The Payments Industry Revolutionized ... Again?

Two perennial innovators made headlines again last week, launching new services that they claim are the future of payments. Tech giant Google and processor start-up Square both released platforms that promise to eliminate a wallet full of cards for consumers, while simplifying accepting payments for businesses.

Google announced the launch in San Francisco and New York of Google Wallet, in concert with CitiBank, MasterCard, First Data, and Sprint a system that utilizes Near Field Communication (NFC) technology to allow users to swipe their phone in front of a reader to pay with whichever card of theirs they wish. As with all big announcements of this type, commentators have seen both positive and negative futures for the product. Integrating every card we carry in our wallets into our phones has a clear benefit, but it also raises questions about security and cost. It will take time and many trials, but most analysts expect that Apple will be releasing a similar upgrade for its iPhone in the near future, heightening competition to make the best system.

Square's new Card Case is an interesting way around the issue of card security. Rather than read payment info each time, Square's system allows consumers to set up a "tab" with businesses they frequent which process with Square. They tell the cashier their name, she charges their account from an iPad, and the payment automatically processes. The company claims that the system is a step towards eliminating the need for a register at many businesses, though of course one can't store cash in an iPad. While a great idea for certain businesses with a small and dedicated client base, Square's restrictions on cashflow (30 day holding period for all volume above $1000 per week) are too onerous for even many small coffee shops.

Both systems are signs of that the industry is changing fast, but either would take years to become widespread in use. They'd also have to reach a critical mass of users in order to begin growing in a self-sustaining way.

The revolution keeps coming slowly, but there's still more research, more questions, and more experimentation to be done. We'll be watching.

Matthew Koren is the President of Priority Payments Northwest, a credit card processing and payroll service provider located in Portland, OR. He runs his company, as well as partnering with a consulting practice: Causeit, Inc. You can contact him by filling out the Contact Us page, or by calling 866-402-1485, ext 750.