mobile wallet technology
Starbucks announced it is pouring some big bucks ($25 million) into the mobile payments start-up Square.
Starting this fall, Square will process all credit and debit card transactions at Starbucks stores scattered across the United States.
According to Starbucks CEO Howard Shultz, the partnership with Square represents a "breakthrough deal for the marketplace."
"Anyone who is going to break the mobile payments barrier in the U.S. has to overcome the resistance to try anything new when everything we have works really, really well, even cash, which is very convenient. But if a big merchant jumping into some mobile payment solution signals to other merchants that there is an opportunity here, that might change the psychology for other merchants," Bill Maurer, director of the Institute for Money, Technology and Financial Inclusion at the University of California, Irvine, told The New York Times.
If there's anything that's going to delay the mobile wallet's future on a global scale rivaling, well, telephony itself, it's going to be because there are so many players and stakeholders tilling the same soil to sow what they hope to reap.
The fact that so many giants and would-be giants are trying to make their networks and systems-in-development the standard mobile wallet platform ensures a battle royale.
The development race will be just that, a race.
But, in the end there will only be a few competitors and everyone else will cease chasing the Holy Grail and fall in under one or another network.
But, because we're investors seeking an edge and know that by the time the end-game is resolved the big money will have been made, we are looking for a "heads-up" on where to place our bets early.
A Mobile Wallet Heads-Up: This Will Be CriticalThe answer to that will be evident by watching whose systems and networks offer the best interoperability.
It won't be just about who owns the rails that tomorrow's locomotives will run on. If there are a lot of different sets of tracks headed towards the same destination, what will matter will be how many trains travel each track and pay what tolls .
The way to gauge who is laying the most attractive tracks will be visible in terms of which systems offer the most intersections from which dead-end travelers can reverse course and join the mainstream path to everyone's desired destination.
That's where interoperability will be critical.
Who will build their systems and networks to best and most easily allow parallel ecosystems to merge, or converge, onto a set of easily accessible shared tracks.
The shakeout will result in some spectacular losses.
So, it's better to be on the right side early on than to take your lumps and invest what's left in the final contestants, all of whom will continue to fight for dominance for years to come, if not forever.
But, it's not just the end-game winners we're seeking, though they will emerge and we will be invested there long before the finish line is in sight.
Its founders and main partners are AT&T Mobility, T-Mobile, Visa (NYSE: V), Discover (NYSE: DFS), American Express (NYSE: AXP) and Verizon Wireless.
This is a monster worth watching.
The idea behind Isis is to allow users to pay with "preferred" credit or debit resources available through their Isis-enabled phones by tapping or waving their devices at NFC (near field communications) terminals in participating merchant outlets.
Isis-enabled phones are being manufactured by additional partners Research in Motion, Samsung and Sony Ericsson.
Card.io is a mobile phone application (available at the Apple App Store and as a Google Android app) that allows users to receive and make payments by letting them (in the case of making a payment) enter an amount they want to charge on their app, for what they want to buy, and holding the card they want to use up to the phone's camera lens, which logs the card and processes the transaction.
Received payments can be channeled directly into the user's checking account, savings account, or PayPal account. Card.io charges a hefty 3.5% (of the transaction amount) fee and 15 cents per transaction.
Another mobile solution to not having a credit swiping machine in your pocket is offered by Square.
Square, named after the small square magnetic tape data reader that you plug into your phone's audio jack to convert encoded data from the tape on the back of cards to an electronic file, was started by Jack Dorsey, creator of Twitter.
Electronic data from the magnetic strips on the backs of cards is encrypted automatically, sent to Square's servers and rerouted through the Global Payments Network. You sign the electronic receipt with your finger, which is then sent to you via SMS or email. Now anyone can accept credit cards for anything.
There are lots of start-ups and up-and-comers wading aggressively into the exploding mobile wallet space. Some of these companies will become giants and some will go the way of the dodo.
But, one thing's for sure, the winners will be worth investing in.
The big brand credit card issuers: American Express, MasterCard, Visa, and Discover Card, along with every other card issuer and wannabe credit extension intermediary are all already into the mobile wallet space.
Their offerings vary and competition between them will be as brutal as it always has been. And that's good for consumers.
Creating choices for consumers to drive business will lead to more innovation and more services offered at more competitive prices. At least, that's the way the free market is supposed to work.
But, traditional credit card issuers that are forcing banks to compete to offer credit to card borrowers, aren't the "disintermediators" I talked about in Part One.
They help spread banking relationships across the spectrum, they do not remove banks from the equation. And because banks are all in the present equation, pricing pressures aren't prevalent and fees and costs remain stubbornly high.
But as you'll see, that's about to change.
The Greater Fear for the BanksWhat banks fear most in the burgeoning mobile wallet world are New Barbarians breaking down the gates that traditionally walled off banks from meaningful interlopers.
The biggest, baddest New Barbarians at the gate are some of the biggest names in the Internet world, the social media world, and the telecom world.
If you want to make a fortune on the mobile wallet future the giant players and Barbarian disintermediators to watch and invest in include: Google, Yahoo (yes, Yahoo), Microsoft (believe it or not), Facebook (when it goes public), Nokia, Research in Motion (yes, I am advocating buying Nokia and RIMM), Apple, Verizon, and Vodafone.
There will be other giants worth buying, but until the ground shakes from their emergence, these giants have a giant head start in the mobile wallet world of the future, starting now.
Of course, keep in mind that the scope of this series is intentionally broad.
So, it's not the place to give specific reasons to buy specific companies. My purpose is to explain to readers the extraordinary opportunities inherent in the mobile wallet future.
But, if you want to know why these specific companies will be huge winners in mobile transactions and what they are doing to warrant their own exceptional futures, as well as when you should buy them, take heart. Keep reading Money Morning.
As it takes shape I will follow this report with specific recommendations accompanied by all the reasons and metrics you'll need to make informed investment decisions.
In the meantime, here's why these businesses are primed to rake in profits on the digital wallet phenomenon.
What? You don't see it? That's because you're looking in the wrong wallet.
Take out your cell phone. In your hand right now is your financial future if you want to get rich.
Your smartphone is about to become your new "digital wallet."
When it comes to your credit, your investments, your banking relationships, how you shop, how you are marketed to and how you pay for everything, your new digital wallet will be at the center of it all.
Understanding what kind of hardware your wallet takes, who delivers your digital services, and understanding your relationship to digital money will be the keys to making a bundle off of it all.
In fact, as the race to shape the future of e-commerce and e-payments develops, fortunes will be made by investing in the companies destined to be big winners in this fast-growing trend.
With that in mind, here's a snapshot of what's here now, where the trend is headed and how you can ride this phenomenal wave all the way to your own private beach.
The Rise of the Digital WalletFirst, you have to realize that you don't use a lot of cash-even though you think you do.
The truth is the whole world is using less and less cash.
On the low end, Swedes transact commerce in cash only 3% of the time. Europeans pay with cash 9% of the time. And Americans pay in cash only 7% of the time.
The rest of the time we're using credit cards, debit cards, prepaid cards, checks, coupons, the Internet, and increasingly, cellphones.
There are several reasons why we're using cash less.