Intuit’s GoPayment mobile payment system is adding functionality for non-profits to raise money, catching up with a similar offering from Square, Wired reports.
Just last week PayPal, after focusing its mobile payments efforts on apps, introduced its own Square-like credit card reader.
That these elephants are stampeding to follow Square encourages us in our opinion that Square has found the right go-to-market strategy for mobile payments and has a real shot at dominating this market.
With the growth of smartphones, the entire tech industry has gone lightheaded over the potential of the mobile payments opportunity.
But commensurate with the scale of the opportunity is the near-impossibility of finding the right go-to-market strategy. Payments and mobile money have the ultimate catch-22 problem: for people to use your system, everyone else has to accept it, and for people to accept it they have to know everyone uses it.
This, and squabbling among large companies (carriers, platform owners, credit card companies, retailers…) about how to split the pie, has frustrated the growth of methods such as NFC (chips embedded in phones that allow you to pay by waving it at a terminal) and apps.
While the elephants locked tusks, Square found a way to grow exponentially (see chart) by tapping on an existing network: credit cards. It is going from an untapped market (small merchants who could not accept credit cards because the existing system was too burdensome) to an underserved market with its point of sale system (bigger merchants who already accept credit cards but have inferior point of sale system). And it is laying the foundations for freeing itself from the credit card and the associated high fees with its “Card Case” application which takes the credit card out of the equation altogether.
Amateur tech industry historians will remember that this is exactly how PayPal became the first viable online payments player. It accepted credit cards, went after an underserved market and network (eBay merchants who had no easy way to accept payments), and eventually moved enough of its members off credit cards, whose fees were eating the company alive, and into bank wire transfers, to achieve sustainable profitability. And it’s worth noting here that Square COO Keith Rabois was an early PayPal executive.
So Square’s strategy has a lot to recommend it and this elephant chase validates it further.
THE BOTTOM LINE is that it looks like the future of mobile payments isn’t NFC or some other technology like apps, but devices and services that make it easier for shoppers to pay with their existing systems, especially credit cards. And that Square has an early lead here and has an excellent shot at being one of the big winners in mobile payments.
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