Mobile Payment: NFC, Google Wallet, and Square

A few weeks ago I was thinking about Square’s business model, a company focused on mobile payments. I became interested on the subject, and I knew that I would finally end up writing a short article about this.

At the moment, I see different ways for mobile payment. The most important and surely with more investment is the NFC (Near Field Communication) and applications that use this technology (of course we are talking mostly about Google Wallet). Then there’s Square, a software based one, which is already established and maybe temporary with a more dominant position within the U.S.

A little about NFC (http://en.wikipedia.org/wiki/Near_field_communication)

Briefly, NFC is a wireless technology that allows encrypted communication in a small space (about 10 cms).

Sure, transactions are possible through this technology and are completely safe. Although payment isn’t the only possible application, it will be important especially in situations of trading documentation, contacts, photos, or even for entertainment using it in the multiplayer mode of some videogames.

Behind this new technology there are communications and tech companies (Google, Nokia, Sony, Philips, Telefónica Movistar, Vodafone, Orange), and also financial ones (La Caixa, Banco Santander, Citibank, Visa, Mastercard), etc. There are smartphones with NFC from Android, Blackberry, Nokia, and many others. But available right now, I’ve only seen the Google Nexus S 4G.

According to experts, by the year 2014, one in five cell phones will have NFC tech, and transactions will exceed 50.000 million dollars.

The killer application within this technology will be Google Wallet. It was presented in May 2011 and released first version of the application on September 2011. It has been supported by many known shops at the United States. And not avoided controversy: Paypal denounced espionage and appropriation of secrets through 2 of its employees.

Also this week we read about an alliance between Banco Santander and Orange to develop what will be the first multi-brand mobile payment system in Spain.

There is one final variant, SIM cards with NFC. But in the end, business is within selling new cellphones.

One last detail, iPhone 4 and 4S doesn’t incorporate NFC, and has been rumored to come inside the next iPhone 5, but it seems that definitely it won’t.

What is Square? (Squareup.com)

It was on year 2009 when a friend of Jack Dorsey (founder and owner of Twitter), unable to finish a sale without accepting credit cards told him the problem. There began the journey of Square.

Square is a company based on the **Brokerage business model. It was established permanently in 2010, same year it was released his first version. It currently has over 100 employees and is a billion dollar company, and its application is available for iOS and Android.

There are basically two ways of business:

Square Card Reader: You must register as a shop and they give you a free credit card reader compatible with your mobile device. It is said that the shape of the card reader gives Square its name.

Square Card Case: You sign up and store your credit card. You pay identifying yourself or just automatically, if shop/store allows Square payment.

Square has achieved excellent reviews, both for simplicity and ease of use, and for its website.

Square earns a 2.75% commission per transaction, but they defend that issue saying that the final amount between bank and credit card rates is usually higher. Also, the payment are received the following day.

Obviously Square is PCI Complaint and Verisign certified.

It seems that one of the strengths of Square has been to be released before NFC technology, and especially after the recent security issue found in Google Wallet.

So, bye bye to Cards?

Changes that radical are a matter of years.

But of course in a market as the mobile, where consumers have lost their fear about using mobile payments(mobile ecommerce multiplied its revenue by 6 in Spain), the possibility of using mobile devices such as e-wallets seem to be a success in a close future.

In the next months will see more movement, especially regarding to NFC applications.

The high penetration of the NFC technology has been said as one of the tech predictions for this year 2012.

Lastly, the gossip …

One of the most interesting points is that Apple doesn’t want to incorporate NFC to their terminals.

The new version of Apple’s OS X includes features like Twitter as native applications, and it may not be the only company from Jack Dorsey to enter into Apple’s machines.

In an effort to unite under the same environment all the Apple users, It isn’t a crazy idea to think about a partnership with Square or perhaps a new Apple own payment division via iTunes.

** The Brokerage business model:

Brokerage model aims to bring together buyers and sellers to facilitate transactions of products or services between them. This can occur in both B2B (Business to Business) and B2C (Business to Consumer) or C2C (Consumer to Consumer).
The broker charges a percentage or transaction fee , there are different ways.