With New Devices Making Mobile Payments Easier, Banks Are Getting A Run For Their Money

The advent of mobile payments is changing consumers’ lives—and reshaping the competitive landscape for the companies that provide payments services to merchants.

Several new companies now offer solutions that use smartphones with small attached card readers or QR codes to accept payments. This gives merchants an easy, inexpensive way to get into mobile payments. As a result, these companies may soon be competing with traditional payments providers, such as banks, for merchants’ business. “These new non-bank providers are making the payment space a lot more competitive,” says Obrea Poindexter, a partner at Morrison & Foerster.

The competition is only getting hotter. “As soon as these nonbank providers get established in the payments arena, they are looking for opportunities to expand the financial services they provide,” says Poindexter. For example, some are now offering cash advance services to merchants or enabling person-to-person payments, among other things.

The key is to understand that payments is just one part of a larger experience, says David De Villiers, CEO at the Wonderwill technology firm. His company offers the Zapper solution, which lets merchants accept payments via customers’ phones. But Zapper also provides merchants with tools for rewards, incentives, and marketing programs, using a simple pay-for-use model. “So it’s not just about facilitating the payments. It’s also about allowing the merchant to communicate with its customers to build a community of loyal customers,” he says. “Mobile payments is an enabler, and it’s really important to get it right. But what we’re doing is using mobile commerce to give the small merchant the power of Internet marketing in the physical, bricks-and-mortar world.” As mobile services providers expand their services, they may fall under increased scrutiny. “Mobile service providers that are merely providing the technology to facilitate mobile services should not be subject to the financial services laws,” says Poindexter. “But regulatory agencies are taking a broader interest in mobile financial services—and that bears watching.”