Why A Sprint Deal With Softbank Could Upend The Mobile Payments Race

PayPal Payments

Japanese telecom giant SoftBank hopes to gain control of Sprint. Besides speeding consolidation in the U.S. carrier market, the deal could be a game-changer for mobile payments, and a boon to eBay. Here are the two reasons why: 

  • SoftBank runs a mobile payments joint venture with eBay’s PayPal in Japan. If SoftBank absorbs Sprint, it may privilege PayPal’s mobile payment solutions across Sprint’s network of 56 million wireless customers. 
  • PayPal’s play in mobile payments is based on mobile credit card readers and associated software. A SoftBank Sprint tie-up could strengthen the hand of card reader-based technologies against rival solutions like Near Field Communications and carrier billing.  

The stakes are high. Estimates of mobile payments volumes for 2011 ran the gamut from $86 billion to $246 billion. 

SoftBank and eBay’s $25 million joint venture, PayPal Japan, centres on PayPal Here. Card readers like PayPal Here and Square plug into a smartphone or tablet. The thumb-sized device and the accompanying software transform phones and tablets into mobile registers.

Retailers can swipe customers’ credit cards without traditional point-of-sale hardware. Consumers can download an app and make in-store cardless payments. (PayPal also offers software that adapt traditional retail registers so that consumers can pay via PayPal with a mobile number and a PIN.)

Not to mention that mobile users already use PayPal’s popular app to manage their account and make online payments. PayPal processed $4 billion in payments originating on mobile devices last year. (See chart above.) It’s also easy to imagine PayPal integrating with Sprint to enable seamless phone billing.

PayPal Here, launched earlier this year, quickly emerged as a major competitor to Square. We’ve already written about how competition and price-cutting also have heated up with Groupon’s recent mobile payments play. There’s also the looming rollout of Isis, backed by Sprint’s carrier rivals, Verizon, T-Mobile and AT&T.

NFC Vs. Card Readers

But the mobile payments race is also about the technology that will emerge as triumphant. Isis and Google Wallet are based on Near Field Communication (NFC). 

NFC payments require a chip to be embedded in devices, so payments can be made via a tap or waving the phone. That creates a chicken-and-egg problem for NFC, since it requires that device manufacturers embrace it. Notably, iPhone 5 did not include NFC.

If Sprint begins to champion PayPal Here, it would be a setback for Google Wallet. Sprint stores now carry Android phones with Google Wallet built-in, and display advertisements for Google Wallet. Since Sprint’s carrier rivals back Isis, it’s not too far-fetched to imagine Sprint championing PayPal Here to differentiate itself from the NFC crowd, and perhaps attract PayPal-dependent customers. 

The SoftBank-Sprint deal remains in the talks phase (as does the T-Mobile USA-MetroPCS merger we analysed Oct. 3). But even if it founders, it reveals how carrier consolidation can have an impact across the mobile ecosystem. 

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