Friday, April 30, 2010

Cellphone Payments Offer Alternative to Cash

Did a focus group in NYC about 25-30 years ago that I think was working on debit card issuance at the time. Times have really changed. I still like cash and swiping my card at the supermarket, but I'll bet the younger generation will flock to it.

You win a bet, but the loser does not have enough cash on him to settle it. If he has a credit card, and most people usually do, there is finally a solution. A number of big and small companies — including eBay’s PayPal unit, Intuit, VeriFone and Square — are creating innovative ways for individuals to avoid cash and checks and settle all debts, public and private, using their cellphones.

Several of the companies have developed small credit card scanners that plug into a cellphone and for a small fee enable any individual or small business to turn a phone into a credit card processing terminal. PayPal’s cellphone app calls for only a simple bump of two cellphones to transfer money. Apple has submitted a patent application for a cellphone payment system.

The new services could have the biggest impact on the smallest businesses, like farm stands or house cleaners, that accept only cash and checks because they do not have stores to house credit card terminals and do not want to enter into complicated, long-term relationships with credit card companies.

Rachel Ancliffe, a clothing designer in Portland, Ore., sells her dresses and blouses at sample sales and from her home, and uses Intuit GoPayment to process credit card payments.

Instead of replacing credit cards, technologies like Square and GoPayment rely on them. Credit card companies stay in the middle, extracting a fee with each swipe or bump.

GoPayment costs $12.95 a month on top of a per-transaction fee of 30 cents plus 1.7 percent to 3.7 percent of the payment, depending on the credit card companies’ rates. Square is free and users pay 15 cents plus 2.75 percent to 3.5 percent of each transaction. It will be available for iPhones and iPod Touches in May and for other phones and laptops later.

Exchanging money with friends using PayPal’s iPhone app is free if payers use a bank or PayPal account, and costs 30 cents plus 2.9 percent of the transaction for credit cards.

But a cashless society could become a reality as the younger generation, accustomed to buying music on iTunes and virtual gifts on Facebook, grows up.

“Older people still tend to like to use cash or checks,” Mr. Abernathy said. “Younger people don’t want to touch a piece of paper. They want to do it all electronically.”
Read article here.

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