The Official blog of Dark Matter, Inc.

Source: JENNA WORTHAM, New York Times, May 11, 2011

Visa is taking another big step in its continuing efforts to create a universal digital wallet.

On Wednesday, the company announced plans to introduce a one-click payment system that will allow Visa customers to sign up for a set of credentials that will allow them to pay for items online with a single click.

Jim McCarthy, the head of global products at Visa, said that the company was trying to simplify the process of buying items online or on a mobile site, which can be cumbersome for people who have to re-enter their card numbers and personal information each time they want to make a purchase online.

“E-commerce is our fastest growing channel,” said Mr. McCarthy. “We know we can do a lot to improve the experience in the e-commerce environment.”

People can buy things with one click at a particular site, say Amazon.com. But they can’t yet do it across the Web. Visa’s new feature reduces the multitude of ways a consumer might want to pay for an item — whether with a Visa check card, a PayPal account or some other means — into a single log-in and password. All of the information is stored in Visa’s secured servers so that users only have to sign in to pay for their purchase.

Mr. McCarthy said the service would be introduced to consumers in the United States and Canada by the year-end holiday shopping season.

Visa has also been testing a system that lets users pay for items with an application that uses “near-field communication” technology on a mobile device to process a payment. This one-click system will also be wrapped into that service when it is introduced more broadly, the company said. The company says that a customer’s entire financial history could be securely stored in one spot, along with frequent-flier accounts, medical benefits, even appliance warranty information from Best Buy, replacing the jumble of account information that most people have stored in different locations — on and offline.

The first users of the service will probably be online gamers. The service will be introduced in social and online games, allowing Visa customers to buy virtual goods. Eventually, Mr. McCarthy said, the company will introduce it “broadly to e-commerce merchants, mobile and social commerce developers who will allow consumers to check out of a site with a single click.” Visa even plans to make the underlying code, or A.P.I., available to third-party developers who want to install the features on their payment Web sites.

Visa executives said the plan was the result of two strategic acquisitions that the company made over the last several months — PlaySpan, a start-up that lets people pay for virtual goods in games, and CyberSource, an e-payments company. Representatives at Visa said it was working with several banking partners, but did not specify which ones.

Visa faces stiff competition as it ramps up its online and mobile offerings. American Express and other credit card issuers are fast at work developing and adopting their own solutions. Mobile carriers have also struggled to bring their own solutions to market, but it is not yet clear when or if, they will debut.

“We’re trying to get ahead of the curve here,” said Mr. McCarthy.

Source: Bloomberg,  Matthew Campbell and Jonathan Browning - Feb 20, 2011 3:01 PM PT

Deutsche Telekom AG, France Telecom SA and other mobile operators, who lost the battle for online applications stores to Apple Inc. and Google Inc., say they have a fighting chance of winning the corner convenience store.

The operators, along with Google and credit card providers including Visa Inc., are scrambling to offer so-called near- field communication payment systems, which will let people buy everything from milk and butter to clothes with a swipe of their smartphone. NFC may be the last chance for operators to avoid being simple conduits of other companies’ electronic commerce.

“Google’s massive, but Google does not have a billing relationship with 99 percent of its customers,” Deutsche Telekom Chief Technology and Innovation Officer Ed Kozel said in an interview last week. “That’s our opportunity.”

The stakes for losing out on this business development are huge, with NFC payments — which could potentially replace many cash registers and credit cards — likely to account for a third of the $1.13 trillion global market in mobile transactions by 2014, according to IE Market Research.

Operators, who “were not as good as the Internet players” for online apps, have an opportunity to get back in the game, said Philippe Vallee, an executive vice president at SIM-card maker Gemalto SA. With NFC, “they can become the applications portal for the secure wallet.”

Mobile Experiments

Deutsche Telekom may buy a payment-processing company for its NFC project or partner with a financial institution, Kozel said. France Telecom, along with other French mobile operators, in May began an NFC experiment in the southern city of Nice. Chief Executive Officer Stephane Richard said in December the Paris-based company is offering new SIM cards for contactless mobile services and expects to have 500,000 clients this year.

For Google, whose Android operating system is activated by about 300,000 new users a day, mobile payments are a “mega- scale” opportunity, CEO Eric Schmidt said at the Mobile World Congress in Barcelona on Feb. 15.

Google, which got 96 percent of its $29.3 billion in sales last year from advertising, is seeking other sources of revenue. The search-engine owner’s flagship Android smartphone, the Samsung Electronics Co Ltd.-made Nexus S, is one of the first commercially available devices with NFC technology installed.

Apple recently hired Benjamin Vigier, an NFC expert, from mobile-payments startup mFoundry, sparking speculation the iPhone maker also has NFC plans. Apple already has an extensive billing system through its iTunes entertainment and apps portal. Still, Apple’s preference for proprietary systems may be a hurdle, said Deutsche Telekom’s Kozel.

Daunting Investment

“Do you think any company could be successful with a vendor-specific NFC solution — Apple terminals, Apple everything?” he asked. “Do you think they could succeed in the marketplace? That would be difficult.”

