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Of course, some aren’t so bullish on NFC, notably eBay (who owns PayPal) CEO John Donohoe, who in a recent earnings call said merchants refer NFC “not for commerce.” And odd statement considering PayPal just dipped its toes in the NFC pool with support for Android.

Gajda tells is, “I think for some people NFC will replace the actual physical credit card but it will be a long time before NFC replaces all payments.” He believes that we are going to start seeing more traction by end of this year but says the capability of “taking credit cards and putting them on mobile phones will represent the long tail” in payments. But he adds, “the pieces are in place for NFC to take off.”

The second part of the Visa’s mobile strategy involves the digital wallet and the mobile web. Gajda says that as e-commerce ramps up on mobile phones, there is a need for one-click, simple username and password checkout experience in a transaction being made on a mobile device. That’s an area where PayPal has been working hard to dominate in but Visa sees room for other players. Should we expect a PayPal-like, one-click mobile payments technology coming from Visa soon? Perhaps, the company hasn’t been afraid to enter PayPal’s territory in the past, launching a peer to peer payments service earlier this year.

Gajda tells us that the biggest challenge of mobile payments in the current market the massive amount of fragmentation in the mobile industry. He explains that with all of the various mobile operating systems, specific manufactured phones, applications and more, keeping up with pace of innovation on the development side is a major challenge for Visa.

Visa actually tested a partnership with retailer The Gap earlier this year which alerted customers via SMS of discounts in stores near them. Gajda tells us Visa is working with a number of other retailers and banks on similar deals which will be announced soon.

Gajda says there are a number of other factors at play in the mobile payments place that need to be highlighted when talking about mobile payments. International is a huge growth area in mobile payments. He tells is that outside the U.S., there are a large number of people who have mobile phones but don’t have banking relationship or credit card. In fact, he says there are 2 billion people in world that have phone, but don’t have a bank account or credit card.

In these markets, Visa’s goal is to bring prepaid accounts, purchasing power and other financial services to basic phones. These could include topping up a mobile phone with airtime, buying transit tickets, peer to peer payments. And this goal was the mean reason behind the purchase of behind the $110 million purchase of Fundamo. The company’s platform delivers mobile financial services to unbanked and under-banked consumers around the world, including person-to-person payments, airtime top-up, bill payment and branchless banking services.

MOBILE Gajda explains that there are three prongs to Visa’s mobile payments strategy. One of these is NFC, and focuses on payments using a mobile phone at a physical store. For background, NFC (near field communications) enables people to make transactions, exchange digital content and connect electronic devices with a simple touch. As we’ve seen with Google Wallet, Android phones such as the Nexus S are being built with NFC chips, making your cell phone a mobile wallet. Visa recently joined the ISIS network, a NFC mobile payment network that is a joint venture formed by AT&T, T-Mobile and Verizon. ISIS will soon launch in a number of markets, including Utah and Texas.

Connecting with the small business world that don’t yet use credit cards or are new to the system is another area where Visa feels there is strong potential, especially with mobile payments. That’s why the company invested in disruptive mobile payments company Square and took an advisory role in the company. Gajda says that the power of Square is that it is enabling small businesses and independent workers such as doctors, designer and other merchants to start using credit cards and grow their businesses. It would make sense for Square and Visa would somehow work to harness the power of their partnership (As of April roughly two-thirds of transactions using Square’s payments service were through Visa credit cards.), but it’s unclear what the two companies will reveal any new co-produced products soon.

Schulz explains that the idea behind the wallet is that consumers want control over their wallet and want to have payment information and access available to them at all times. She believes that the digital wallet will click to buy incorporated on retailers’ sites is essential to the future of e-commerce in both the U.S. and emerging markets.

DIGITAL Visa’s digital payments guru Schulz outlined her strategy for digital payments at the company, which centralizes around the creation of the digital wallet. Schulz says that because of the fact that e-commerce is being more easy and convenient with customers, especially with m-commerce, the underlying payments infrastructure has to evolve.

And Visa’s answer to this is a new digital wallet initiative. Here’s how it works. Users will have an account, and they can add their credit card numbers (and cards from other credit card companies such as American Express and Mastercard). Visa is partnering with a number of financial institutions to offer this product to their customers.

Users can also load their loyalty points and rewards cards, as well as organize their shopping lists. Schulz describes it as a “wallet in the cloud.” But she says the key to the success of the wallet is a seamless, one-click payments experience for the consumers. So Visa has partnered with a number of large-scale retailers (which will be announced soon) to integrate what Schulz refers to as a ‘new acceptance mark’ on a merchant payments page.

So there will be a button you can click on, which will prompt you to sign-on and then will sync your digital wallet with the purchase in your shopping cart. So for example, imagine you had a camera in your cart, and Visa offered a 20 percent off at camera’s purchased at BestBuy, the wallet would sync and show the discount in your cart. The same works for loyalty points and more.

Visa competitor American Express is also working hard to innovate both at the large retailer level, as well as among smaller retailers, with GoSocial.

She compares the digital wallet offering to “two-hand clapping.” ” You can have a digital wallet,” Schulz explains, “but you need a merchant solution of click to buy, and Visa’s going to transform that experience.” And Schulz highlights another recent acquisition, Playspan, has helping drive a simplified commerce experience, a.k.a. click to buy, within game or within app.

Of course adding another checkout experience to online retailers’ sites can be a complicated and time-consuming process. But that’s where Visa’s $2 billion acquisition of CyberSource comes in. CyberSource is said to process about 25 percent of all e-commerce dollars transacted in the United States, and operates e-commerce for hundreds of thousands of retailers. Schulz says this relationship has helped speed up the pace of implementation.

Creating the digital wallet, both on the mobile and web platforms, is no easy task. Visa has a name for itself in the credit card industry but the fact is that the brand still has to attach innovation to itself in order for people to take these products seriously. Perhaps that’s one of the reasons why Google’s Mobile Wallet news created waves, even though NFC technology is in its early stages.

But he says that there is still so much room for innovation around how we pay with mobile phones. “With the rise of smartphone usage, we are already seeing a lot of innovation around commerce,” he explains. “It’s inevitable that this will extend to the payments around the sales in mobile commerce.”

While Visa, American Express and others are looking to capitalize on the changes taking place in the payments industry, it is a challenging effort. Local commerce is a big part of this, and everyone is trying to find a way to close the redemption loop. But e-commerce, amongst larger retailers, is also a multi-billion dollar market that Visa hopes to continue to play in with products like a digital wallet. And in-store payments, whether that be through NFC, Square or others, represent another market.

I’ve been talking to a number of executives of payments companies and founders of innovative payments startups, and while their objectives are different, they all seem to agree on one thing. It’s early and there is still much more innovation were going to see in the next few years in the online and mobile payments space.

