Mobile payments always seemed like one of those obscure distant technologies you hear rumors about and just assume it will only be available in tech-savvy societies like Japan, Singapore and maybe the Chinese black market. After originating in Japan and quickly gaining traction in other regions of the developed world, mobile payment systems are expected to make a significant impact on today's North American consumer culture. According to Juniper Research, an expert on mobile ecosystem technologies, the market for mobile payment transactions will grow exponentially over the next several years to reach $670 billion by 2015. Most of this growth will be driven by near field communication (NFC) applications, allowing digital purchases within physical stores.
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Major Players
Exploiting the expected trend for mobile payment services, Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) have supposedly started allocating sufficient funds to NFC research. Google, with the introduction of the Google Wallet, has been the only company to confirm its intent on introducing mobile payments services. Major retailers such as Subway and Macy's (NYSE:M) will support the Google Wallet, which is also partnered with financial partners Citibank (NYSE:C) and MasterCard (NYSE:MA). By simply waving your phone over a compatible reader, rather than swiping a credit or debit card, a purchase can be made. Microsoft is rumored to introduce similar one-swipe mobile payment features with their Windows Phone 7 operating system to rival Android 2.3.

Mobile payment and money transfer leader PayPal recently doubled its previous 2011 estimate for mobile transactions to $3 billion, as the frequency of this method of payment has surged 300% since last year. On a year-over-year basis, eBay (NASDAQ:EBAY) has increased its product development expenditures by 31%, citing additional investing in mobile technologies as a top priority. Many of PayPal's competitors such as Obopay, Amazon Payments, O2 Money and China's AliPay will likely prevent the eBay subsidiary from fully capitalizing on the offline point of sale market. PayPal currently has a broad user base that use its services for a wide range of online transactions. Leveraging its online presence into the offline NFC field, PayPal can become a competitive force in this expanding business.

Jack Dorsey's (the creator of Twitter) second hot startup, Square, provides a "pocked-sized credit card reader [which] plugs into your phone's audio jack," making it easy for small businesses to accept credit cards without installing a high-fee terminal. Unlike other plastic methods of payment, Square provides next-day payouts to vendors, providing much-needed convenience to independent merchants who need to maintain a minimum cash float. To get a sense of the expected growth in mobile payment alternatives, in December 2009 Square was valued at a paltry $40 million; 20 months later, the company currently processes over $3 million worth of daily mobile transactions and is valued at $1 billion.

The Bottom Line
Estimates provided by Goldman Sachs (NYSE:GS) suggest that by 2020, the retail industry will be a $4.2 trillion market. As consumers search for more convenient shopping alternatives, NFC mobile payment methods will likely become the norm. Similar to the post-tech bubble growth of online shopping, mobile payment options are introducing groundbreaking measures to make offline retail attractive again. (For further reading, see What We Can Learn From 2011 Tech Leaders.)

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