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Was 2011 the Year of Mobile Payments?

At the beginning of the year, 2011 was heralded as "The Year of Mobile Payments." Many analysts predicted that by the end of the year we would be well on our way toward a wide adoption of some form of mobile money. They expected consumers to have a plethora of choices, and it would not be uncommon to see someone whip out a phone instead of a wallet when it came time to settle a bill.

Obviously, that's not the case. Plastic is as prevalent as ever. But even though we haven't ditched real wallets for their mobile equivalents, a lot did happen in the world of mobile payments in 2011:


The story of mobile payments in 2011 begins with Starbucks and its ingenious mobile payment application. Eschewing fancy tech for relatively pedestrian barcodes at the point of sale, the Starbucks app is a tidy little mobile payment method that does what it does with a minimum of fuss and a maximum of utility. It's simple to use and fast at the point of sale — two qualities mobile payments will need to supplant cash and cards. Additionally, by making its mobile payments closed-loop, and keeping the transactions on its own systems, Starbucks didn't need to partner with a carrier or card brand to complicate things. 

The app has become the early standard for mobile payment success and has demonstrated that customers will adopt mobile payments at the point of sale. Rolled out in January, the app was used for 3 million transactions in its first three months – and that was before it even had an Android version. In 11 months the app has now accounted for more than 26 million transactions at Starbucks locations across the U.S. It has been made available in Canada now and will be launched in the U.K. and Ireland in January.


While Starbucks was letting customers pay with their mobile phones, Square was getting merchants paid with their mobile phones. With a streamlined app and clever credit card reader, Square solved a real problem for small businesses and made it simple for even the tiniest merchants to accept credit cards.  

Gauging by Square's numbers, there were a lot of those tiny merchants looking for a solution. So far Square has registered over one million merchants and is processing around $11 million per day.

Square still has some issues to solve, most notably in encrypting transactions from end-to-end, but they get credit for making payments interesting in 2011. Add in Square's iPad-based cash register and mobile wallet solutions launched in May and you have a company that's rethinking the way merchants and customers interact at the point of sale.  That may be why Square has wrapped up $137 million in funding, including investments from Visa and Sir Richard Branson, and has a valuation of $1 billion. 


Square isn't the only start-up rethinking the way we pay for things. Another prime example is Dwolla, a Des Moines, Iowa-based mobile payment company. In March, Dwolla launched services aimed at getting consumers to give up their cards. Like Square, Dwolla wanted to end the byzantine rules and fees imposed on merchants by credit card companies. Its solution: get rid of credit cards altogether. Dwolla lets customers pay from prefunded accounts at the point of sale using a phone's GPS to place the customer in merchant locations. And all Dwolla charges is merchants is 25 cents for every transaction over $10, no complicated interchange tables and fees. 

Other mobile payment start-ups entering the market this year include Cimbal, TabbedOutPressPay and a host of others. It's more than likely that many, if not most, of these start-ups won't succeed in the long run. That's the nature of start-ups. (For instance, Bling Nation, a mobile payment start-up that garnered considerable attention last year, suspended its services in June to "reevaluate its business model.") But one of these companies may have just what it takes to cause a major disruption to payments and be the next PayPal.


As for PayPal, 2011 witnessed its attempts to go from being only a provider of online payments to a player in the offline payment world. Ninety percent of retail in the U.S. is still carried out in "old-fashioned" brick-and-mortar stores, and PayPal is intent on getting a piece of those transactions.

In July, PayPal's president Scott Thompson predicted the demise of the physical wallet in 2015 and the company seems to be actively working towards making that happen. PayPal's parent company eBay made several acquisitions in the mobile payment space, most notably direct carrier biller Zong, and PayPal forged alliances with NCR and mFoundry to provide mobile banking and financial services. Additionally, PayPal unveiled an offline strategy to eventually allow retailers the ability to accept PayPal at their brick-and-mortar locatons. The company even opened a temporary store in Manhattan to show retailers just how its offline offerings will work.

The Card Brands

Mobile payments in 2011 hasn't been just about start-ups and disruption. As many of the mobile payment start-ups can attest, making a payment happen at the point of sale is no easy task and the major card brands — Visa, MasterCard, American Express and Discover — have a head start. 2011 showed that the card brands know the future is mobile and they were active in trying to extend their influence over that channel

American Express launched Serve, a mobile payment platform that offers offline, online and peer-to-peer payments. Visa released its own peer-to-peer platform and mobile payment strategy built around connecting mobile money programs in developing markets. MasterCard partnered on several mobile payment programs including the Quick Tap program in the U.K. and Google Wallet in the U.S. And even Discover was active in mobile payments as the original partner to sign on with Isis, the U.S. mobile payment joint venture of Verizon Wireless, AT&T and T-Mobile.

