Increasingly, consumers are opting to pay for purchases with near-field communications (NFC) based touch-and-go payment systems. It’s a precursor to one of the next great technological battles: NFC-based smartphone payments.
One of the challengers for the future of payments will be the eBay-owned online payment provider PayPal. Over at Forbes, Steven Bertoni takes a look behind the scenes of their battle for smart payment supremacy:
The clogged roads of San Jose teem with Priuses, which merely serve as earnest slalom gates for David Marcus to blow through in his black Porsche Panamera Turbo on a January afternoon. The 40-year-old president of PayPal has been in a rush since taking the top job 21 months ago. He’s overseen a sweeping overhaul of the payment company’s technology. He’s rolled out a passel of new products to let his 143 million users pay with their phones. And he’s seen his parent company, eBay, become a public target–Carl Icahn has quietly amassed a 2% stake, ahead of a just-promised proxy fight–as the division he runs increasingly appears more valuable than the core business that purchased it.
Colourful investor Carl Icahn placed a strategic bet on PayPal for a good reason. As market research firms such as Gartner point out, in a few years, the mobile payment market could potentially be worth many billions – or even trillions – of dollars. Unsurprisingly, the big names of tech and some plucky start-ups are preparing to fight for a slice:
Money is going mobile, and the race is on to control the flow of bits and cash across a billion smartphones and at millions of online and physical locations. Research firm Gartner estimates that mobile payments will top $720 billion a year by 2017, up from $235 billion last year. The upside remains enormous: Humans made $15 trillion worth of retail transactions in 2013. Whoever ends up with controlling interests in this new digital ecosystem will reap billions in transaction fees, collect massive amounts of consumer data and control the type of targeted advertising that makes marketers drool. Giants such as Apple, Amazon, Google, Visa and MasterCard all want to be your mobile digital wallet, as do several well-financed start-ups, including Square, founded by Twitter billionaire Jack Dorsey.
The larger competitors, including Google, Apple, Amazon and the major credit card companies, have some big advantages in the battle to control mobile payments:
Google released a wallet product for its nearly billion Android users and inked a deal with MasterCard to get access to millions of retailers. Apple has been able to use its retail stores as laboratories. It thinks it can convert its nearly 600 million iTunes customers to use the service offline and has slapped thumbprint readers on its iPhone 5s, with the idea of replacing credit card signatures. Amazon just announced that it’s developing a Kindle-based payment system to allow its 230 million customers to send money to each other and check out in stores.
For PayPal, another problem is its technology works better in theory than in practice:
Eager to show off some of the magic, we’re racing to Birk’s, a bustling Silicon Valley cafe that accepts PayPal from diners. Marcus fires up the PayPal iPhone app, which locates him in the restaurant and allows him to scan a bar code before the meal and watch the check update on his phone in real time. The idea is to bring the speed and simplicity of Internet shopping into the physical store. “I like to think of it as The Matrix, ” grins Marcus, a slight accent revealing his French and Swiss upbringing.
But there’s a glitch in this matrix. The restaurant is not running the latest program. There’s no bar code to scan before the meal and none on the check. Instead Marcus must type in a seven-digit code attached to the bottom of the check. When the check arrives the code is missing. “ The challenge,” Marcus says, trying hard to mask his frustration, “is not only scaling the technology but having people understand it on the merchant side.” Ten minutes later the waiter returns, code in hand. Marcus enters a tip, pays the bill via iPhone and sighs: “When it actually works you don’t have to wait.”
Over the coming months and years, the battle for mobile payments is sure to heat up. And as this new tech reality dawns, PayPal and its rivals won’t be able to afford too many more glitches in the matrix.
The economist John Maynard Keynes is known for his famous quote: “When the facts change, I change my mind. What do you do, sir?”
Over at Time, Micah Singleton observes that, like an economist, one of the world’s largest tech giants has also been forced to change its mind in changing circumstances:
Apple has become the worldwide leader in digital music sales, accelerated the mobile revolution with the iPhone and launched tablets as a viable product category with the iPad.
Yet for all of Apple’s positive moves over the past few years, some of its decisions have been diametrically opposed to what Apple executives — specifically, former CEO Steve Jobs and current chief Tim Cook — said the company would do. Yes, Apple has flip-flopped numerous times.
One of the most glaring backflips was the decision not to include the ability to run apps in the original iPhone. Originally, Steve Jobs hoped developers would create web apps in Safari rather than the full apps users have since come to expect:
With more than 1 billion apps now in the App Store, it’s unfathomable to think that it was once considered a bad move on Jobs’ part to make third-party applications available on the iPhone. During the introduction of the iPhone at Macworld in January 2007, Jobs made it clear that he wanted developers to build web apps to be accessed through Safari instead of native applications requiring a software development kit (SDK) and stored on the iPhone itself.
Ultimately, consumer apathy towards the concept of web apps on smartphones, combined with some gentle persuasion from the board, forced Jobs’ hand:
Even then, Apple Board Member and current Chairman Art Levinson tried to change Jobs’ mind. “I called him a half dozen times to lobby for the potential of the apps,” Levinson told Isaacson. SVP of worldwide product marketing Phil Schiller told [Steve Jobs biographer Walter] Isaacson he “couldn’t imagine that we would create something as powerful as the iPhone and not empower developers to make lots of apps. I knew customers would love them.”
As you may have noticed, web apps never caught on like Jobs expected, and in October 2007 Apple announced that an SDK would be made available to developers. The App Store was born in July 2008.
