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Square shakes up the mobile payments world more than most

More conversations about mobile payments with a wave of news this week:

 There are several major announcements here.

A notable one is the Electronic Transactions Association’s  launch of a Mobile Payments Committee with Verizon Wireless, AT&T, Sprint, T-Mobile, Google, Capital One, American Express, Discover, Isis, Intuit, Panasonic, First Data, MasterCard, Visa and PayPal among the committee’s participating members.

With such credible names working together, this is an interesting alliance.

However, the most notable mobile payments processor in the USA is missing: Square.

Square is the upstart disruptor and their announcements of a $25 million deal with Starbucks received a helluva lotta press coverage, as it should.

… and many more. 

What’s the deal?

According to the BBC’s website:

Global coffee shop chain Starbucks has invested $25 million in Square, the electronic payment service founded by Twitter co-founder Jack Dorsey.

Nearly 7,000 shops in the US will accept payment via the service, in which credit cards are slotted into a small device connected to a smartphone.

Starbucks' head will become a director at Square as part of the deal.

In a letter posted to Square's website, chief executive Mr Dorsey said the deal would help "accelerate" the product.

"When Starbucks builds the Square Directory into their apps and in-store Digital Network, it gives Square new visibility, driving more customers to opt-in to Square."

Starbucks' chief executive Howard Schultz added: "As the largest retail mobile payment platform in the US, we're excited and proud to accept payments with Square.

The deal is important from my perspective as it brings together the two leaders in US mobile payments developments – Square and Starbucks (have you seen their app?) – and leaves the Mobile Payments Council looking like a bit of a damp squib by comparison.

Why aren’t these guys on the Council?

Because they’re too threatening.

Even so, the challenge raised in most articles about Square and mobile payments is whether people really want this?

Article after article talk about the fact that mobile is not a good reason to use such technology for payments as existing systems – cash and card – work well (I disagree btw).

What they point out is that there has to be an additional benefits, over and above the replacement of cash and card, that mobile provides.

As noted in the New York Times blog:

Businesses of all kinds — from big companies like Google, Microsoft and Sprint to small start-ups like GoPago and Scvngr — are hoping to profit from mobile payments. They just have to figure out what kind of system is most appealing to consumers and merchants. And they have to convince people that paying with a phone is safer and more convenient than using cash or a credit card.

Wired takes the discussion further:

“Credit, debit and cash all work pretty good in the United States,” says Gene Signorini, a vice president at Mobiquity, which designs and builds mobile applications for corporate clients. “Those payment options aren’t really broken.” Consumers will only change their behavior, he says, if paying with their phones truly changes the retail experience: “It’s not about the technology itself.”

Yea, yea, yea.

But for all the nay, nay, naysayers, Square has hit the issue on the head by wrapping mobile into a retail experience.

That’s what Square understands, as I recently blogged when talking about Jack Dorsey, Square’s founder, as the Steve Jobs of finance.

No wonder the Cult of Mac says:

Mobile payments and digital wallets aren’t really about payments or transactions. They’re about an improved customer experience. That means ease of use, automated reward and loyalty programs, the ability to help users discover new businesses, and ways to simplify and improve the entire shopping experience. Square does this very well and arguably does it better than its competitors.

Not surprising when the guy behind Square is the guy who created twitter.

As Business Insider headlined it, Social Will Move Mobile Payments to the Next Level:

Social networks increasingly influence behavior  and thinking.  The social commerce movement is already in full swing with the likes of Shoedazzle, goodreads, and the celebrity-driven shopping service OpenSky. Of course, Dorsey gets that and will likely facilitate social connections with Twitter and others. That social momentum will grease the skids for a mobile payment and commerce explosion.

The idea of payments integrated with mobile and all linked to social media is the tenet of Movenbank, Brett King’s new venture.

If you’re not familiar with Movenbank, Payment Eye sums up their proposition well:

Mobile financial services company Movenbank has raised USD2.41 million in seed funding from Anthemis Group, Raptor Ventures and angel investors. The firm, based in New York, powers mobile banking and payment services through its partnerships with banks, mobile manufacturers, consumer credit groups and social media companies. In addition, Movenbank is launching "CRED", a credibility scoring system that combines traditional credit data with social media data to help users monitor their financial health. The company plans to use the new funding to invest in its team and further develop CRED.

Admittedly, it’s taken Movenbank way longer than expected to get to this stage, having first been launched by Brett at last year’s SIBOS, so it’ll be interesting to see where the venture goes.  Nevertheless, I like the CREDscore concept, a similar concept to the trust score concept I was touting at SIBOS 2009, so good luck to them.  Oh, and if you didn’t see it, here’s the video:

What all of this shows is that finance is being changed dramatically by mobile technologies.

As everyone knows, or should know, technology is often predicted to change things faster and less dramatically than they achieve but, when they do achieve such dramatic change, it is often far more radical and has a far longer term impact on industries than anticipated.

That’s what’s happening with mobile technologies in banking …

  • According to KPMG, mobile payments are set to hit £591bn by 2015
  • Juniper Research reckon that mobile appliances will process 30% of all ecommerce transactions by 2017; whilst
  • Gartner has forecast that mobile transaction values will exceed $171.5 billion this year, up nearly 62 percent from 2011, and grow to $617 billion by 2016, with more than 448 million device users participating;

… so keep watching this space.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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