The second half of the NFC conundrum is that there are a lot of hands reaching for the supposed pile of money that NFC payments will enable. Look at Google's announcement of the Wallet product. Or the ISIS partnership between Verizon, T-Mobile and AT&T. Google is partnering with Mastercard, CitiBank, Sprint, FirstData, Verifone, VivoTech (the NFC partner), Hypercom, Ingenico and NXP (another NFC partner). All of these large companies are going to want a slice of the pie. Where does that leave the retailers? You know, the ones that are actually trying to make money with good and services? Sadly, on the outside of the circle. The carriers are the biggest culprits, wanting to take as much as 50% of transaction revenue because it is "going over their pipes." The financial services companies will be happy taking their normal rates in the 1.75% to 3% range as long as there is a promise that more people will pay electronically (read: sans cash). Between retailers, partners and infrastructure, NFC has years to go before it will be viable for all parties involved.

What will happen in this time frame? Think about the so-called "4G" technology WiMax. The technology is already becoming antiquated with LTE and all the major carriers are working on the next version after that. Sprint is keeping a hybrid of WiMax and LTE going forward but overall it is a tech that died before it even matured. NFC may be the same. What if there are massive leaps in quantum teleportation in the next several years? Does NFC become the WiMax of the payment world?

Maturation Of Direct Carrier Billing The "I do not see myself buying a fridge with this" line comes mostly from the direct carrier folks. Direct carrier billing is the perfect area for micro-payments and payments that stem from ease of use. Think of parking. If you could pay for your parking on the street with your phone, would that convenience be worth an extra couple of cents on the dollar to you? The direct to carrier ecosystem has evolved to the point where it actually makes sense for offline and online use. Zong (acquired by eBay for PayPal integration), PaymentOne and Boku are the leaders in this space. PaymentOne has processed $5 billion in mobile payments and lets users pay with their phone numbers, validating transactions via text. Zong allows that capability as well. Payment One's "One Care" features, announced last week at CTIA, makes direct to carrier billing safe and secure. Transparency is important in mobile commerce because consumers do not really trust their phones to handle their money quite yet. The most important aspect of direct to carrier billing now is that the revenue mechanism has been flipped. It used to be that merchants only got some 40% or less of payments while the carriers and partners took the rest. Even with high margin transactions, that is unacceptable. Today, direct to carrier billing provides the merchants with more than 80% of the revenue, sometimes nearly 95%.

The Dongle World: Smartphones As Credit Card Readers Square, VeriSign and Intuit are pushing hard into the dongle department. Jumio is doing the same thing, just without the dongle. There is not much to be said about the dongle world that we have not already touched on at ReadWriteWeb outside of the notion that it is bringing easy credit card readers to the mobile masses.

The dongle competitors are not worried about what is happening in the ecosytem because it does not really touch their core business. For instance, PayPal does not see NFC or dongles infringing on its business in any way, shape or form. As Laura Chambers, PayPal's head of mobile, said in a recent interview, "we are not worried about much in the ways of competition. There is a lot of white space in the industry for horizontal movement."

What Is PayPal Really Doing? In the interview with Chambers, the first question I asked was, "Why does it seem like PayPal has become a "me too" operator in mobile payments?" It is a fair question, even if Chambers balked to acknowledge that PayPal has been in "me too" mode for the last year or so. PayPal has ignored the dongle movement and NFC is not on its radar as a technology it feels it needs to integrate. "What is the difference between a tap versus a swipe?" Chambers asked. "We are working with what works in the current infrastructure ... We have sat down with consumers and merchants to work with them on what they want." PayPal is growing sideways because there is not a ton of room right now to grow vertically. PayPal will get into NFC solutions when the time is appropriate. Its strategy now is to create as much flexibility for consumers as possible through its mobile wallet program. PayPal's stance is data driven - the company can track when and what consumers buy from mobile phones and tablets. Hence, PayPal is focusing on the shopping end of the spectrum, as opposed to a pure payments play. "60% of people buy more and spend more on mobile," Chambers said. "But, we see that people are not really buying different things on mobile ... the No. 1 driver of growth in mobile payments is boredom." That fits in well with what PayPal sees as "couch commerce." They released a study recently saying that mobile shopping is going to boom this holiday season. As such, PayPal is ready to deploy an end-to-end solution for merchants and consumers to reward loyalty and provide deals and offers along with digital receipts. PayPal believes that it has a lot of room to grow in mobile through these types of horizontal movements. We are also seeing this on a non-mobile front with eBay partnering with Facebook and the Open Graph API and the new X.Commerce initiative that consolidates the PayPal, Zong, Magento, RedLaser and Milo technologies. The company is calling it an "open commerce ecosystem."

Future Of Mobile Payments This article is the first in a series of the trends in mobile payments that ReadWriteWeb will be working on in the next several months. There are a lot of questions and the answers are just beginning to emerge. Who are the winners in the space? Are retail shops in danger of "becoming expensive fronts for online shopping," as Chambers said in the interview? Does NFC really have potential to disrupt offline payments or is it just cool technology? These questions and more are what we will be tackling in the months to come.

New Sage Mobile Payments 2.0 features:One Merchant Account — Businesses can now use their existing Sage Merchant ID (MID) account to add mobile payments to their existing payment solution, and at the same low processing rate.Updated User Interface on Smart Phones — The new, completely intuitive, colorful user interface makes processing payments easier than ever.Signature Capture — Businesses can give customers peace of mind knowing a signature is required to complete their transaction. With the swipe of a finger, a signature is captured to complete a sale. A signed receipt is emailed to both the business and their customer.Tax And Tip Calculator — Businesses no longer need a separate calculator to determine tax due and tips; Sage Mobile automatically calculates both.‘App Store’ Download — By going to the Android Marketplace or Apple’s iTunes store, businesses can download the Sage Mobile application at no cost. Then, once they have called Sage to set up their merchant account, they can start accepting mobile payments.

Businesses using Sage Mobile Payments can benefit from increased chances to close sales; anytime, anywhere transactions; a secure and PCI compliant payment processing environment; real-time authorizations for expedited cash flow; and minimal cost.Sage has been providing businesses and organizations with electronic payment systems for more than 20 years. Visit Sage Payment Solutions online at www.sagepayments.com.

Sage North America today announced the launch of Sage Mobile Payments 2.0, the latest version of its Payment Card Industry (PCI) compliant mobile payments product. Sage Mobile Payments comes bundled with a Sage merchant account, and allows businesses to cost effectively and securely process credit and debit card transactions on mobile devices, like cell phones and tablets, including Apple’s iPad, across all major wireless carriers. Version 2.0 focuses on enhancing the customer experience through new features designed to save businesses time and increase the security of their transactions.

he company said it is now on pace to do $3 billion in mobile payments this year though much of that is person-to-person transfers using the PayPal app, which don’t yield much revenue for PayPal. Users do not have to pay a transaction fee when payments pull from bank accounts or an existing PayPal balance.

In many ways, this is similar to personal transfers PayPal has previously enabled through its mobile app using Bump Technologies. Users are able to send money back and forth by bumping their phones together, a solution that doesn’t rely on NFC. It’s unclear how much of that may have happened through bump payments, so I don’t know how significant person-to-person NFC payments will be. It’s nice to be able to make a payment to someone by just touching phones but, again, it’s not like many PayPal users don’t have that ability now.

