Steve Geringer is offering a second time at bat for mobile payment technology that struck out: sound innovation that didn't match business realities.
"Having a great product doesn't necessarily make you successful," says Geringer, who is overseeing the sale of technology owned by FonePays, a startup that never got off the ground. "You need to find a niche … everybody and their brother is selling mobile terminals."
Mobile payments have attracted tons of buzz over the past year, but even with all the hype, the tough rules of business apply, particularly for those companies that can't find the right niche or powerful cheerleaders, or run afoul of stringent regulations.
For FonePays, the back-end servers and front-end applications for Web, SMS, Android and iPhone platforms are up for grabs, and were still available at press time. FonePays was designed to allow people to pay each other by using their mobile phones. It completed beta testing, but wasn't able to secure enough funding.
It's not unusual for a person-to-person and mobile payment company to struggle.
Bling Nation, which would not make an executive available for an interview, recently went on what it is calling a hiatus to revamp its business. The company used BlingTags, microchip stickers, to allow consumers to use any mobile device to link a PayPal account to debit purchases without sharing information. Bling Nation faces well-heeled competitors like Isis, Google Wallet and Square, and it lost some bank partnerships for its FanConnect loyalty program this spring.
"Technology is the easy part," says Andy Schmidt, research director for commercial banking and payments at TowerGroup. "Selling that idea to the market is much harder. We're seeing phenomenal ideas out there that make sense to people who follow the mobile payments market closely. But when you go to Wal-Mart or Macy's with that idea, there's the head scratch."
And just because the business case can be harder than the tech development, that doesn't mean the tech side is easy. Most forward-looking point of sale mobile payments services rely on near-field communication technology, a method of communicating information wirelessly at short range that won't be widely available on phones for a year. And the lack of best practices for tech, security and revenue sharing for a broad mobile payment ecosystem can also make life difficult for new companies.
"There's no accepted standard, and there's still a lack of knowledge on behalf of merchants and consumers about mobile technology," says Beth Robertson, director of payments research for Javelin Strategy and Research. "At this time we're in such an early stage of the market, it's hard to know what's going to shake out."
Even for companies that do gain some ground, politics can obstruct. "For a startup, some of the hurdles like regulatory burdens may also be significant enough to pose a barrier to a smaller firm," Robertson says. FaceCash recently stopped doing business in California because of state regulations: a $500,000 tangible net worth requirement and a $750,000 aggregate surety bond requirement.
"We can't get [FaceCash] to spread quickly in California and other places because of the regulatory environment. The compliance issues are pretty serious," says Aaron Greenspan, the creator of FaceCash, which enables payments when a user head shot taken with a mobile phone shows up on a merchant's computer.
Greenspan, who once sued Facebook founder Mark Zuckerberg in a copyright dispute, is bullish on his startup's tech but angry about regulations that he says favor much larger payments networks. FaceCash, which connects payers' bank accounts to a bar code, has developed a bank routing system to enable automated clearing house transactions, and can capture line-item transaction data. "We've been able to solve the major points in terms of tech challenges, which is why it's doubly disappointing on the regulatory front," Greenspan says.
It helps to find powerful partners or institutional evangelists. For example, Naratte's Zoosh ultrasound near-field communication alternative earned a shout-out from PayPal's mobile payments chief, Laura Chambers. In Zoosh's announcement Chambers said she was "looking forward" to the product's growth.
Another route is matching mobile payments to a strong ease-of-use business case. While it's a cliche, it's also true that consumers will not adopt mobile payments that are not noticeably easier than what they're already using.
The companies that are finding success are making that case. For example, Zong's model of letting shoppers enter phone numbers into a box, then pay by verifying a return text, proved enticing enough to attract the participation of 250 carriers globally — and $240 million from eBay, which acquired Zong to help PayPal expand into mobile commerce.
"You can have the greatest technology in the world, but without the right management; what's the point!"
Any retailer who is basing a mobile technology on a moving target like NFC, is well; not a good partner anyways.
United states is a tough nut to crack anyways but outside of CONUS mobile payment systems are a better fit right now. (Minus NFC, that is).
That said: I think the bigger challenge to mobile payment adoption is simply rocking the boat. The entire payment and financial ecosystem in the US is overwhelmingly complex and cumbersome.
Think of it this way: if payment systems were built from scratch in 2011, how different would they look ? They would look amazingly different. Payments would be direct to merchant with the handler taking a percentage, instead of filtering through 15 layers of clearing houses, handlers, and gateways. Of course, that also increases the risks of fraud.
We are walking a thin line with our mobile payments startup, TotalTab (http://www.totaltab.com) - a mobile restaurant payments app. We are trying to build it scalable so it fits what I consider legacy POS solutions (the traditional client / server model) as well as newer POS systems (like cloud-based and web-based systems).