Tuesday, February 1, 2011

Mobile Payments: The biggest tech trend of 2011?

Author: Riley Alexander, MD, MBA

2010 saw the rise of Android and the introduction of the iPad, which has made the slate tablet the hottest device in computing (or recreated the sector if you remember the awful tablet PCs of the early 2000's). Despite this, I would still argue the biggest tech trend of 2010 was Groupon and its many clones. With recent valuation estimates placing the company at $15 billion and its largest clone, LivingSocial, selling over 1 million Amazon gift cards in one day, the daily deal/group coupon has changed the way consumers engage with business. 2011 may offer something of the same--mobile payments.

As of now, there are actually several ways to use your phone to make payments, but they all go about doing this in different ways. I'll try and cover some of the bigger ones, but I'm sure to leave out a few.

Card readers:
The simplest solution to paying with your phone is simply hooking up a card reader to your phone. There are several options for this...I was even surprised how many there are out there when I did a Google Shopping search for "iPhone credit card readers." The biggest player in this market is Square. Square is the brainchild of Jack Dorsey, who created a little website called Twitter. Square requires the use of a free card reader that plugs in to the headphone jack of your smartphone or iPad. The app and reader are free for the user. It is targeted at both the business user and personal user. The big drawback for personal use is, of course, that you have to have this square card reader sticking out of your phone or on you to use it.

Pay by text:
No card, no cash, no reader...just your phone. That's the idea of paying by text. These services allow you to initiate transactions with anyone that has a phone that can send/receive a text. No smartphone required. They still require use of banks and or credit cards for transfer of funds so they aren't trying to reinvent the wheel, just a different way of making the payment. One of the front-runners in this domain is Philly-based Venmo. They have apps available for iPhone and Android to make for a more streamlined experience, but they are not a requirement. I've used it many times and can say it's very effective. No account is necessary to recieve funds, but a secure account must be set up through Venmo to allow transfer of funds to bank accounts and withdrawal from credit cards to cover payments. The real problem right now is finding businesses that support it. It's more geared at peer-to-peer transactions, currently, and has succeeded in implementing the social networking element into payments. Breaking through the card reader infrastructure is difficult, but probably not impossible.

The venerable online payment giant has entered the mobile payment space, as well. They have taken a multi-pronged approach to this. As many people have PayPal accounts, they are leveraging their current infrastructure to implement this. PayPal allows users to make payments via text, app or using the very popular iPhone app, Bump. This allows users to simply "bump" their phones together to make a transaction. While the previously mentioned pay-by-text services, like Venmo, don't require users to have an account at the time of transaction (it is required to withdraw money, however), PayPal does...limiting new user acquisition, but offering a familiar and trusted name.

The 800 pound gorilla in the space appears to be NFC or near-field communications. NFC made it's Stateside debut in the Google Nexus S and appears to hint at Google's future entry into the payment arena. This system utilizes RFID to exchange information with a reader. Currently, this is just a feature with promise on the phone that doesn't have much practical value, but NFC is important because it allows use of multiple payment accounts from one source...multiple cards, gift cards, membership cards, etc. Just within the last week, the promise of NFC adoption gained even more credence...Apple may be on board in the next iPhone and iPad. It's no doubt that Google was already a huge player, but Apple has something Google doesn't, iTunes. As others have already speculated, iTunes gives Apple an advantage in implementing this and actually making it work. Expect to hear a lot about this after the next iPad/iPhone are announced, officially, later this year.

Technologies like these may seem unrelated to medicine, but as more and more practices are resorting to cash-based practices and as deductibles and co-pays grow, medical practices will see much more direct exchange of payments in the future. Keeping up with these trends will ensure that your patients have the proper options to pay and your practice can use the payment methods that ensure the quickest and most secure transactions.

It's looking like the mobile payments arena will be a real battleground in the coming year. I'm going to enjoy seeing how it all plays out.

About the author:

Dr. Riley Alexander is a pathology resident at Indiana University School of Medicine, blog "addict" and avid follower of technology. His primary interests revolve around how technology, especially mobile, will create increased efficiency, enhanced physician education and better delivery of care in the medical field. Dr. Alexander is a graduate of Indiana University School of Medicine with a combined MD/MBA, in partnership with IU's Kelley School of Business. Due to this, he is also very interested in management, healthcare policy and non-clinical aspects of the medical field and enjoys exploring non-clinical opportunities for medical students, residents and physicians. He completed his undergraduate education at IU-Bloomington.

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