Shimone Samuel, Product Experience Manager for PayPal Mobile, however, said the NFC solution has fewer steps than bump payments and can be activated even when only one person has launched their widget. Bump payments require both people to have their PayPal mobile app open. He said PayPal turned to NFC because it simplifies P2P payments.

“What I’m looking for is what is simplest and easiest for customers and NFC is the simplest way to request money,” he said.

The bigger opportunity is in enabling real-world payments as retail and local merchants, something PayPal is still set to unveil later this year. That will be a much bigger deal because it will signal how PayPal will counter moves by Google and its NFC payments initiative, as well as other challengers like Square and the carrier consortium, Isis project. Samuel declined to comment on how PayPal will use NFC specifically at point of sale but he said the company takes every opportunity to learn from its products.

PayPal needs to figure out how to tap that market for offline purchases, which is much bigger than than pure online transactions where it’s excelled. So it’s nice that PayPal has enabled some P2P NFC payments, and it’s showing that it’s getting up to speed on NFC. But we’re still waiting to see the real fireworks.

“I thought someone would be able to change the way people shop, but I didn’t think it would be a startup because this will happen quickly and you also need brands that people trust. And PayPal is one of them. It takes the combination of a trusted payment company and the cooperation with great brands that people trust to change how people shop. I thought I would be able to convince all the major retailers all around the world because I have had  relationships with them for 30 years,” Kingsborough said.

Even with the departure of PayPal’s president Scott Thompson, who is now Yahoo’s new CEO, PayPal hasn’t missed a beat and is executing on its vision, Kingsborough said.

Solving consumer and merchants needs Kingsborough came in and honed the in-store payment initiative, which was underway well before Kingborough arrived. He focused on appealing first to consumers and making it simple for them to grasp, before ensuring the merchants could be able to understand the value of the system. Then he went about getting the cooperation of merchants, criss-crossing the country to call upon retailers and payment infrastructure companies to get them on board. Along the way, he helped PayPal pick up necessary components like location-based service WHERE, whose CEO Walt Doyle was personally persuaded to sell by Kingsborough. The plan is now to start rolling out the payment system in the second quarter though the first U.S. trials have already begun with Home Depot.

Kingsborough said he was drawn to PayPal’s approach to payments because it was aimed at solving deep consumer and merchant needs. He said competitors who focus on near field communication and other alternative payment systems are too often preoccupied with the capabilities of their technology, but they’re not addressing the pressing needs of users.

“Competitors think they’ll solve how easy it is to pay at retail, but that’s not a consumer problem. Their problem is how do they become masters of shopping and use their money smartly and organize their efforts to shop online, in-store and on mobile,” said Kingsborough. “We have a holistic approach. We ask the consumers [what they] want to do. They want to save money, save time and feel important in stores.”

NFC: a feature, not a solution That’s partly why he thinks NFC in particular isn’t ready for prime time. He said it’s going to take a while for it to proliferate in stores and on handsets. But more fundamentally, it doesn’t make consumer’s lives better.

“Do I think NFC will work someday? Maybe. But to me, NFC is a feature, not a solution that solves problems. If your strategy is NFC today, you need a new strategy,” Kingsborough.

Google and Isis, the carrier consortium including Verizon, AT&T and T-Mobile, are pushing hard on NFC and are angling to become the go-to mobile wallet for users, who will be able to pay at point-of-sale terminals with a tap of their phone. Many of the pieces for NFC fell into place for the technology in 2011, though there are still many hurdles ahead toward a broad rollout (subscription required) and mass consumer adoption.

PayPal’s approach bypasses many of the hardware constraints of NFC and pushes a two-pronged approach to in-store payments. Users can either use a PayPal Access card connected to their account, or more intriguingly, enter their phone number and PIN at a POS terminal and access their PayPal account. PayPal takes a user’s identification and turns it into a token, which is authenticated in the cloud, so no actual credit card numbers or financial data travels back and forth.

What it takes to win Kingsborough said the companies that win will be comprehensive and ubiquitous, allowing consumers to conduct transactions wherever they want to. By going with a software-based approach, PayPal can address about 8.2 million of the 10 million point of sale terminals with its payment system, without forcing retailers to buy new hardware. Then it’s up to PayPal to convince retailers to jump on board. It’s doing some critical work by signing deals with payment infrastructure companies like AJB Software Designs, which helps connect the point of sale terminals at many tier-one retailers to payment processors and financial institutions. Merchants that use AJB will have an easy path in enabling PayPal payments in store. PayPal is talking to other point of sale companies such as Verifone.

Merchants won’t just be getting a potentially cheaper alternative to credit cards. In PayPal’s vision, they’ll also be getting a way to push out offers to consumers, both in-store and nearby. Kingsborough said PayPal is working through its mobile app to address a variety of needs of merchants, from helping them manage online, mobile and in-store sales to improving loyalty and offering targeted discounts to users. Those additional tools will be rolled out over time in the next year or two. Google has outlined early plans to also provide coupons and offers to consumers using Google Offers in conjunction with Google Wallet.

Providing value But the other important winning determinant will be providing valuable, relevant and easy-to-use services to consumers, becoming the one mobile wallet they turn to, said Kingsborough. He said using tools like WHERE’s targeting and location technology will allow merchants to not just push out deals but deliver very context-aware content. For example, he said a clothes retailers might be able to message a nearby customer, letting them know they’ll earn $5 in their PayPal account that day if they buy jeans that they’ve purchased in the past. And, with the right permissions, the merchant may also be able to know the customer is with two friends and offer a group discount.

“It’s not just the capabilities of location-based services or understanding what a person just did; but it’s about being highly relevant to the person using the services,” Kingsborough said

He said in the battle to become the preferred digital wallet, PayPal will be the simplest for people to use, allowing people to link their credit, debit and loyalty cards, even potentially their drivers license. Just as people stick primarily to one browser, he said consumers will want to rely on primarily one wallet and he believes that PayPal will be that provider.

“Ours to lose” Kingsborough said it’s the whole offering that makes PayPal’s approach a winner. It’s a trusted name with more than 100 million users worldwide and it’s focused on providing value to both consumers and merchants with an easy path to ubiquity. “This is ours to lose,” he said. “I’m very confident about that. Otherwise, I’d be golfing right now in Hawaii.”

PayPal recently revealed that it was testing an in-store payments technology both via mobile and point of sale systems on a ‘friends and family’ basis at Home Depot. Initially, the pilot was only for 5 stores. Today, on eBay’s earnings call eBay President and CEO (and interim PayPal president) John Donahoe revealed that PayPal will be extending the pilot to 51 Home Depot stores in the San Francisco Bay Area.

PayPal recently revealed that it was testing an in-store payments technology both via mobile and point of sale systems on a ‘friends and family’ basis at Home Depot. Initially, the pilot was only for 5 stores. Today, on eBay’s earnings call eBay President and CEO (and interim PayPal president) John Donahoe revealed that PayPal will be extending the pilot to 51 Home Depot stores in the San Francisco Bay Area.