On top of transaction fees, handlers of mobile transactions will aim to earn revenue from targeted advertising and offers using discount services like those provided by Groupon Inc. Credit card, phone, and software companies are also exploring how to offer easy payments between individuals, or practical services like dividing restaurant bills between mobile devices.

Still, taking full advantage of the growth of NFC payments may require a daunting series of investments for any one type of company. A commercially viable NFC system will require the physical infrastructure of an entirely new way of paying for goods — point-of-sale terminals and NFC equipment in handsets – - along with software, security, and processing platforms.

The scale of those investments makes it unlikely phone companies can go it alone, said Bill Gajda, the head of mobile innovation for San Francisco-based Visa.

‘Big Job’

“I’d be interested to see if any operator goes as far as trying to process payments,” he said. “That’s a big job. The best route forward to operators is to work with banks and payment companies. At the time of transaction, do you really want to do dispute resolution, risk, fraud? You don’t. Let the payment companies do what they do.”

Late last year, U.S. carriers AT&T Inc., Verizon Wireless, and Deutsche Telekom’s T-Mobile unit began efforts to build a joint national payments network, ISIS. The system will be made available to all banks and merchants with help from Discover Financial Services and Barclays Plc — posing a possible threat to parallel efforts by Visa and Mastercard Inc.

The widening availability of NFC-capable handsets is pushing companies looking for a piece of the market to move more quickly. In addition to the Nexus S, “many if not most” new Research in Motion Inc. BlackBerry devices will be NFC-capable this year, and Apple’s next iPhone model may include the technology.

No Floodgate

As a critical mass of users builds, operators are pointing to their experience with secure billing — and existing access to customers’ bank details — as an advantage in the NFC race.

To be sure, a widespread move to universal mobile payment is far from certain. A “long tail” of merchants may go years before installing payment terminals, even if major retailers move to do so in the next two to three years, Visa’s Gajda said. NFC’s growth may also be limited by the spread of smartphones capable of handling the technology.

Some similar payment systems have had only slow uptake. Contactless credit card payments, using existing technologies such as MasterCard’s PayPass and Visa’s payWave, are “still pretty niche in terms of usage,” said Pete Cunningham, an analyst at research firm Canalys in Reading, U.K.

While contactless card payments are slowly becoming more popular, operators shouldn’t expect a sudden revenue boom from payments, he added.

“It’s not going to be a floodgate.”

The world’s leading smartphone makers are rapidly accelerating their adoption of mobile payment technologies that will enable their handsets and mobile operating systems to better compete in the not so distant future – a future, many believe, that will be dominated by mobile payments across the retail landscape.

Two sources close to Microsoft indicate that Microsoft is presently – and aggressively – working toward a version of its Windows Phone software that will deliver mobile payment functionality.

The development could be a powerful one for Microsoft, which currently boasts only 5.5% of the competitive mobile operating system market. The first devices sporting mobile-payment technology could debut as early as this year, the sources tell Bloomberg.

As it now stands, Microsoft controls 14 patents referencing NFC. That’s according to the U.S. Patent Office.

Microsoft is likely to get support in its mobile payments effort from Nokia Oyj, the handset maker that recently said it will use Windows Phone software on its devices. Nokia said it will make NFC a standard feature of its 2011 smartphones based on the Symbian operating system.

ABI Research estimates that NFC-enabled phones will double in 2012. Gartner, meanwhile, predicts that by 2014, 340 million global wireless users will use mobile payments.

Amazon may soon join the bustling crowd of mobile and tech giants clamoring to adopt mobile payment systems as rapidly as possible.

And it’s no April Fool’s prank.

According to sources speaking in confidence with Bloomberg News, Amazon.com may be poised to introduce a new service that would allow consumers pay for goods in physical stores using their mobile phones.

The company’s Amazon Payments unit is exploring whether to start a service based on so-called near-field-communication technology, said the people, who asked not to be named because the project isn’t public.

With time it has become increasingly clear that Amazon is eager to parlay its “dominance in Internet retailing” into mobile commerce.

According to the latest projections from Gartner, by 2014, some 340 million global mobile users will use some variety of mobile payments. All told, those transactions will total $245 billion (it was only $32 billion in 2010).

The rumor mill further notes that Amazon may even be considering the creation of “NFC-based marketing services.” How would it work? The example provided illustrates a consumer shopping for jeans “who can’t find the right size in a retail store might be able to tap a handset against the item’s NFC tag to locate the correct item for order through Amazon.com.”

Why this matters: The planned payment system would allow Google to offer retailers more data about their customers and help them target ads and discount offers to mobile-device users near their stores.

Google Inc. is teaming up with MasterCard Inc. and Citigroup Inc. to embed technology in Android mobile devices that would allow consumers to make purchases by waving their smartphones in front of a small reader at the checkout counter, according to people familiar with the matter.

The Internet giant is aiming to make mobile payments easier in a bid to boost its advertising business. The planned payment system would allow Google to offer retailers more data about their customers and help them target ads and discount offers to mobile-device users near their stores, these people said. Google isn’t expected to get a cut of the transaction fees.

