Mobile Payments

January 15, 2012 at 12:00a.m.

San Jose Mercury News

Brothers Adam and Ben Mayberry, who sell their distinctively themed T-shirts to the crowds outside San Jose Sharks games, credit a small piece of hardware that plugs into their iPad and allows them to accept Visa, MasterCard and American Express with boosting sales and legitimizing the curbside business.

“I wouldn’t know the first place to begin at taking payments, or credit- card payments in general,” Adam Mayberry, 31, said of the payment device offered by San Francisco startup Square. “It’s a cool technology. It interacts with our customers and gives them the comfort that what we do is kind of cool.”

Google, PayPal and the major wireless phone carriers also are racing to combine mobile technology and cloud computing to change how people pay for things in the offline world, and how retailers connect to their customers, even within their stores. All are developing new products, including the Isis payments system organized by Verizon, AT&T and T-Mobile, that will allow consumers to pay with a smartphone. Isis will have a limited launch this year and a national rollout in 2013.

Square says it signed up more than 1 million small and midsize businesses such as Mayberry Workshop in its first year of operation in 2011, and it is on the leading edge of a trend that has Internet companies increasingly vying to claim a piece of the payment process in offline retail. Square allows anyone to accept major credit-card payments using an iPhone, iPad or Android mobile device.

“We went from basically nobody using Square to a million businesses all across the United States,” said Keith Rabois, Square’s chief operating officer. “Our growth is accelerating. The opportunity in front of us is vast.”

Square, which had about 30 employees a year ago, expects its 200-person workforce to more than double in 2012. The startup says its payments volume nearly quintupled between March and October to a rate of more than $2 billion a year, and it recorded its first day processing $11 million in payments in November.

Mountain View-based Intuit, meanwhile, saw 1,000 percent growth during 2011 in adoption of its free GoPayment credit-card reader, which also can receive credit-card payments through an iPhone, iPad or Android mobile device.

The economy, said Intuit spokeswoman Sharna Brockett, “is still tough. So as a small business owner, you can’t really afford to miss a sale anymore. Turning away a customer because they don’t have cash is tough, so a lot of business owners have decided it’s better to accept all payment options.”

Google has entered the payments market in a limited way with its Wallet smartphone app, which allows consumers to make purchases in big chain retailers such as Gap and convenience stores such as 7-Eleven by tapping a smartphone equipped with Near Field Communication technology on a checkout-line sensor.

But in a high-stakes battle with wireless giant Verizon, which is using the same technology for the Isis system, Google Wallet is limited to a single smartphone on a single carrier — the Samsung Nexus S phone on Sprint.

A Verizon spokeswoman said that, contrary to some reports, the carrier is not blocking the payments app on the new Google-branded Galaxy Nexus phone.

“Google Wallet does not simply access the operating system and basic hardware of our phones like thousands of other applications,” said the Verizon spokeswoman, Heidi Flato. “Instead, in order to work as architected by Google, Google Wallet needs to be integrated into a new, secure and proprietary hardware element in our phones.”

Verizon, a Google spokeswoman countered, “asked us not to include this functionality in the product.”

The spat is one measure of how important the companies believe off-line payments will be. Google’s proposed $12.5 billion purchase of Motorola Mobility would allow it to ensure future Motorola phones have the payments technology, said Leslie Hand, research director for IDC Retail Insights.

San Jose-based PayPal also is working on a menu of NFC-based products starting this year, such as the ability to transfer money from one phone to another by bumping them together, as well as using them to make payments. “PayPal is re-imagining money,” then- President Scott Thompson said in a recent blog post.

While analysts are watching to see if Apple will offer its own payment service with the iPhone, IDC said Thursday in its annual prediction report that there will be more than 500 million NFC-enabled phones in the hands of the world’s consumers by the end of 2015, driving adoption of smartphone payments.

Still, analysts disagree whether consumers want to ditch their debit and credit cards to pay with a phone.

“Yes, you can argue that it’s pretty convenient to have it on your cellphone, but it’s pretty convenient to have a debit card in your wallet, too,” said Van Baker, a Gartner analyst. “While there are some advantages for the merchants, there aren’t many advantages for consumers.”

Square says it benefits consumers by offering credit-card purchases and helps small businesses by giving them access to the powerful data-analysis services of a cloud computing company.