Earlier this year when she penned Mobile Payments: A Guide to the Growing Market in Your Pocket, Liz noted, ”Cell phones represent the killer combination of their owner’s identity, presence and wallet — and they are nearly ubiquitous.” It is estimated that the worldwide market for mobile payments is going to grow to $633.4 billion by 2014. Perhaps that is why it is hardly a surprise money keeps pouring into mobile payment start-ups.
Today, New York-based Payfone said that it has received $11 million in Series B funding in a financing round led by Opus Capital, which was joined by Blackberry Partners Fund and the original backers of Payfone, RRE Ventures. Bob Borchers of Opus Capital and formerly an Apple executive in charge of the iPhone’s marketing, is joining the board of Payfone along side Blackberry’s Kevin Talbot. Payfone is competing with other liberally funded startups such as Zong and Boku which have attracted multiple-millions of dollars from top venture capitalists.
The company hopes to use the funds to go after mobile users in Europe, Latin America and Asia. The Payfone platform doesn’t need a premium SMS service in order to receive payments, which makes it good for emerging markets. The company boasts that its one-click mobile billing gives it an edge over its rivals. Payfone uses the phone company’s networks to receive payments. The customers simply receive charges on their pre-paid or contract accounts.
Payfone is smart to focus overseas and use the carrier infrastructure. In the U.S., it seems the mobile payments market is going to get tougher. Bloomberg reports that AT&T and Verizon Wireless along with T-Mobile USA are working on a secret mobile payment-focused joint venture company that is going to compete with the likes of Visa and MasterCard when it comes to buying things with a mobile phone.
The partnership, which also includes Deutsche Telekom AG unit T-Mobile USA, may work with Discover Financial Services and Barclays Plc to test a system at stores in Atlanta and three other U.S. cities that would let a consumer pay with the contactless wave of a smartphone, the people said. The carriers have been searching for a chief executive officer. The trial would be the carriers’ biggest effort to spur mobile payments in the U.S. and supplant more than 1 billion plastic cards in American wallets.
Retailers may be eager to help another network after years of fighting over transaction fees set by Visa and MasterCard. The merchants persuaded Congress last month to approve caps on interchange, or “swipe” fees, for debit transactions and filed a 2005 federal antitrust lawsuit that is still pending. The U.S. Department of Justice is weighing whether to bring a civil lawsuit against Visa, the company said last week.
This development isn’t good news for the U.S.-centric mobile payment startups. They have a very brief window of opportunity. Either they go big fast or they go home. It was inevitable that the U.S. carriers would finally wake up one day and realize that they have access to owner’s identity, presence and wallet, along with a billing system to support that. All they needed was someone to handle the back-end of payment processing.
Now, the real fun begins!