PayPal recently revealed that it was testing an in-store payments technology both via mobile and point of sale systems on a ‘friends and family’ basis at Home Depot. Initially, the pilot was only for 5 stores. Today, on eBay’s earnings call eBay President and CEO (and interim PayPal president) John Donahoe revealed that PayPal will be extending the pilot to 51 Home Depot stores in the San Francisco Bay Area.

PayPal recently revealed that it was testing an in-store payments technology both via mobile and point of sale systems on a ‘friends and family’ basis at Home Depot. Initially, the pilot was only for 5 stores. Today, on eBay’s earnings call eBay President and CEO (and interim PayPal president) John Donahoe revealed that PayPal will be extending the pilot to 51 Home Depot stores in the San Francisco Bay Area.

Basically, via the pilot customers (for now, this only applies to PayPal employees) are able to pay for items via their PayPal account at Home Depot’s point of sale systems. They can either use a pin code via their mobile phone or a specialized PayPal credit card that can be swiped, the payment amount will be deducted from their PayPal account.

The bigger vision of brick and mortar partnerships are set to include location-based offers, making payments accessible from any device and offering more payments flexibility to customers after they’ve checked out. Users will also have the ability to access realtime store inventory, receive in-store offers, and real-time location-based advertising from stores. PayPal will also help retailers use location and transaction data to improve the experience for consumers.

As PayPal’s Anuj Nayar told us recently,  the Home Depot test program was individually established between PayPal and the big-box retailer, but in the future, PayPal is partnering with point-of-sale software companies to help expand the in-store program to other brick and mortar retailers.

The assumption is that the results of the smaller test at Home Depot, which only launched a few weeks ago, must have been positive, so Home Depot is expanding the pilot program. We’re told that PayPal will be partnering with at least 20 other known top-tier retailers for the in-store payments test, which will be unveiled later this year.

When asked about the impact of PayPal point of sale integrations will have this year, Donahoe says the last year was about the planning process, this year will be getting the in-store integrations rolled out and next year will be about sale. “The goal is to get a product that will be expanded to every vertical around the world so we can build a business around the point of sale product.”

Donahoe said he tried actually the in-store integration this morning at a Home Depot in San Jose (he says he left his wallet and mobile phone in the car), and just was able to enter his mobile number and pin and was able to pay. The receipt was emailed to him.

The company also operates GameCoins.com, a centralized place to discover new gaming titles and earn virtual currency to be spent on games. Game Coins can be converted into a publisher’s virtual currency, as well as into Facebook Credits.

To date, Sometrics has helped process 3.3 trillion units virtual currency since the company’s launch in 2007. Sometrics also says that gaming partners see an average 15 percent revenue lift through the use of its virtual currency payment solutions.

To date, Sometrics has raised $6 million in funding from the Mail Room Fund, an investment consortium that includes the William Morris Talent Agency, Accel and Venrock, as well as AT&T, Greycroft Partners, and Steamboat Ventures.

Sometrics will be added to American Express’ Serve digital payment and commerce platform. The credit card giant debuted Serve in March as a way to integrate a variety of payment options into a single account that can be funded from a bank account, debit, credit or charge card. American Express will continue the operation of Sometrics’ current business and will work with Sometrics will allow Serve customers to purchase virtual currencies via the platform. Over time, AmEx plans to integrate Serve into the payment path of the games that Sometrics supports.

Of course, American Express isn’t the only credit card company looking to capitalize on the changes taking place in the payments industry. Visa has big plans to dominate mobile payments and the digital wallet, buying virtual goods payments platform PlaySpan for $190 million, as well as acquiring mobile payments company Fundamo for $110 million.

But in the past year, American Express has actually been making some interesting partnerships in the payments space, recently teaming up with Foursquare, Facebook and even Zynga for deals. This could help the company dominate social payments and close the redemption loop.

And AmEx has been boosting its Serve platform with carrier partnerships, including Sprint and Verizon. Serve has also formed relationships with other partners including TicketMaster, AOL, and a number of gaming companies (however, those names have not been disclosed yet).

Much like Apple with iTunes, Facebook takes a 30 percent cut on every dollar spent through the Credits platform.

Today users can buy Credits with 15 currencies, including U.S. dollars, Euros, the British Pound and the Venezuelan Bolivar.

It is important to first highlight, that for any mobile payments system to work, consumers will need to open some form of application to allow users to connect the phone to complete the payment. 

To date, Facebook sees over 200 million unique users accessing the social network through a mobile devices each month.

Almost all of the major brands who would adopt mobile payments in the beginning (i.e. Best Buy, Gap, Target) have invested heavily into growing a Facebook presence. It is this ability to connect to users and their social graph through a Facebook payment option that makes Credits and mobile payments an attractive model.

From this point, it is Facebook’s network that makes its payment option so attractive. As I scan my phone to finalize my purchase, I am presented with the option to share this purchase with my friends. Selecting yes, opens up an additional discount for my friends and I. From there my friends have the option to use the promotion through Best Buy’s ecommerce page or on location.

For now, Facebook prefers to play down talk of its broader ambitions for Credits. The 30 percent tax Facebook imposes on those who accept Credits might be too high to allow for the regular sale physical goods and services.

Other big players include PayPal who has more than 81 million active registered accounts and 210 million accounts, in 190 markets and it supported 24 currencies.

Google, with its Google Checkout and Android phones is also set to be a big player. With NFC technology being implemented on all future Google phones, we expect a mobile payment app preloaded on these phones. 

Probably an even bigger player is Apple and its 100 million iTunes users. The iPhone is set to be the main phone to drive mobile payments, even if other phones offer these features. But one thing is for sure: the mobile (social) payments market will be fragmented for the first few years and Facebook is easily in the position to come out victorious.

While analysts feel 2011 is the year for mobile payments, there is still uncertainty of how quickly consumers will move their wallet to a digital format or what platform they will use. 

One factor that is definite is the speed at which small business will adapt mobile transactions.

Third-party companies such as Bling Nation and Square to name a few win over merchants by cutting the transaction process fee by as much as 50 percent. With consumers swiping their debits cards more so than ever, this is a huge savings for any company.

Additionally, the three major U.S wireless carriers, Verizon Wireless, AT&T and T-Mobile partnered with Discover Card to form a mobile payment company called “Isis,” a venture to provide mobile payment carrier billing solution for payments.

The closet form of mobile payments in the U.S. that can be utilized nationally is the Starbucks digital gift card. 

While this option only applies to Starbucks stores, consumers can now makes purchases by scanning their phones.

The biggest challenge, currently keeping mobile payments from going mainstream is technology adoption. 

Not only do consumers need to carry a phone that has the correct technology, retailers also need to implement technology that connects with the phone.

Other challenges that could cause slow growth are the number of companies attempting to break into the space. 

From small start-ups to large tech companies such as Google and Apple, many consumers could be slow to adopt as they wait it out and see which platform becomes widely adopted.

To truly accelerate growth, we believe a large company needs to step up and look at the opportunity as a way to break into the $6.2 trillion retail market by covering the costs of technology adoption.

One player who is seen to have this ability is Apple. 

As the largest tech company in the world, rumors have come up, that Apple will implement NFC technology into the next generation iPhone 5 and with 100 million users already connected through iTunes, giving away the retail technology to scan mobile payments could be a quick way to gain accelerated usage.

