Alternative-payments providers such as PayPal Inc., ProPay Inc., Square Inc. and SparkBase Inc. may be better-positioned than the payment card networks to cause the marketplace disruption needed to make mobile payments more mainstream, an Aite Group analyst suggests in a new report.
“There are some players who are setting themselves up to enable that disruption and really trying to drive big change,” Rick Oglesby, senior analyst with Aite Group and author of “Digital Wallets: Who Will Win The Game?” tells ISO&Agent Weekly.
The reason newcomers such as PayPal and Square might occupy a better position to capture mobile-payments growth is that they are not relying on Near Field Communication technology like the payment networks involved in Google Inc.’s mobile wallet and Isis, Oglesby contends.
PayPal, Square and others are taking a more versatile, technology-independent approach and focusing on market-driven value propositions, Oglesby wrote in the report. Even American Express Co. is taking this approach with a cloud-based digital wallet that competes directly with PayPal and rejects the NFC-driven approach Visa Inc. and MasterCard Worldwide favor, he argues.
PayPal might have an advantage because it launched an open-access network in 2009, Oglesby writes. Some 850,000 program developers use what is called PayPal X.
The main obstacle PayPal faces is its struggle to create a presence in stores, Oglesby tells ISO&Agent Weekly. But that is changing.
In September, PayPal exhibited some ways consumers could shop at stores using the company’s mobile products.
One scenario shows a buyer interacting with a PayPal application at a merchant’s point-of-sale terminal. Another buyer is seen scanning barcodes at a supermarket, putting those goods in a shopping bag and paying for them instantly on a PayPal mobile-phone app and bypassing the cashier’s line.
PayPal also plans to integrate location-based merchant offers through mobile alerts when a consumer is in a retailer’s general area.
Payment-terminal manufacturers and key payment gateways such as Authorize.net could also help give alternative-payments providers an advantage over Visa, MasterCard and Discover Financial Services, Oglesby suggests.
While terminal manufacturers and payment gateways are required to enable Visa and MasterCard’s preferred products, they have taken a provider-agnostic approach, he writes.
“In short, the major card brands are painted into a corner, deploying mobile payments strategies designed to protect their existing businesses,” Oglesby writes.
Meanwhile, alternative-payments providers have far more flexibility to pursue a wide variety of products to test for and identify demand forces to drive the result, he adds.