The project, which is in its early stages, would allow holders of Citigroup-issued debit and credit cards to pay for purchases by activating a mobile-payment application developed for one current model and many coming models of Android phones. The idea is to turn the phones into a kind of electronic wallet.

These phone users also would be able to get targeted ads or discount offers, which Google hopes to sell to local merchants. They also could manage credit-card accounts and track spending through an application on their smartphone, the people said.

The venture also involves VeriFone Systems Inc., which makes credit-card readers for cash registers. VeriFone would roll out more so-called contact-less devices, or readers that enable consumers to pay with a wave or tap of a credit or debit card. The readers also would allow people to pay by tapping their smartphones, said the people familiar with the matter.

The credit-card readers involved all use “near field communication” technology that is already in place at thousands of merchants nationwide. Today, customers who have credit cards embedded with that technology have the option of waving a card in front of a reader, instead of using a traditional swipe method.

Google’s Android mobile-device software, which powers hundreds of different devices, supports this technology.

The planned payment system would be unlikely to put consumers at any greater financial risks. As with conventional credit-card transactions, the card companies would cover the cost of unauthorized purchases. Nor is the NFC technology itself particularly vulnerable.

“Because it’s contact-less there’s a perception people can grab it from thin air, but it’s actually a more sophisticated technology than credit cards with a magnetic stripe, making it more difficult to steal a consumer’s payment information,” said Nick Holland, a mobile-transactions analyst at Yankee Group.

The Google-backed system, which is expected to be released this year, marks the latest effort to broaden the uses of smartphones for everyday activities—from chatting to emailing to shopping. The telecom, technology and financial-services industries all are looking for strategies to make them leaders in the evolving business of getting consumers to pay for products with their phones. Offering that option could allow device makers such as Apple Inc. to sell more of their phones.

Wireless carriers Verizon Wireless—a venture of Vodafone Group PLC and Verizon Communications Inc.—AT&T Inc. and T-Mobile USA said last fall that they would team up on a venture, dubbed Isis, to enable customers to pay for goods with their smartphones. Discover Financial Services Inc. will process those payments, potentially eliminating the need to carry cash, credit and debit cards, reward cards and transit passes.

Google’s move is part of its quest to sell ads and other services to local retailers, a growth frontier for Internet companies. Google executives, including outgoing Chief Executive Eric Schmidt, haven’t been shy about saying that Android devices could serve as payment facilitators, thanks to NFC technology, though they haven’t specified what Google’s role will be.

“A phone is a lot smarter than a card,” said Doug Bergeron, VeriFone’s chief executive, in an interview. “It opens the door to a rich experience at the point of sale that retailers really covet.”

He declined to comment on his company’s relationship with Google.

Mr. Bergeron added that he also expects Apple to embed NFC technology in future iPhones. BlackBerry maker Research in Motion Ltd. has said its future phones would support NFC.

A spokeswoman for Apple declined to comment.

The market for mobile payments is expected to grow significantly in the next several years, reaching $618 billion by 2016, according to a report by consulting firm Edgar, Dunn & Co. and sponsored by MasterCard.

A report issued this month by the Federal Reserve cited industry estimates that there were 70 million contact-less devices, including credit and debit cards, and 150,000 contact-less readers installed by merchants in the U.S.

While most of the financial activity that now takes place on smartphones involves people engaging in transactions with their bank, the credit-card industry has spent millions of dollars to issue new plastic with the contact-less chip that speeds the check-out process.

The technology has been slow to catch on, however, partly because many consumers remain unaware of it, and they still need to pull out their card to use it.

MasterCard and rival Visa Inc. have been courting customers with contact-less programs and mobile-payment pilot tests. Visa and several large banks are testing mobile-payment programs that allow consumers to make contact-less payments with an existing smartphone equipped with a special chip card and antenna.

If Google’s program with MasterCard and Citigroup is successful, it could potentially expand to other card issuers and networks. In addition to attracting new consumers through ads or offers and seeing instant results, the program would offer retailers access to data about customers so they would be able to market future offers to their devices, said people familiar with the matter.

That potential, however, could raise privacy concerns.

Unlike some other forms of local advertising, the system would allow Google to prove whether ads targeted at certain groups of people led directly to in-store sales, these people said.

Google, by helping to facilitate transactions and redemptions of coupons and discounts, may also be able to gain insight into consumer-spending behavior, said a person familiar with the matter.

A representative of Wal-Mart Stores Inc. confirmed the company had a briefing with Google about the technology, but characterized it as very preliminary discussions and said it hasn’t been asked to adopt it.

The local business ad market is a massive opportunity that has begun to be exploited by Internet companies such as Groupon Inc., social network Facebook Inc., and business-reviews site Yelp Inc.

Separate from ad spending by large retailers, small and medium-sized businesses with 100 or fewer employees collectively spent $35 billion to $40 billion in local advertising in the U.S. in 2009, estimates BIA/Kelsey, a local-media advisory firm.