Apple is often presented as a company that sets market expectations. Yet, from Video iPods to e-books, consumer demand has pressured even Apple to reconsider its options.
Megan Garber from The Atlantic takes a look back at the switch from operator dialling to rotary dialling in the US.
As anyone familiar with classic cinema or television would be aware, before the advent of a rotary dial phone, users would have to ask a human operator to connect their calls:
In the mid-20th century, in response to the United States’ rapidly expanding telephone network, executives at the Bell System introduced a new way of dialling the phone. Until then, for the most part, it was human operators—mostly women—who had directed calls to their destinations.
Rather than phone numbers as we know them today, the system relied on calling a line from a particular exchange:
Dialling systems had reflected this reliance on the vocal cord. Phone numbers weren’t numbers; they were alphanumeric addresses, named after phone exchanges that encompassed particular geographic areas. Lucy and Ricky Ricardo, should you have attempted to call their apartment, were apparently reachable with a request for “Murray Hill 5-9975”.
While it’s often forgotten today, implementing all-number dialling was quite a technological challenge at the time:
Engineers at Bell Labs designed the numbering scheme beginning in the early 1940s and working into the next decade. They took advantage, in that, of a supremely rare and an even more supremely geeky opportunity: to design a system, from scratch, that would ensure a maximum amount of efficiency for a maximum number of phone users. The area codes that lead our own phone numbers today—212, 202, 415—were direct results of their work…
When it came to creating the area codes for the country, the engineers also made their plans with maximum efficiencies in mind. New York, the most densely populated area of the nation, got 212—2-1-2 containing the lowest number of clicks possible on the rotary phone. Los Angeles got 213—the second-lowest—while Chicago got 312, and Detroit got 313. Anchorage, Alaska, on the other hand, got 907, which required 26 clicks from the person doing the dialling. To make the system even more efficient and human-confusion-proof, engineers also ensured that codes resembling each other (say, Oregon’s 503 and Florida’s 305) were distributed far apart from each other on the map.
The Bell System was slow and methodical in its switch from the old numbering system to the new one:
Recognizing that users of the phone system (as users of any technology are wont to do when transition comes along) would likely resist the change, the group did so slowly, and strategically. It built in long grace periods for people to accommodate themselves to the new numbers. It produced pamphlets methodically explaining the new system.
However, despite the steps Bell put in place, a backlash sprung up against the new dealing system:
Still, people protested. In San Francisco, a group sprang up to battle Bell and its numbering scheme. The Anti-Digit Dialling League—consisting of thousands of members at its height, including the semanticist S.I. Hayakawa—decried Bell’s version of digital transition. The all-digit dialling system was evidence of “the cult of technology,” the League argued, not to mention that cult’s “creeping numeralism.” To make its point, the group published its own pamphlet—one that was aptly, if vaguely, titled Phones Are for People. “So far,” it noted, “17 million of the nation’s 77-million phones have lost their letters in favour of numbers. The time to reverse the trend is NOW.”
Of course, many of the fears of the pro-operator Luddites proved to be unfounded. But in a time of rapid technological change, it’s a timely reminder of the sort of backlash change can provoke – even if it isn’t grounded in reality.
Lazy, young, good for nothing degenerate layabout kids! As Clive Thompson from Wired points out, back in the early ‘90s, pundits warned and worried about the future under Generation X:
Back in the early ’90s, boomer pundits across America declared Generation X a group of apathetic, coddled, entitled slackers. Born between roughly 1961 and 1981, they lacked any political idealism—“stuck in a terminal cynicism,” as The Dallas Morning News observed. Gormless narcissists, their “intimacy and communication skills remain at a 12-year-old level,” one expert wrote.
Of course, it might be a while since you last read such criticisms of Generation-X:
But then something funny happened. Gen X punditry died—very suddenly.
Check the data. If you plug “Generation X” into Google’s Ngram search engine—which tracks the occurrence of words and phrases in books—you find that the term exploded in use around 1989, climbing steeply throughout the ’90s. But in 2000 it peaked and began declining just as rapidly. You see a similar pattern in major newspapers, where the term boomed to more than 2,000 in 1995, then declined to just over 800 last year. It’s been years since I’ve heard it used as an insult.
So what happened to the supposed laziness? Generation-X grew up:
By the turn of the millennium, Gen Xers were rounding the corner into their thirties and forties. They started buying houses, getting into government, and running businesses, and the emptiness of the libels thrown at them soon became screamingly obvious. Think about it: Barack Obama, born in 1961, is a Gen Xer—which kind of makes the whole “slacker” label bankrupt.
The good news for the Millennials is that the day will eventually come when they, too, are grumpy grumbling about the strange new music, technological proficiency and cultural preferences of the younger cohort:
In the ’50s, senators fretted that comic books would “offer courses in murder, mayhem, [and] robbery” for youth. In the ’80s, parents worried that Dungeons and Dragons would “pollute and destroy our children’s minds”—and that the Walkman would turn them into antisocial drones. This pattern is as old as the hills. As Chaucer noted in The Canterbury Tales, “Youth and elde are often at debaat.”
Kids these days! Back in my day, Sonny Jim Crockett – as Chaucer (or perhaps StartupSmart’s resident grump, Taskmaster) would no doubt say.
Andrew Sadauskas is a former journalist at SmartCompany and a former editor of TechCompany.
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