Though it cannot be applied to all of your purchases, Starbucks seems to be the furthest along, allowing customers to purchase digital gift cards that can be scanned at all Starbuck locations nationwide.

To help accelerate growth, implementing a rewards program will draw more consumers to try the new payment platform.  This option to collect and track rewards is one of the key features that have helped Starbucks see quicker adoption.

Pat Polillo, vice president of sales and support for AJB, told me it’s unclear how many of AJB’s more than 140 major retailers will sign on with PayPal’s system when it becomes available later this year. But he said it’s an appealing option for retailers who don’t have to upgrade their point-of-sale hardware to accept payments from PayPal’s mobile payment system. He said five retailers have already asked if AJB will be working to support PayPal’s system.

“What’s nice about PayPal’s solution is it doesn’t require NFC hardware. That’s how you can envision that retailers would say it makes sense, because it uses the infrastructure already in their stores,” Polillo said.

PayPal plans to strike similar agreements with other payment ecosystems, PayPal spokesman Anuj Nayar told TechCrunch earlier this week.  Nayar told me recently that PayPal’s in-store payment system will roll out over the next 12 to 24 months. This is the beauty of PayPal’s approach because it doesn’t require consumers or merchants to have NFC devices, which is something PayPal has harped on a number of times. And if PayPal can do a good selling job on retailers, it has a pretty quick path toward a broad deployment.

But getting in stores is just the first step for PayPal. It has to show more value for merchants. As I wrote recently, PayPal is looking to leverage location-based offers to help drive traffic to retailers and encourage users to pay via PayPal, which can close the redemption loop and help show retailers the efficacy of using PayPal. But there needs to more ways for merchants and retailers to connect to consumers. Being able to establish a user’s presence inside a store will allow a merchant to send them offers and discounts. PayPal has shown off how it hopes to help merchants do this by encouraging users to scan QR codes when they enter a store for a coupon. And it is planning to let consumers scan items to check for inventory or purchase products directly from a store aisle and have it shipped home.

All of these other added elements are going to be necessary for PayPal to sell its system to merchants, who need more than just another payment system. Those elements will come in time but for now, PayPal is laying the ground work to be in a lot of stores later this year.

“We look forward to working with Global Payments to introduce PAYware Mobile in Canada,” said VeriFone Executive Vice President Jeff Dumbrell. “Merchants and other small businesses are eager to use VeriFone’s solution to adapt their iPhones for card payment acceptance anywhere, anytime.”

The VeriFone system currently incorporates a secure mag-stripe card encryption reader for iPhone and a PA-DSS validated App; an EMV version of the card encryption reader is anticipated soon. An English language version of the PAYware Mobile app for Canada is available for immediate download, with a French version planned for later this year.

The PAYware Mobile card encryption sleeve incorporates VeriFone’s end-to-end encryption technology and ensures secure payment processing. It incorporates a stylus for signature capture and a mini-USB port for charging the iPhone while the ergonomic reader is attached.

Users also gain access to the PAYware Connect gateway, a fully customizable and reliable gateway service that's ideal for small businesses. Details of all iPhone payment transactions are available in real-time within the Merchant Portal on the payment gateway, which also enables businesses to consolidate payment reporting from multiple PAYware Mobile-equipped iPhones.

"What we wanted to focus on was removing the mechanics of the transaction and building the relationship between the merchant and customer," said Megan Quinn, director of products at Square, which occupies space at the Chronicle building at Fifth and Mission streets.

But, of course, Square isn't the only company working hard to crack the nut of mobile payments - and they all face considerable challenges.

Google, Visa, MasterCard, VeriFone, eBay's PayPal division and a joint venture among AT&T, Verizon and T-Mobile are attacking the problem in various ways. In most cases, those businesses are going a different direction than Square, employing near field communications (NFC) technology that allows people to tap their phone near a terminal to make a payment.

Done right, mobile payments can accelerate the monetary exchange, while streamlining the issuance, acceptance and storage of receipts, coupons and loyalty cards. Down the road - once consumer and retail use reaches critical mass - the hope is that people will be able to leave their wallets at home altogether.

But there's a chicken and egg paradox: Customers won't start using mobile payments in great numbers until they're accepted in great numbers, and retailers don't have a huge incentive to roll these systems out until customers are clamoring to pay this way.

There are only about 150,000 retailers nationwide that accept payments over MasterCard's NFC-based Paypass readers. Google's Wallet payment app works with this system, and industry rumors suggest the next iPhone might as well.

Square, which has so far focused on small merchants has about 20,000 that accept Card Case.

Another big challenge is human inertia. To get people to download apps, key in credit card numbers and transform a habit they're very comfortable with, mobile payments will have to represent more than a little improvement over what they do today.

"You have to offer them a compelling reason to do it," said David Mangini, an IBM executive focused on mobile payments. "At a very, very minimum ... it has to be just as convenient, just as broadly accepted and just as safe."

One of the big knocks on basic NFC payments is that tapping a phone near a reader doesn't represent a whopping improvement over swiping a card. In addition, merchants have little to gain by replacing one expensive payment infrastructure with another, some observers say.

"It doesn't upset the status quo," said Nick Holland, senior analyst at Yankee Group. "It doesn't really change the original business model and it all goes through the same rails."

Receipts, deals Google argues that its NFC-based Wallet app is a big step forward for a few reasons. A single tap replaces not just the payment, but also the exchange of receipts, coupons and loyalty points.

On top of that, Google believes it's tying together the on- and off-line retail worlds, by allowing consumers to move the deals they spot on the Web into the Wallet app, where they can redeem them in the real world. Google Wallet also advertises nearby deals when users open up the app.

"For the consumer, it's really about tap, pay and save," said Osama Bedier, vice president of payments at Google. "On the merchant side, it's about closing the loop on that advertising."

This is a critical goal for Google, too, as it experiences slowing growth in online advertising - 93 percent of commerce still occurs offline, according to Forrester Research

For its part, Square steers around the limitations of NFC - as well as the various roadblocks of wireless carriers and credit processing networks - by leveraging the powers of the Internet to process payments. The credit card information is stored online, in Square's secure cloud, not on the device itself.

Square, which started by providing small attachments that allow merchants to swipe credit cards using mobile devices, acts as the merchant of record for its customers. This allows the businesses to quickly start accepting credit cards without going through the usual drawn out and expensive process of applying for a merchant account. But it also clearly puts more risk onto Square's shoulders.

Square turned on the hands-free feature on its Card Case app, which takes advantage of the so-called geofencing capabilities in the latest version of Apple's mobile software, in an upgrade to the app in November. The feature is only available on Apple devices to date

Quinn said "automatic tabs" represents an obvious improvement over traditional payments and it's quickly driving user growth (though the company doesn't disclose user numbers).

In addition, retailers have seen revenue leap as much as 20 percent since integrating the app. It drives traffic by highlighting nearby establishments, and the ease of payment encourages customer loyalty, the company says. Tips also tend to go up.

Is it safe? But the question that has dogged Square - and indeed hangs over much of the mobile payment space - is security.

