutting into profit margins, if someone else is left in control of their mobile payment systems. So their collaboration is a logical one.
No launch date has been set for MCX, but development of the mobile app is already under way. It is believed that like its competitors, the app will combine payments services with customized offers sent through customers' smartphones.
The big box retailers are not alone in their actions. The prior week Starbucks (NASDAQ: SBUX) announced a partnership with mobile payments startup Square to replace transaction systems in all of its coffee shops in the United States. Starbucks is also investing $25 million into the company created by Twitter co-founder Jack Dorsey which now has more than 75,000 businesses which accept Square payments.
Square will soon process all of Starbucks' credit and debit card transactions. Starbucks said that its app allowing for mobile payments has been the fastest growing of all its innovations. Mobile payments for Starbucks are growing rapidly but are still a small part of its overall revenues, accounting for less than 2 percent of its 60 million weekly transactions across the globe.
So why this mad scramble, reminiscent of the Oklahoma Land Rush, in the mobile payments space? Simple. Most in the payments industry believe that in the not too distant future most consumer payments will be made digitally via a mobile device.
Many prominent research firms are in agreement, predicting a bright future marked by rapid growth in the next few years. The value of transactions made over mobile devices is estimated to be roughly $240 billion this year, according to Juniper Research. Juniper forecasts that this total will triple over the next five years. Technology research company Gartner expects the value of mobile transactions to increase to $600 billion by 2016, up from $172 billion this year. And analysts at research firm Forrester predict that by 2016 consumers may be able to leave their actual wallets at home and pay for most of their shopping with their mobile devices.
Bottom line here is that even though the figures may vary, one thing is certain. Growth in mobile payments over the next several years will be rapid. Smartphones may eventually replace wallets. But there is a problem from the standpoint of trying to invest into this macro trend.....
The multitude of mobile payment systems risks leaving consumers confused about which system is best. And despite the great number of entrants, no single mobile payments technology has yet emerged as a winner, as the standard. So there may be no sure single investment to single out as the way to play the mobile wallet and mobile payments.
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