Can P-to-P Mean Phone to Phone?

Seeing its opening in the mobile wallet market, Mobeewave's pushing a product that exists somewhere between the models of Square and Venmo, resurrecting a relatively old idea of having people pay each other by using their phones.

The idea is as old as PayPal, which launched in 1998 as a way to transfer funds between Palm Pilots. PayPal, like many other person-to-person payment providers, left its original concept behind to develop a broader commerce platform.

But the mobile app economy is rewriting the rules on what consumers should and should not be able to do. And while mainstream mobile wallets like Apple Pay and Android Pay focus on digitizing the act of paying with a plastic card, "mobile wallets can also be a way to accept payments in addition to making payments,"  said Maxime de Nanclas, Chief Operating Officer and Co-Founder of the Montreal-based Mobeewave.

Mobeewave is offering its new phone-to-phone version of P-to-P payments initially in contactless-heavy markets like the U.K. and Canada with plans to offer in the U.S. shortly. While the U.S. has lagged Canada and other markets in adopting contactless payments, the popularity of mobile phones in the U.S. bodes well for the future of contactless payments, de Nanclas said.

Mobeewave uses Near Field Communication technology to initiate transactions, and encrypts user credentials inside the device. This process enables an open loop system that requires less work from users to participate—they need to have only an NFC enabled phone and a mobile wallet, rather than both users signing up for the same payment app, de Nanclas said.

Mobeewave envisions several examples of how this system would be useful.

On the "Square" side of the concept, it can be a way for merchants to accept funds without worrying about having the most up-to-date payment acceptance hardware.

"In the U.S. you have the EMV migration, and it takes time for merchants to change terminals," de Nanclas said, adding the cost of terminals is coming down, but there's still an expense that can be mitigated if smartphones could take up some of the payments volume for merchants.

And on the "Venmo" side of the model, Mobeewave sees the technology enabling payments for gifts, rentals, garage sales, fundraisers and single-person businesses like babysitters, plumbers and tutors.

It's the potential business use that's interesting, according to Emmett Higdon, the mobile practice leader at Javelin Strategy & Research.

"Lots of folks are tackling mobile person to person, and everybody is waiting to see how that shakes out," Higdon said. "When you see [Mobeewave] it's more interesting as a business play than a consumer play. It's like a contactless version of Square in terms of how the function works."

Moebeewave's fees vary from country to country, but are generally based on a per-transaction cost plus the partner's own fees. The company sees itself as a potential add-on to mobile wallets rather than a competitor.

"Issuance of these wallets is coming up, but the other side of the equation is consumer acceptance," de Nanclas said.

Though the concept is not new, consumer comfort with mobile technology and NFC could give the idea a boost this time, said Andy Schmidt, principal executive advisor at CEB, who sees the technology as complementary to existing payment methods."Now with the iPhone 6 and the Samsung Galaxy s6,this technology is more available."