Early last year, VeriFone CEO Douglas Bergeron blasted Square - its attention-grabbing young competitor - for what he called serious security flaws. In an online video, he argued that any bad actor could use the Square dongle and an easy-to-create app to skim credit card numbers.

Square CEO Jack Dorsey, also the co-founder of Twitter, defended the company's security practices in a letter. He also highlighted the inherent insecurity of credit cards, noting that any sketchy waiter is equally free to steal your information.

Meanwhile, Quinn argued that Card Case is actually more secure than credit cards because it only works if you're in the location and your face matches the picture that pops up on the merchant's screen.

The radio technology behind NFC has taken some security lumps, too.

Late last month, a security researcher at a Washington, D.C., conference used a wireless reader she bought on eBay to highlight some weaknesses of radio frequency identification, Forbes reported. She pulled the critical data from an RFID-enabled credit card through a volunteer's clothing, encoded that data onto a blank card and put it to use onstage.

Holland said that any new form of payment inevitably creates new forms of fraud. The challenge will be to educate consumers and merchants about how to minimize the risks.

"Clearly, having a device always with you and connected is a very inviting target for criminals," he said. "Any safe is only as strong as the key."

Offline payments The test is running for five days, during which time anyone who downloads the app from the Android store or Apple store in Sweden and enters their PayPal credentials can receive an NFC sticker when they arrive at one of the two stores so they can tap to pay for items in the store.

“Our wallet lives in the cloud and not on devices. There are plenty of ways to access your wallet in the cloud and NFC could be a great way to do that.”

“We think it is a very interesting technology and we are looking at ways to use it,” he said. “It is one of the technologies that we are looking at – we are not betting the bank on NFC.

PayPal parent company eBay has not been a big supporter of NFC – or near-field communications – technology. However, as a leader in the alternative payments space, it makes sense that PayPal would want to investigate NFC.

“While eBay maybe hasn’t been a big proponent, PayPal has been quite vocal about the opportunity,” said Drew Sievers, CEO of mFoundry, Larkspur, CA. “PayPal is the biggest jewel in the eBay empire, so their vision is, in my opinion, the most interesting driver for eBay corporate.

“PayPal’s publicly stated goal is to become as important a payment option offline as it is online,” he said. “NFC is a potentially disruptive technology that could offer fertile ground for PayPal’s offline payments endeavors.”

NFC has been embraced by numerous companies such as Google, Isis – which is a partnership of AT&T, Verizon and T-Mobile – and others. However, there are significant challenges facing these companies’ efforts to expand NFC as there are still a limited number of mobile phones available that support NFC.

However, PayPal – as an alternative payment solution – also faces the challenge of getting retailers to accept PayPal payments if it were to try for a broader NFC roll out.

“PayPal faces the same challenges with NFC as everyone else in the ecosystem: NFC-enabled phone penetration combined with merchant acceptance penetration,” Mr. Sievers said.

“In fact, they face an additional challenge since nearly every existing NFC-enabled merchant takes Visa, MC, Amex, and Discover, but those same points of sale don’t take PayPal yet,” he said.

“So PayPal has two things to sell: NFC acceptance and PayPal acceptance. That’s a tough sell.”

Long-term strategy While the NFC test is limited, it is another example of how PayPal is trying to bring its technology to bricks-and-mortar retailers. PayPal wants to get merchants to use PayPal and is looking for ways to embed PayPal in the shopping experience via applications, deals and a variety of other merchant services.

“EBay is recognizing that NFC is one of those things that would enable them to grow more in a physical retail environment rather than providing online or electronic transactions,” said John Devlin, London-based group director of AutoID and Smart Cards at ABI Research.

However, it is likely to be some time before PayPal would be able to deploy an NFC solution on any kind of scale. “This is something that they are thinking about on a medium to long-term basis,” Mr. Devlin said.

“In the next couple of years, NFC is really going to be used at the local or national market level rather than an international basis,” he said. “Once it becomes more widely available, that is when PayPal would be more actively interested in pushing ahead.

The sticker model of NFC – where an NFC sticker is placed on a mobile device to make it compatible with an NFC reader – is more of a limited solution.

“It is not able to plug into the handset and take advantage of all of the different smartphone functionality,” Mr. Devlin said. “It has advantages in that you can upgrade existing handsets quickly and easily but I don’t think anyone is really pushing ahead with stickers for a long-term consumer solution on a mass market level. This indicates that this is a trial rather than a precursor to a wider deployment.”

Proximity payments PayPal expects to do $3.5 billion in mobile payments this year using its existing payments solutions. The NFC mobile app test is another way that it is experimenting with new payments solutions as proximity payments grow “This is what we’ve always done – experiment and test and be open to partnerships to drive innovation,” Mr. Nayar said. “What we are going to start to see soon is the growth in proximity payments where you need to be in contact with a reader of some sort,” he said. “This can be done with Bluetooth, RFID and NFC is another way to do it.”

In a video provided by PayPal, it shows how users will be able to walk into a store and check in to a location to unlock discounts and coupons. When a consumer goes to check out, he’ll be able to pay by entering his phone number. That leverages eBay’s purchase of Zong and its carrier billing capabilities, though it’s not clear how much easier or more convenient that is for consumers who pay with a credit card swipe. But it does open up the option to use carrier billing for physical goods in-store, which is good for people without a card, though the question of how large the transactions fees will be is important. Right now, carrier billing fees are still much higher than credit card fees, which might deter some merchants.

Users will also be able to scan items in-store and pay for them with PayPal without having to get in line. Customers can just flash their phone to an employee who will confirm the purchase. This is very much like AisleBuyer and it sounds like PayPal is looking to bring this to restaurant bills as well, something Thompson hinted at in his blog post. This is a cool step that makes sense for people who want to get in and out quickly.

Customers will be able to apparently pay ahead for coffee ahead of time and pick it up. Users will also be able to choose how they pay for something after the purchase with PayPal Credit, which seems to leverage eBay’s BillMeLater. All of this appears to work through PayPal’s mobile application and doesn’t seem to require any new investments by merchants. That’s a big concern for mobile payments built on near field communication, which requires many businesses to upgrade their point-of-sale terminals to handle contactless payments.

The new mobile payment tools don’t appear to include NFC payments. PayPal recently introduced person-to-person payments using NFC on Android devices, but the company told me at the time it was just focusing NFC on P2P payments. It sounds like PayPal is trying to work around the hardware constraints of NFC payments at point of sale.

Other shopping features on display included the ability to get push notifications for discounts that can be shared, which appears to build off eBay’s acquisition of WHERE. Consumers will also be able to scan an item in store and find inventory at other locations, something eBay got from its RedLaser and Milo pick-ups.

It’s unclear how soon all of this will come together and how many merchants will sign on. But providing a complete service for retailers and businesses to not only push out offers and discounts but also complete the transactions makes sense. Merchants can close the loop on transactions and understand how their marketing is doing. This is essentially what Google is trying to do with Google Wallet and Offers though it’s focusing primarily on facilitating targeted marketing, rather than taking a cut of transactions.

