When Will Mobile Micropayments be an Everyday Reality?

Micropayments: a Blast from the Past

Back in 2003, MobileLime, a local start up, enabled me to use my phone as a debit card, and rewarded me with mobile coupons from local vendors.  I could walk to my video store in Brookline, MA without my wallet, and pay for my videos with my old Samsung flip phone.

What’s gone awry in the last seven years?
MobileLime’s mobile debit system was never widely adopted,  and the “wallet phone concept,” where credit/debit payments go through mobile carriers hasn’t progressed much beyond paying for ringtones or votes on American Idol.

Chip technology in mobile phones for payment hasn’t been rolled out by major US carriers yet. Even though many credit cards are now embedded with NFC (near field communications) chips and you can “tap & go” to pay for small purchases at your local CVS, consumer awareness of the technology is limited.  RFID (radio frequency identification), another way of storing and processing information, hasn’t really made its way out of the transportation industry, where it has largely been used for tolls, ZipCar activation, or subway fees.

Online micropayments, used mostly for paying for online content or charity donations, never really caught fire.  TipJoy closed shop in 2009. Twonate and Tipit.to are temporarily closed. Micropayments only seem to work on a huge scale, such as 99 cent songs on Apple iTunes.

What will it take to get back to 2003, when I could leave the house without a wallet?
The biggest barriers seem to be the infrastructure and bureaucracy of mobile carriers and credit card companies. Third party fees in the form of percentage of purchase and transaction fees add up without providing much value to small businesses.

Several catalysts are converging right now that could shake things up:

• Mobile smartphone usage is at an all-time high, and consumers are using their phones for scheduling, stock trades, computing, and gaming– much more than just calling.
• Location based social media and mobile couponing- through services like Foursquare, which alert users to nearby deals when they check in at a store or restaurant-  are growing in popularity. Mobile payment is a natural continuation of the experience.
• Facebook has a partnership with Zong, a pay-by-mobile company, and PayPal has a micropayments system and mobile payment app. The existing user base for these two companies is huge. Consumers are already spending millions via micropayments for Facebook games.
• Services like Square are helping to overcome merchant barrier to entry.  Square offers merchants physical reader devices so that they can accept mobile phone payments.

Micropayments  can work on a social and/or mobile network, provided that they’re done within the platform, are easy, and add value for everyday life.  The convergence of shifting consumer mobile behavior and mobile payments embedded into well-liked services could make the difference.  

I’m hoping the  everyday reality of mobile micropayments for things like coffee, parking meters, and videos is just a few years away…