While Qualcomm for many is synonymous with wireless, the company acquired Atlanta-based mobile banking startup Firethorn two years ago with an eye to also becoming a major player in the mobile payment space. More importantly, it acquired Firethorn founder Tripp Rackley — the man it hopes will make Qualcomm the Western Union of mobile.
An engineering graduate of Georgia Tech, Rackley first combined technology with banking in 1995 when as a 25-year-old he founded nFront, an Internet banking firm he took public in 1999. In 2002 Rackley founded Firethorn, for which Qualcomm paid $210 million five years later and made a standalone division. Firethorn has gained substantial traction in the space, inking partnerships with the three largest U.S. mobile carriers and compiling a list of more than a dozen banking partners.
Ask Rackley to describe Firethorn’s play in the mobile banking space, and he will talk about what he calls “the Costanza wallet,” that huge, leather-bound mass of stuff that Jerry Seinfeld’s pal notoriously lugged around in his back pocket. That scenario, according Rackley, now a Qualcomm senior vice president and division president of Firethorn, is what Qualcomm is trying to address as it vies for space in the ultra-competitive field. As he explained to me:
“Your phone has 30 different applications to mimic your wallet today, with different user names, passwords, UIs, and feature functionality. It’s really nothing more than a physical wallet that has a rubber band wrapped around it because it’s overloaded.”
Indeed, the mobile payment field today is a remarkably fragmented space, where apps and services vary from bank to bank and handset to handset. Rackley hopes to leverage Qualcomm’s deep pockets and strong relationships in mobile — along with his own financial background — as the segment slowly moves from one of novelty into the mainstream.
There’s no shortage of players in mobile payments, either, which has long been seen as a potential goldmine but has yet to gain much real traction. The tie-up with Qualcomm gives Firethorn substantial street cred in mobile, enabling the former startup to build an m-commerce ecosystem that eventually fuels Qualcomm’s silicon business. And Qualcomm’s massive bankroll can continue to fund Firethorn while the segment gets legs.
“We continue to invest heavily in the chip side of the business,” Rackley said. “We have something that I wouldn’t be able to say we had before with Firethorn. We were by far the best-capitalized private company in the mobile space, but we didn’t have billions of dollars of cash.”
That cash will be necessary to fulfill Qualcomm’s long-term vision of a thriving mobile payments space built on its chipsets. Mainstream consumers in the U.S. are beginning to embrace basic features like checking their accounts on the mobile web, but the industry has a long way to go before the mobile wallet becomes a reality through contactless payments and other apps. So Qualcomm is continuing to invest in a space that it hopes will become a pillar of its business several years down the road. As Rackley said:
“It’s going to be a long time before mobile payments take off; there will be a lot of people trying to make that happen. But until we go into a grocery store and see people pulling phones out to pay, we won’t be there.”
Firethorn faces stiff competition from Obopay and a host of other startups; meanwhile PayPal and Google are both expanding their online payment businesses into mobile as well. And Mastercard and Visa have competing programs, furthering splintering the market for mobile payments.
Just as importantly, it’s far from clear that consumers actually want their phones to do everything from conducting online transactions to paying for a soda at the convenience store. Sub-segments of the space seem to be getting legs, but an all-encompassing mobile-payment ecosystem seems far off indeed. So the patience of investors — including Qualcomm — may be needed for a very long time indeed.