PayPal, Zong, and Apple Test Ways to Boost Popularity of Mobile Payments

Despite plenty of attempts, mobile payment systems haven't seen widespread adoption in the U.S., even as they've become commonplace in other countries. There are lots of guesses why -- perhaps Americans are content enough with credit and debit cards -- but the strategies of five companies tell us what they think the obstacle could be.

Zong seems to think it's a billing problem. Its system, one of only two to be integrated into Facebook's new Credits system (the other is PayPal) allows users to buy things by giving their mobile phone number; the cost of the item appears on their phone bill. Apparently, Zong believes that we, the card-swiping public, are deterred by having to open a separate account as with Obopay or PayPal.

Or maybe Zong believes its target demographic can't open a new account. Since mobile payments have popularized in developing countries like Kenya, Cote d'Ivoire and the Philippines, some technologists have suggested it's because residents of those countries don't have access to bank accounts or debit cards. Zong could be betting that the biggest mobile payments demographic in the United States will be teenagers, who may not have easy access to credit cards, but whose parents pay the cell phone bill.

PayPal apparently thinks it's a friction problem: in other words, that there's too much work involved in executing mobile payments at present. The eBay (EBAY) property has allowed its users in the U.S. to send money by text message for some time, but the service hasn't caught on. PayPal has now responded by making the process dead simple: it has enlisted the makers of the Bump iPhone app. Now sending money between PayPal accounts involves simply tapping two iPhones together, like this.

Apple (AAPL) seems to believe the solution is convenience. Bumping two phones is great when you need to pay back a friend, but the real horsepower of mobile e-commerce will be retail purchases, executed the moment a user wants something. Hence Apple's acquisition of a new iPhone app company called Siri, a voice-powered virtual assistant that is uncannily good at finding flights, concerts and hotel rooms. Were Apple to bake Siri into its iPhone OS and use its users' existing iTunes accounts for billing, the company could arrange lucrative partnerships with sites like StubHub, Hotels.com or Expedia (EXPE) and command a percentage off the top.

Another small but auspicious player is FaceCash, founded by Aaron Greenspan, the former Harvard student that first hired Mark Zuckerberg to work on his school social network. FaceCash's engineers seem to believe that making mobile payments cheaper for retailers will drive them away from the credit card companies they've traditionally relied on, and that the customers will follow.

With FaceCash, users hold their phone up to a barcode reader at, say, a local restaurant, and the price of their check is instantly debited from their bank account. FaceCash earned itself a veritable paean from VentureBeat on April 19, despite the fact that its widespread adoption will mean getting hundreds of thousands of SMB's to install a new and separate point-of-sale systems. But it's respectable enough in its ambition, which is to dismantle Visa (V) and MasterCard (MA) as the electronic payments standards.

Smartphone app-maker Layar sees mobile purchases as suffering from a discovery problem: namely, that users need to find a place to buy something before they can even think about making a purchase. Layar works like this: hold your smartphone up to the world around you, and it shows you a live camera image from your phone, overlayed with little bubbles telling you which direction to walk to find restaurants, bars, and other points of interest. On April 28 Layar launched a virtual "store" in which companies can sell "layers" of information to users. Travel guide publisher Berlitz, for example, has signed on to sell a layer containing hotels and shopping outlets.

No wonder that heavyweights and startups alike are jockeying for the right formula; according to an estimate by Edgar, Dunn and Company, the worldwide mobile payments market will more than quadruple by 2012, to $510 billion. And with so much extra cash piling up on the major tech companies' balance sheets, some of them may choose to acquire, rather than engineer, an innovative solution.