The future of payments lies on the phone

For the last couple of months, a score of technology companies have announced support for Tap to Pay on phone. Here is a quick rundown:

Clover, a Point-of-Sale and business management platform by Fiserv, now enables small & medium sized businesses to accept Tap-to-Phone payments on iPhones:

As a point-of-sale platform for merchants, Clover processes over $234 billion in payments each year. Small- and medium-size businesses (SMBs) in the U.S. can now accept in-person contactless payments on their own iPhones thanks to an integration with the Clover Go iOS app and Tap to Pay on iPhone. For Clover merchants on the move, including fitness trainers, home service providers, market vendors and food truck operators, the addition of Tap to Pay on iPhone enables contactless payment acceptance without the need for additional hardware. Businesses can also use Tap to Pay on iPhone as a complementary solution to accept payments for needs like line busting or accepting payments at the table.

Fiserv, one of the leading payment technology providers in the world, launched digital issuance for debit cards:

Financial institutions can eliminate the wait that often goes along with receiving physical debit cards with the launch of new capabilities from Fiserv, a leading global provider of payments and financial services technology solutions. Cardholders now can access a new or replacement debit card electronically, allowing them to make in-store and online purchases immediately and eliminating the need to wait for a physical card to be mailed out, received and activated.

Houzz will allow contractors and professionals on its platform to get paid with Tap to Pay on iPhone

Houzz Inc, the leading platform for home remodeling and design, today introduced Tap to Pay on iPhone within Houzz Pro, the all-in-one business management and marketing software for residential contractors and design professionals. With Tap to Pay on iPhone, industry professionals can turn their phones into point-of-sale devices to quickly collect electronic payments in person. Pros simply open any invoice in Houzz Pro, choose a scheduled payment and select “Collect Payment”. Then they tap their iPhone to their client’s contactless credit card, debit card, or smartphone to accept the charge from a digital wallet.

ACI Worldwide and MagicCube Partner to Deliver Tap to Pay Acceptance for Mid- to Large Retailers

ACI Worldwide, a global leader in mission-critical, real-time payments, has teamed up with MagicCube, the creator of i-Accept™, to deliver secure and seamless contactless payments on commercial off-the-shelf (COTS) smartphones and tablets using Tap to Pay—with or without PIN. The solution will provide mid-size and large retailers operating in complex environments with device-agnostic control and visibility of transaction data. This comes on the heels of MagicCube’s announcement extending its platform to big-box retailers.

i-Accept empowers financial services institutions to enable large merchants and retailers to accept contactless transactions through payment cards and mobile wallets such as Apple Pay, Google Pay, and Samsung Pay. Uniquely, i-Accept adapts to local card schemes and crypto wallets and supports Buy Now, Pay Later programs. It also allows for secure PIN capture on a COTS device screen without the need to scramble or shuffle the PIN entry device keys, making the transaction experience intuitive and efficient for the customer.

Stripe launches Tap to Pay on Android

Stripe, a financial infrastructure platform for businesses, today announced support for Tap to Pay on Android, enabling businesses in six countries to accept contactless in-person payments using a compatible phone or tablet.

Square software turns Android devices into powerful payment technology

Square today launched Tap to Pay on Android for sellers across the U.S., Australia, Ireland, France, Spain, and the United Kingdom. The new technology empowers sellers to securely accept contactless payments with a compatible Android device, and at no additional cost.

Visa offers fascinating commentary on Tap to Pay (TSP). In the US, T2P penetration is now at 34%, up 700% compared to three years ago.

And tap-to-pay continues to be a powerful driver of engagement. Globally, 74% of all face-to-face transactions outside the U.S. are now taps. In the U.S., we’re at 34%, up 7x from three years ago and up more than 10 percentage points from last year.

A couple of highlights in the second quarter include U.S. quick service restaurants, where penetration surpassed 40% and in key metro areas across the United States, we continue to see great traction beyond the success in New York and San Francisco, L.A., Detroit, Seattle, San Diego and Ocean to Miami are all now over 40%.

