Who will win the mobile payment wars?

Mobile payment has been a massive technology talking point over the past two years as hardware manufacturers wizen up to the fact that more can be done with their products and banks realise that going to an ATM or, even worse, the actual branch is not high on their clients’ priority list.

The uptake in mobile payments is largely Africa’s fault: the majority of people with a mobile phone don’t have access to normal bank accounts; scarcity of resources has led to innovation. According to Portio Research, the number of people using their mobile phones is expected to skyrocket to half a billion, making US$663-billion worth of payments, by 2014.

Visa’s Head of Global Mobile Product Bill Gajda says that there are over 2-billion people in the world with mobile phones that aren’t banked yet with a thousand new people getting phones every minute.

South African company, Fundamo, was recently acquired by Visa for US$100-milion because of the massive opportunity that mobile payments present, not only in emerging markets, but on a global scale. This acquisition activity follows hot on the heels of the success of MPesa which was created with an aim to allow microfinance borrowers to conveniently receive and repay loans using the network of Safaricom airtime resellers.

It has since been transitioned to be run by IBM Global Services on behalf of Vodafone. Kenya has been MPesa’s most successful market with 14-million subscribers and over 28 000 agents, however, bigger and more affluent markets like South Africa haven’t seen the kind of prolific uptake that countries in central Africa have seen — by May 2011 it only had 100 000 customers.

All of the tech talk around mobile payments has been about NFC or Near Field Communication(NFC) technology which is a set of standards used by smartphones to communicate when they’re within a certain proximity (usually centimetres) of one another.

The problem with NFC technology has been its reliance on the correct software and hardware on the client side as well as the retailer side in order to work. On the client side, phones like the Samsung Galaxy S II, some models of Blackberry’s Bold (9900/9790) and Curve (9360/9380) ranges, and LG Optimus are NFC enabled — which is quite limiting. On the retailer side technology rollouts rely largely on the “big two”: Visa and Mastercard. If card terminals are going to be replaced, it has to be at the convenience of these big guns.

Today South African Bank FNB officially launched functionality within its app that allows for geo-mobile payments. This new feature allows users to be within a 500 metre (not centimetre) radius of each other without the need to touch the mobile device against a pay point. The system uses cellular tower triangulation or Wi-Fi to connect, there’s no exchange of banking details and the payment system authenticates based on verification software already in the app, which makes it a lot safer and more convenient to use.

Interestingly, FNB’s move is in stark contrast to its competitor ABSA’s experimentation with NFC since December 2011. Anti-NFC payments are hardly new though, MXit — one of the world’s largest mobile social networks has been experimenting with a system called “Gust” since early April.

This is where the mobile payments game hots-up incredibly: it’s the intersection of mobile carriers (Your AT&Ts and Vodafones), hardware manufacturers (Samsung, Apple and Googorola – yes I said it), software companies (Fundamo, MXit) and financial institutions (Visa, Mastercard) — all of which want a piece of the “card-killer”.

Google is rumoured to be launching Google Wallet; along with Samsung which has just announced the S III will be the Olympics phone; and Visa which has installed 3 000 wireless payment terminals across many of the venues, just in time for the Olympics.

Vodafone is already in the game via its history with MPesa. This is turning out to be a multi-billion dollar battle between companies that already share an uneasy past so watch this space closely; the gloves are just starting to come off.