The still arguably pre-nascent business is attracting new big tech players, like Apple and Google, while the traditional credit card players move towards creating systems that would make your smartphone your credit card.
The primary approach to building in-store systems involves near field technology (NFC), which requires technology that almost no smartphones have yet. NFC lets you put your phone near a payment device where a radio signal captures information now stored on an electronic strip that needs to be swiped.
But Fig Card uses text messages to complete transactions ? something any mobile phone can already do.
With the acquisition PayPal gets this tech and Fig Card?s founders, Max Metral and Hasty Granbery. PayPal, owned by eBay, is best known for completing transactions online but has been fortifying its smartphone app. A year ago PayPal even restored Palm Pilot-era functionality which makes it possible to make phone-to-phone payments ? a direct challenge to Square, which is also disrupting the e-wallet space.
The race is on, but there is a general consensus emerging that NFC ? which operates on frequencies similar to RFID chips and tags ? could become the industry standard within the next year, according to Sarah Clark of SJB Research, who is also editor of Near Field Communications World.
There are technical challenges with NFC, however, including the fact that it requires a separate antenna and a secure element chip in order to guard the privacy of users, Clark told Wired.com in a phone interview from London, where she is based.
?Most mobile phone manufacturers are looking at 2012 as the year that NFC is going to happen,? Clark said. ?This year, all the big names are exploring it, and they all have teams that are working on it. They?re asking, ?Who should I partner with, and how do I build a great consumer experience with this???
At present, there is only one smart-phone available in the United States which supports NFC, according to Clark: Google?s Nexus S handset.
Last month, Bloomberg reported that Google plans to begin testing its own mobile payments system within the next few months. Google will install thousands of special cash-register systems from VeriFone Systems, which uses NFC, at merchant locations in New York and San Francisco, the wire service reported.
Clark said that NFC technology could help Google on its mission to dominate mobile advertising.
?NSC has a enormous potential in mobile advertising,? Slark said. ?The ultimate vision that people have on that side of the business is that if your mobile phone provider knew that you were on way to a shopping mall, it could send you a voucher or a coupon at that moment, and that could be really useful for consumers.?
?Mobile advertising is absolutely crucial to Google and my belief is that NFC is going to play a key role there,? Clark said.
And then there?s Apple. Last November, Cult of Mac?s Leander Kahney reported that the Cupertino, Califonia-based tech juggernaut is experimenting with NFC technology on its iPhone line of smartphone devices.
?Apple is undeniably working on this and they have some very interesting patent applications that show that they are serious about it,? Clark said. ?If Apple puts NFC into the iPhone, that?s going to be day one of the commercial marketplace for NFC technology.?
There are other big players jockeying for position in the mobile payments space as well, including ISIS, an initiative being spear-headed by AT&T, Verizon, T-Mobile (which AT&T is in the process of acquiring) and Discover Financial Services, which sells the Discover credit card.
In 2009, financial services giant American Express purchased Revolution Money, a company backed by former AOL executive Steve Case, for $300 million.
Meanwhile, Seattle-based coffee giant Starbucks announced in January that its mobile phone application is now accepted in all 6,800 of the company?s retail locations.
As for Fig Card, it?s quite understandable that PayPal would buy the startup. After all, PayPal pioneered the online payments market. Founded in 1998 in Palo Alto, California, PayPal was acquired by eBay, the giant online auctioneer, in 2002.
Since then, PayPal has come to dominate the market for online payments. Last year, the company processed $92 billion in online payments. In the first quarter of 2011, the company handled $27.3 billion.
Mobile payments are poised to explode. This year, the PayPal expects to process $2 billion in paperless payments ? nearly triple the amount of mobile payments the company processed in 2010, company spokesperson Sara Gorman told Wired.com.
PayPal has actually been experimenting with mobile payments since 2006, Gorman said, but as the dream of paperless point-of-sale transactions comes closer, the company is intensifying its focus on the space, both internally, and though acquisitions, such as Fig Card.
?This is a really hot space to be in right now, but it?s still early, which is why we?re taking a platform-agnostic approach,? Gorman said.
Whether it?s SMS or NFC ? or some other technology ? it?s clear that we?re approaching the day when mobile payments will become a reality on a mass-consumer scale.
?People are putting their toes in the water and finding out what?s going to work best,? Clark said. ?But it?s now clear that the end of the road is in sight.?
PayPal?s parent company, EBay, said Thursday that its revenue rose 16 percent to $2.55 billion in the first quarter, exceeding Wall Street?s consensus expectation of $2.48 billion. Ebay?s shares closed up 1.15 percent on Friday.
Source: http://feeds.wired.com/~r/wired/index/~3/Kyf5x1Wkw5I/
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