PayPal’s payment initiative is part of eBay’s broader commerce platform called X.commerce, which it’s building off the acquisition of Magento.

But there’s also a lot of questions to be answered. For instance, will consumers find this more convenient than a card swipe? Will PayPal make it any easier for people to set-up and manage accounts? Do all of these parts work well together in one solution? And how aggressive will PayPal be in selling this to merchants and consumers? I’ll be interested to hear more and I think PayPal can be a big contender if it gets its execution right. This is going to be a big market but it will require not only great tools but a lot of smart selling to consumers and merchants.

Levelup is a mobile payments system at its core. It currently has 100,000 users across four cities (Boston, New York, Philadelphia and San Francisco) with 600 merchants signed up.

The basic payment structure is that LevelUp provides the merchants with an Android smartphone with a QR code reader and consumers with the LevelUp app that has a personalized QR code that effectively acts as the interface to their wallet

Users tie their debit/credit cards to the QR code in LevelUp's app. The security behind that is what could be considered a triple-blind token system. No actual payment information is being stored on the device (unlike the Google Wallet, for instance) and there are three steps from the phone to the bank to obfuscate where the payment is actually coming from.

Then there are the deals and game mechanics. When merchants sign up, they are prompted to give buyers a credit.

The more times that people pay with LevelUp, the more opportunities for credit to be accumulated (hence, the notion of leveling up to a new offer).

About 45% of users return to pay full price at the merchant and users on average use LevelUp about twice per week. The location system comes in by seeing on a map in the app what merchants close to you are using the service and what kind of deals they have.

"With LevelUp being transactional, we wanted to make it as fundamentally simple as humanely possible," Priebatsch said. "Frankly you should never have to do anything other than just pay with it and good things should happen to you and that should make you want to keep using it."

LevelUp has a certain type of groundswell that other local mobile payments options do not. In that way, LevelUp's closest kindred spirit is more likely to be Dwolla than it is something like Square or Google Wallet

There has been talk of SCVNGR being acquired but it is more likely that the company will eventually make partnerships with other ground-swell mobile payments companies like Dwolla.

What LevelUp and Dwolla have done is created a local ecosystem of merchants willing to use mobile payments in their communities. This is the bottom-up approach and, as of yet, is proving to be as effective than the top-down approach taken by companies like Google and PayPal.

What are the pain points for mobile payments? For the consumer, it is having the app and the ability to tie it to a payments process. LevelUp cuts down on the pain points by having the ability to tie the wallet to a debit/credit card through its triple-blind token system and using QR codes.

According to Priebatsch, QR codes are not necessary to the process. Any interface (like NFC) will do but the QR code is working for now and LevelUp can work with any device that can project a black and white image

This is where Priebatsch starts to get deep into the nature of payments and the notion that money is nothing but a form of information that transfers from one point to another. Priebatsch's grand plan, that translates well to a five to 10 years down the road for the company, is to bring the payments process down to "interchange zero" where the cost of moving that information from Point A to Point B is next to nothing.

Here is the philosophy, according to Priebatsch:

People will eventually make the flow of money more and more efficient, and the cost of transferring information, or money as information, will eventually converge to zero. This concept is something that we describe as "interchange zero". And as money flows frictionless-ly, all sorts of great things happen around that. You get to pay less at the store because the business does not have to pay interchange on top of their prices.

The really fascinating thing with that, is that a new monetization model needs to be found for the payments industry because somebody needs to make the $50 billion dollars a year to actually support the whole thing. And I believe, and I have a game mechanics background, that the way that that money is going to be replaced, as the idea of me paying you to just move money back and forth goes away, the way that people are going to make money on payments is taking the information inherent in payments and applying a series of game mechanics.

To create a series of actions which get consumers to spend more and come back more often. And this help the business make more money off of each transaction. So the payment, as a utility, will be frictionless, and the money will flow to the company, enterprise, person, organization who can add the most value to the transaction."

“Mobile payments is only one small change that retailers need to compete in with in order to match what consumers are doing in stores, including bar code scanning and price comparing,” he said.

Users can either enter their phone number at check-out on a kiosk to have the bill sent to their carrier’s account bill. Consumers can also pay via a PayPal-issued credit card that connects with their phone account number.

PayPal is reportedly working with 20 retailers on the initiative and has plans to release the names of other retailers in the following months.

The PayPal-enabled program lets consumers pay for items by using the PayPal mobile wallet.

Mobile home Home Depot is the first retailer to be announced from PayPal’s new mobile payment solution to help retailers integrate mobile payments at point-of-sale stations.

The program also has tentative plans to extend to other Home Depot locations if the test trial is successful.

Payment war PayPal has been aggressively pursuing mobile payments recently to claim its piece of the mobile pie.

For example, in December PayPal tested a NFC-enabled mobile app in two retail locations in Sweden (see story).

Mobile payments are a hot item, but until recently it has been difficult for retailers to get behind the technology.

PayPal’s push for mobile payments in 2012 might be a response to Google Wallet, which let numerous retailers and brands in 2011 with mobile payments.

However, some experts believe that mobile payments still have a way to go to get consumers on board and will be more driven by NFC-enabled mobile devices.

“In the long-term, NFC phones will become more pervasive and normal credit cards will be mobilized,” said Drew Sievers, CEO of mFoundry, Larkspur, CA.

Mr. Sievers is not affiliated with PayPal or Home Depot. He commented based on his expertise on the subject.

“A mobile payment has to have a very rich incentive for a consumer to latch on to, and merchants need to layer on relevant offers and deals in order for them to stick around,” Mr. Sievers said.

WHERE is able to target consumers based on a variety of factors including location but also search and purchase data. The goal is to be able to find nearby users and walk them into a store so they will buy a product based on an offer or deal. That will allow PayPal to close the redemption loop and show merchants how much business they are getting from PayPal, Doyle said.

We talked about the potential of offering local deals when PayPal bought WHERE. But it is interesting to see that PayPal considers WHERE a key tool in its larger mobile payments efforts. It’s not surprising, considering Google Wallet is being combined with Google Offers, but it shows that this is becoming table stakes in mobile payments. You can’t just have a great payment solution; you also need to have marketing and outreach tools to distinguish yourself from other offerings. And you need to provide merchants with more benefits than just an alternative to a card swipe. Having a way for merchants and retailers to grab people off the street is going to be key for successful payment systems. And putting coupons and deals in the hands of consumers can help convince them that it makes sense to use an alternative to credit cards or cash.

One of the problems I see, however, is that with WHERE there is no guarantee that consumers must pay via PayPal at the point of sale. A user could receive a mobile ad for a deal or coupon and then choose to pay with cash or a card, which would leave the redemption loop open. That, Doyle said, is something PayPal will be working on as it rolls out its payment system.

But he said this is part of the bigger challenge for all mobile payment providers. They have to provide more benefit than a card swipe to both consumers and merchants. It is going to take an ecosystem to accelerate adoption, said Doyle, and there is a lot more learning needed in the years to come.