The Mobile Network Operators

Not willing to sit back and be "dumb pipes" while all those mobile transactions crossed their networks, the wireless carriers made their own play for mobile payments in 2011. The pull of mobile payments was so tantalizing that mobile rivals announced this year that they would work together. Competing mobile operators in France, Germany, the U.K., Italy, Taiwan and elsewhere formed joint ventures to create national mobile payment networks. At this point, most are still figuring out how to work together with only France's Buyster actually online.   

Isis, the American version of the mobile payment JV phenomenon, continued working this year toward an expected 2012 launch. Among other announcements the company formed partnerships with the major card brands, a mobile wallet provider and handset manufacturers. And while Isis' own product is still trying to get off the ground, that doesn't mean it's not impacting the market. Isis partner Verizon Wireless requested Google Wallet be disabled on one of the a handset, likely in an attempt to hamper an Isis competitor.

Google Wallet

And as for that competitor, May saw the launch of Google Wallet, a real, honest-to-goodness "tap and go" mobile payment solution for everybody. The company assembled all the necessary pieces to make a mobile payment happen at the point of sale including a carrier (Sprint), handset manufacturer (Samsung), card brand (MasterCard), TSM and merchant acquirer (First Data), and card issuer (Citi). Add in other companies like numerous point of sale manufacturers and retailers to accept Google Wallet and the effort was enormous. Google pulled it off in less than a year. 

Google hasn't publicly discussed how many consumers have downloaded Google Wallet or are actively using it, but even if the numbers are modest, what Google accomplished by being first to market with a working mobile payment solution is not.

Even if 2011 didn't live up to the hype of being the inflection point where mobile payments took off, there were plenty of stories this year to show that mobile payments are coming, albeit slowly. It may not have been the year in mobile payments, but it certainly was a year in mobile payments. 

As always, Mobile Payments Today invites any comments. What do you think about what happened in mobile payments in 2011? What were the big stories? What were small stories that should have been bigger (or might lead to bigger things in 2012)? Please feel free to leave any feedback in the comments section below. Thanks! -- James

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User Comments – Give us your opinion!
  • Greg Serv
    The current incarnation of the dot-com madness will be no different from the previous one in that it will produce real companies which will be successful long after the bubble has burst. Square will be among them. Unlike LinkedIn and Skype, to name just a couple, Square shows you exactly how it will make real money. A while back we did the numbers on how profitable Square is and our estimate showed that for every $1 million processed, Square gets about $13,000 – $14,000 in revenues, but that was before the start-up dropped the per-transaction fee from its discount rate, which will reduce this total by at least a couple of thousand dollars. Still, Square probably gets about a cent for every dollar it processes.
  • Lars Aase
    Is Square mobile payment? I thought it was a mobile payment terminal for card payments..
  • James Wester
    Lars -- Great question and a very valid point, especially considering we have been clear about separating out mobile POS as a distinct subset within mobile payments. (Here's a link to an infographic we did a few months ago explaining how we look at the different types of mobile payments: But even though it's not the same as a tap-and-go type payment, we cover Square for two reasons:

    1 - Mobile POS is a huge part of the "mobile money" story. Mobile POS systems are lowering the bar for who can use electronic payments by leveraging mobile technology. Electronic payments are becoming less about "customers paying merchants" and more about "party 1 paying party 2 using electronic currency." That's a huge step in the eventual widespread adoption of mobile payments.

    2 Square is the prime example of mobile POS. Though its self-reported numbers are never well-defined (i.e. showing total merchants and not active merchants, or showing maximum daily processing and not average daily processing), Square is succeeding in getting the technology in the hands of users.

    I should probably add that Square DOES have a mobile wallet product as well. As I said in the piece, Square's mobile wallet and cash register show a company "rethinking the way merchants and customers interact at the point of sale."

    Greg -- Great work on running the numbers, although I might quibble a little bit on them (e.g. as the merchant of record I'm not sure their cut is that high). I would also question the current valuation even based on your higher numbers, but would love to discuss that as well. Feel free to reach out via the "contact us" form and click on "I would like to contact one of your writers." That will route your email and contact info to me.

    Thank you both for your feedback!

    James Wester
  • Jason Carey
    Has anybody looked at the true first mobile wallet offered by swipe pay ? It seems the one thing everybody has over looked is none of these mobile wallets that use NFC are safe ? Forget about processing fees what will happen to the increase in fraud ?
    I thought the whole idea was to make payments more secure and safer for the consumer and more excess able. The swipe pay systems allows consumers to pay for goods online in a retailer and the use at ATM.... Worth a look.
  • Abraham Paul
    It is suicidal for Telcos to allow banking and other industries to hijack 'Pay by Phone' Services.
    Please read my posting on 'Money through Mobile' (MTM). and
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