Mobile payment technologies are finally vaulting forward in the U.S. after years of slow advances.
All three of those approaches require a smartphone that's loaded with an app to communicate with a terminal at a store or other location via a near field communications (NFC) chip or Bluetooth wireless.
However, PayPal is already enabling mobile payments in the cloud for 50 million mobile users without the need for a physical phone at the point of purchase. PayPal customers buying goods at The Home Depot and other stores can simply enter a mobile phone number and PIN at a checkout keypad to transfer money from a PayPal account linked to a bank account or a credit card.
PayPal recently announced its customers will be able to use their accounts to buy goods at stores where the Discover credit card is honored starting in the second quarter of 2013.
Meanwhile, Starbucks allows customers to pay for coffee by using its in-store optical scanners at checkout to read a user's smartphone screen to deduct money from a Starbucks card. Dunkin' Donuts recently announced a similar technology.
Various other mobile payment approaches have recently emerged, including the Merchant Customer Exchange, a mobile payments network announced Aug. 15 that will rely on smartphones and some unnamed technology. The founders include retail heavyweights Best Buy, Walmart, Target and 7-Eleven.
With so many new mobile payment systems surfacing, analysts say they could pose too many choices and will only confuse the buying public. Since the U.S. already has a number of credit card options, including Visa, MasterCard, American Express and Discover, some users won't be motivated to try another payment option linked to a smartphone.
Too many choices
"The fundamental problem with mobile payments in this country, compared to other parts of the world, is that users have so many options already to pay for things," said Jack Gold, an analyst at J. Gold Associates. "If I have five credit cards in my wallet, do I need to have one or more in my phone as well? And do I trust the issuer of the mobile credit card enough to use that service? And if I use my phone to pay, is that really all that much easier than pulling a card out of my wallet?"
Gold said there will be some "gadget freaks" who will use smartphones with mobile payment apps "just because it's cool." In order for mobile payments to go mainstream, he said the apps and steps required have to be "really easy to use," and the service has to be trusted and sufficiently unique that a consumer cannot get in other ways.
Because of these obstacles, mobile payments will take several more years to develop in North America, Gold predicted.
Gold's sentiment is shared by other analysts, who note that consumer awareness of mobile apps and payment services is still very low.
Some major U.S retailers are more interested than consumers in mobile payments technology and apps, in part to potentially lower the fees that they pay to the banks and credit card companies. Home Depot adopted the PayPal in-store payment system partly to lower transactions costs, noting "abusive" interchange fees charged by banks and credit card companies. Such fees paid by merchants to banks can be as high as 12% per transaction.
Because credit card companies and the banks they represent are concerned about losing customers in coming years to other creditors, such as the merchants or wireless carriers, all the major credit card companies are revving up support for mobile wallet technologies, analysts said.
Avivah Litan, an analyst at Gartner, recently said that various mobile payment systems won't hurt credit card companies and banks for five years, but could make a significant impact in a decade.
Dunkin' Donuts mobile app
At Dunkin' Donuts, the enthusiasm is nonetheless high for a new mobile app for buying coffee and other items. The Dunkin' App, announced Aug. 16, uses money stored on a Dunkin' Donuts card that is connected to a customer's smartphone, which runs the Dunkin' App downloaded from the Google Play store or Apple's App Store. Users authorize the payment via the phone, then scan the smartphone screen over an optical laser reader at checkout.
Scott Hudler, vice president of global consumer engagement at Dunkin', said via email that it was "essential to leverage the existing laser scanners in Dunkin' Donuts restaurants to provide guests with the speed and convenience of using the mobile payment app."
The technology will mean customers can make a Dunkin' run "more quickly than ever before," he added. Similar technology used by Starbucks didn't factor into the new Dunkin' offering, he said.
The app will help Dunkin' franchisees see reduced transaction fee costs, he said. "We are committed to offer the best guest experience and enabling our franchisees to run their restaurants as efficiently and effectively as possible," Hudler said.
Hudler said Dunkin' is "eager" to work with both Google and Apple in the future as both companies offer or enhance mobile payment platforms. "The Dunkin' App will continue to evolve, and we expect to release upgraded versions with new features a few times a year," Hudler said.
Google Wallet works with NFC on several smartphones sold by Sprint and by Google itself that interact with thousands of payment terminals nationwide. NFC requires a near touch of a smartphone to a terminal to transfer a payment.
On the other hand, Apple is rumored to be supporting Bluetooth 4.0 to make payment transfers from an app running on its next-generation iPhone, which would allow payments from a much farther distance, such as the center of a large store yards from a checkout counter.
Isis, a consortium of Verizon Wireless, AT&T and T-Mobile USA, will also rely on NFC in smartphones. Isis puts the payment security element on a phone SIM card, a fundamental difference from Google, which embeds the security element in a chip in the phone's core instead.
Isis has announced various retailers and gas station pump payments with its NFC smartphones. Videos on the Isis Web site show various demonstrations of the payment technology, although it isn't clear when the promised "summer" launch in Salt Lake City and Austin will take place, and Isis officials won't say.
Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen or subscribe to Matt's RSS feed. His email address is firstname.lastname@example.org.
Read more about mobile payments in Computerworld's Mobile Payments Topic Center.