Mass transit continues to be one of the best ways to get people used to tapping and we’ve set records. In the first half of 2023, we processed more than 745 million Visa Tap to Ride transactions globally, up 35% over the first half of last year. We’ve enabled 55 new transit systems, bringing our footprint to over 650.

The rising popularity of payments on the phone carries significant ramifications for different industries. Payment facilitators will face a major strategic risk if they don’t introduce the technology in time. T2P on phone will soon be table stakes and like in a poker game, a company needs to buy their way in before they can think about winning. The same logic applies to debit and credit card issuers. Enabling the addition of a card to a digital wallet is no longer enough. Instant provisioning to digital wallets will be a required standard. I believe that while card plastics still play a role in the payment world, but more and more transactions will take place on smartphones. Hence, any card that wishes to gain top of wallet must find a way to consumer phones.

Furthermore, the increasing adoption of T2P on phone represents a huge tailwind for device manufacturers. It’s very simple. The more popular T2P on phone is, the more phones these manufacturers will ship. Apple, in particular, will be among the biggest beneficiary. Even if consumers take time to upgrade hardware, Apple can still extract revenue from subscriptions and the App Store. That’s in addition to the 0.15% cut that Apple earns on every Apple Pay transaction.

Retailers that don’t allow T2P on phone will have no choice, but to follow the trend. The biggest name in this bucket is Walmart. They stubbornly refuse to accept contactless payments, except their own Walmart Pay. But when even the Costcos and the Aldis of the world accept T2P on phone and the trend is irreversible, I expect Walmart to concede and change their mind in 2-3 years.

What about PayPal? I believe this trend will make it more important for PayPal to push their branded credit/debit cards. Think about it this way. Even if PayPal announced support for T2P on phone with PayPal app tomorrow, consumers would still need to install the app on their phones. It takes only 2-3 finger taps to complete the task, but it’s by no means easy. On the other hand, Apple Pay and the Wallet app are ready to use from the get-go. No further installation required. That’s a significant disadvantage from PayPal’s perspective. To overcome that, they need to be involved in in-store transactions.

Because rewards are accumulated through a PayPal account, any point earned through the use of PayPal/Venmo cards in stores can spur activity on their apps. PayPal will have time to act as consumer behavior is often difficult to change. But they should make sure their cards are provisioned in digital wallets and their branded cards are in as many hands as possible.

Weekly reading – 12th December 2020

What I wrote last week

How much money could you save from drinking coffee at home?


The economics of the $2B+ Christmas tree industry

Bloomberg’s profile on OnlyFans, a potential major social media on the horizon

Uber sold its autonomous vehicle arm to Aurora. This move isn’t a surprise given that Uber has been trying to offload cash-intensive and loss-making businesses in order to focus on the ones that do make money. Though there is a big write-down from $7.5 billion to $4 billion, investors may find this deal good news

CNBC has a good article on AT&T, HBO and their effort to compete with Netflix and other streamers

Inside Google’s deal with French Media

Many Google employees came out with their version of the story involved Timnit Gebru, contradicting what the company publicly said

WSJ’s profile on a few men that helped build Microsoft’s gaming business today

Online grocery slowed down in the last few months compared to the height in the summer. The basket size continued to be relatively big, compared to the same period last year and pre-Covid months.
Source: Brickmeetsclick

Clover, which belongs to Fiserv and sells hardware & software payment solutions to small businesses, a competitor of Square, seems to have a higher GPV as well as a higher percentage of sellers with $125k in annual GPV. As Clover has more than 90% of its sellers above the $125,000 GPV threshold, the figure is far smaller for Square.

Source: Fiserv


John Gruber’s review of Apple’s latest product: AirPods Max

What I found interesting

A story on a small coffee business in Vietnam that prioritizes sustainability

Benefits of walking

The US Department of Health and Human Services published a presentation on how unhealthy Americans’ diet is. The information is informative and use, but the presentation is hilariously terrible.

The old Americans get, the more they spend time alone