As New iPhone Looms, Mobile Payments “Not for the Faint of Heart”

Heard of the iPhone 6 yet? One of the rumored features is near field communication technology that will enable, among other things, users to pay for items in stores with their smartphones.

It could be a watershed moment for the adoption of mobile payments technology, a crowded yet slow-moving sector. Every year since about 2010, some pundit has said consumers would start paying for everything with their phones, and the multibillion-dollar mobile payments market would explode.

So far, it hasn’t happened.

But with Apple, the world’s biggest tech company, jumping into a fray that already includes Google, PayPal, wireless carriers, and credit-card companies, things could change. Will the iPhone 6 transform the mobile payments landscape? Could a slew of other companies effectively be wiped out with one announcement?

“This is something that will take time—years. I don’t think it’s particularly fatal to anyone,” says Chris Gardner, a co-founder of Paydiant, a Boston-area mobile payments startup. While he calls the iPhone 6 launch a “meaningful event,” he adds, “I don’t believe this is a space that lends itself to a single inflection point.”

But he says, “This is not a space for the faint of heart. The ecosystem is so complex.” Gardner notes that “just processing a payment” takes many steps, and “everyone has their hand out for a piece of the action.” What’s more, there’s a reason why the largest tech companies in the world are jumping into this “big chaotic stew,” he says. It’s because “we are witnessing a once-in-a-generation shift in how people pay for stuff.”

Paydiant, for its part, has been working with big customers like sandwich chain Subway, mobile-wallet consortium MCX, and banks such as Capital One. The 75-person startup, which recently moved headquarters from Wellesley to Newton, MA, builds software for banks and retailers so they can use their own branded apps for payments and marketing.

Like many other companies, Paydiant is betting on providing services further up the chain than just payments—things like loyalty and rewards programs, marketing, and customer analytics.

If the rumors are true, the iPhone 6 features would seem to compete more with the big guys who are trying to become payment networks, like Google and PayPal. Interestingly, credit-card companies including Visa and MasterCard have reportedly been working with Apple so that customers can make mobile payments using cloud-based “tokens” instead of real credit-card numbers.

“They’ve capitulated and recognized that cloud-based payment models are going to proliferate,” Gardner says of credit-card companies.

Another rumor is that Apple’s long-anticipated iWatch will also enable mobile payments. Gardner is less optimistic about the future of the smartwatch market, especially for things like health applications. “I think we live in a post-watch society,” he says. “The smartphone has largely supplanted that. How people use their phones—pictures, videos—that doesn’t translate to a watch.”

Of the big tech companies, PayPal seems to get Gardner’s vote as most likely to succeed in mobile payments. That’s in part because PayPal doesn’t run a huge ad network—unlike Apple and Google—and “so retailers tend to be less petrified of what that means,” he says.

Meanwhile, look for a “slow, steady ramp” in mobile payments adoption, he says, similar to how ATMs and debit cards gradually became mainstream. But, he adds, “Apple will steepen the curve.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and Editor of Xconomy Boston. E-mail him at gthuang [at] xconomy.com. Follow @gthuang

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  • Copernicus

    Wasn’t Subway a Paydiant partner? Did they jump ship for Apple?

  • Evan

    Subway and Paydiant continue to work closely together on the Subway mobile application which includes mobile payments, ordering and loyalty. Subway, like any Paydiant customer, may also decide to accept other mobile payment apps and technologies like Apple Pay or Google Wallet in addition to having their own app.

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