A Mobile Way to Pay

Many small and midsize businesses looking for an easier way to accept credit cards from customers, make payments to suppliers and perform other financial transactions can now turn to their cell phones to handle these common tasks.

Gartner predicts that worldwide usage of handheld devices for such purposes is poised to double. According to Sandy Shen, research director at Gartner, mobile-payment usage is expected to rise from 1.7 percent to 3 percent in North America between 2009 and 2012. In real numbers, that’s tens of millions of users.

Whether it’s opening new opportunities for consumers in Montreal or SMBs in Vancouver, the mobile-payment market is quickly expanding, as giant partnerships among vendors and carriers take root and dozens of startups throw their hats into the ring, offering downloadable applets and other products. With such technologies, processes that in the past may have lasted days — say, waiting for a check to clear or getting approval to pay an invoice — now take only seconds to complete.

Consider EnStream LP, a venture involving Canada’s three wireless carriers — Bell Mobility, Rogers and TELUS. Under the auspices of EnStream, these entities are jointly developing and marketing Zoompass, a mobile commerce application that lets people send and receive money anywhere across Canada using their mobile devices.

Although EnStream designed Zoompass with consumer users in mind, it agrees that the product will be attractive to SMBs. “They have the most to gain in this space,” says Aran Hamilton, vice president of strategic partnerships for the Toronto-based company. “Being able to allow small and midsize businesses to accept mobile payments to their phones might reduce a lot of infrastructure.”

Mobile-payment technology in Eastern Europe, the Middle East and Africa, as well as Latin America, is expected to exceed 3 percent penetration by 2012, slightly outpacing North American adoption
SOURCE: Gartner

For now, Zoompass permits what Hamilton calls “the merging of the phone and the wallet” — person-to-person mobile payments via a free downloadable application that works on a wide range of devices. Users set up a Zoompass account first. Then, they link a credit card or a bank account to that account. (EnStream is attaining PCI certification.)

Purchases using Zoompass are free, and so is receiving money transfers. The company takes a 50-cent fee per person-to-person transfer and a 3.5 percent fee for money sent from a credit card.

EnStream gives users Zoompass prepaid cards so that they can easily access money in their Zoompass accounts. The prepaid card is accepted anywhere MasterCard is accepted, including online.

EnStream’s all-Linux shop is the engine behind Zoompass. “We’re a big fan of open source,” says Fabian Ubogi, a systems engineer at EnStream.

Other elements of the network include Cisco Systems and F5 Networks hardware, as well as Hewlett-Packard servers. A nearby collocation facility hosts the platform and has room to expand as transactions do. EnStream mirrors the entire setup elsewhere for redundancy and disaster recovery.

A Growing Field

Other manufacturers are also joining the mobile-payment technology realm. Intuit, the developer of Quicken, offers GoPayment, a processing service that lets businesses accept credit card payments through phones and PDAs. And Chicago startup mPayy is positioning its payment system to work across websites and, with the forthcoming Version 3.0, over cell phones and other devices. EnStream, mPayy and other mobile-payment providers also permit users to transfer funds into bank accounts.

When Intuit launched GoPayment in May, it focused on users such as artists selling work at street fairs and tradesmen out on calls all day, says Mary Shapero, product manager at Intuit. As with Zoompass, GoPayment users create accounts with Intuit, and then download the application to their cell phones. An electrician who has completed a repair job can enter a customer’s credit card number into his phone to authorize payment or swipe the card with a separately sold reader.

Conrad Sheehan, founder and CEO of mPayy, says his company’s applet can be embedded into a MySpace or Facebook page to facilitate payments through social media. “Our goal is to try to eliminate as many layers as possible between a buyer and a seller,” Sheehan says.

In the case of mPayy, a buyer logs into her account using her cell phone number, enters the dollar amount of the purchase and hits “submit.” The seller receives a text message alerting them of the incoming payment.

Rather than process a credit card transaction, mPayy uses the Automated ClearingHouse network that serves banks to transmit a deposit into a seller’s mPayy account. MPayy takes 2 percent of the total transaction value plus 20 cents, while PayPal, for example, takes 2.9 percent plus 30 cents.

Modest fees and the promise of quick payment add up to substantial appeal for SMBs wishing to process payments using mobile devices. On average, “small businesses carry $1,500 in overdue payments each month,” says Shapero. “Paying by mobile device helps them get paid quickly and easily.”

To realize the full promise of mobile-payment technology, services “need to provide good value, such as access to payment services where there is no alternative, lower service charges and more efficient transactions,” Gartner’s Shen notes.