“2012 in mobile payments is where location-based services were, like, three to four years ago. It’s, like, the year when things begin but it’s not where the critical adoption curve kicks in. You need consumer adoption on handsets and merchant adoption on the point of sale side. You will see it begin this year, and we will all learn a ton,” Doyle said.

The startup then provides a separate “CFO App” that lets the financial officer, or the executive in charge, to approve and release payments. Both accounting manager and CFO apps are available on the iPad or via a secure web app. In turn, the bank used by the SMB gets a third web-based app that enables the financial institution to manage its MineralTree users.

Each of the three apps are linked to the startup’s payment server, which coordinates and manages all payment functions in the system, between customers, the bank, and payment service providers, etc. While it may sound like there are a lot of moving parts, in reality, the MineralTree solution provides an all-in-one, universal platform for all the payment channels an SMB or bank uses, whether it be check, ACH, wire, payment cards, PayPal, or mobile banking.

MineralTree’s payments platform is definitely niche, but for the 2.5 million SMBs currently operating in the U.S., this has the potential to solve a lot of problems inherent to the paper-based and snail-slow payment, approval, and accounting processes many are currently working with. It will be interesting to see if the team can convince the big banks that this is a workable solution for their SMB clients.

Isis, which was formed through a partnership involving AT&T, Verizon Wireless, and T-Mobile USA, is attempting to enter the mobile payments business at a busy time. Google has already launched Google Wallet, although it remains limited to one smartphone on Sprint Nextel, and is only compatible with merchants with newer payment terminals. Visa, meanwhile, is attempting to create its own digital wallet. American Express, which has expressed a preference to partner, on Monday said it would invest $100 million in start-ups devoted to digital payments.

The approach that Isis is taking is wholly different from Google. Isis is working on a neutral platform that serves as a foundation for other parties such as retailers, credit card issuers and payment networks, who can plug in and offer their own services to their customers. Isis doesn't access any of the customer data. Abbott said it is working with a number of different business models, including charging a rental fee to use the platform, or possibly taking a cut of each transaction. The hope is the platform is valuable enough of a tool that companies will be willing to pay to use it.

That's a wholly different approach than Google Wallet, which is largely controlled by Google. Under that model, Google is providing the payment services to retailers, payment networks and banks for free. But in exchange, it gets access to the customer's data, enabling the company to deliver targeted ads.

"Free is a price I can't afford," he said, was a common expression among the companies he talks to.

Isis started off slowly but has had a few significant announcements in the recent months. The venture managed to strike deals with the four major payment networks: Visa, MasterCard, American Express and Discover, which was the first to sign up with ISIS.

Its plans are for a trial to begin next year in Salt Lake City and Austin, Texas. Abbott said he wasn't worried that Isis was falling behind Google's own initiative.

Abbott is less concerned about timing because much of the infrastructure is still moving into place. Phones and merchant terminals need a technology called near-field communications to talk with each other. There are few terminals with the necessary NFC chip, and even fewer phones. The Nexus S is one of the few NFC-enabled devices, and is positioned as Google's flagship phone for Google Wallet. The upcoming Galaxy Nexus will also have NFC, as well as a number of other handsets including BlackBerrys.

ISIS is focused on building out the system, improving the customer experience, and making sure all of its partners will be ready. That includes the carriers, handset manufacturers, payment networks, banks and retailers, who all must be able to handle or direct a customer complaint if something goes wrong.

"We absolutely want to get out fast, but we won't put out anything until it's ready," he said. "The customer experience is infinitely more important than speed."

Whether service professionals are meeting with customers at home or sales associates are interacting with visitors at a retail location, the new Vantiv solution is part of Vantiv’s overall strategy to address customers’ growing mobile payment needs.

“Merchants and consumers are seeking greater mobility, control and timely access to data,” said Bill Weingart, Chief Product Officer, Vantiv. “We’ve teamed with Verizon to combine our payment and security expertise with Verizon’s ability to tailor development of mobile technologies to address those needs.”

The Vantiv mobile payment solution serves merchants who require mobility, convenience and security and addresses many business needs through a value-added suite of applications including accounting, payroll, workforce management, loyalty, inventory and customer relationship management (CRM). Having complete business control in a packaged, intuitive and flexible platform is a significant differentiator in the realm of tablets, and allows merchants to conduct data enriched customer interactions and transactions, anytime and anywhere.

JKrete Supply in Mason, Ohio is among the first Vantiv customers to participate in the field trial.

“This technology gives me more flexibility and makes it easier to serve my customers,” said Jay Rhoden, Owner, JKrete Supply. “Having the option of being mobile takes my business to a whole different level. I have everything I need at my fingertips. I can sell my products anywhere I go at any time. Vantiv tailored this product to meet my needs; it is clear they listened to customer demand.”

“Verizon, through our Private Application Store for Business, is leading the charge to work with innovative companies to develop industry-specific mobile solutions,” said Chandan Sharma, Vice President and Global Managing Director of Verizon’s financial services practice. “The ability to customize enterprise tablets and applications has been characterized as a potential ‘game changer,’ and we look forward to working with Vantiv and its customers to advance the playing field for mobile commerce.”

The capabilities were featured in a Tab Times article “The 10 most important tablet trends, products, and stories at CES 2012.”

For more information on Vantiv and to view more information on the Vantiv mobile payment solution visit us at www.vantiv.com .

American Express recently took the spotlight when the company signed a deal with Verizon Wireless allowing mobile users to make purchases on Verizon devices using a streamlined process. As the largest U.S. wireless carrier, Verizon reaches a broad audience. The partnership comes at the right time as American Express opens its own digital payment software called Serve, which will come pre-installed on all Verizon smartphones and tablets.

In an apparent bid to boost sales of Android phones, Google launched Google Wallet, a mobile payment platform for Android users. How it works: Google's Android platform will support NFC technology (more on that in a minute) capable of turning your phone into your wallet, letting you store digital credit cards on your Google Wallet account. Just walk into a store, pick up a product, and tap your phone on the payment reader. Google's service will support the payment networks of Citigroup's (NYSE: C  ) Citi, MasterCard (NYSE: MA  ) , and First Data.

eBay's (Nasdaq: EBAY  ) PayPal has dominated the online payment space for over a decade, but as the competition gets tough and the focus shifts to mobile devices, the company will need to make big moves to maintain its head start. One such move was initiating Titanium+Commerce, a mobile payment program that lets small businesses design their own smartphone apps for processing PayPal transactions.

Another emerging competitor in the mobile payments space is ISIS, a mobile commerce network founded as a coalition among AT&T (NYSE: T  ) , Verizon Wireless, and T-Mobile. Similar to Google Wallet, ISIS will run on any NFC-enabled device offered by the three carriers. Payment network partners will include American Express, Discover, MasterCard, and Visa (NYSE: V  ) .

Why this will workFor one thing, smartphones have conquered dozens of industries by gradually replacing everyday items like pocket calendars, road maps, and cameras with their ever-evolving apps. I have no doubt the move to mobile payments will quickly make credit cards a thing of the past. Who will finish the race with the most market share? The company that can get the most merchants to adopt its service. At this point, ISIS shows the most promise because merchants will benefit from a solution offering multiple wireless carriers.