Security can still make or break mobile-payment systems

Computerworld - Way back in January 2011, I talked about a dawn of mobile payment systems that seemed about to break. A year and a half later, it appears to have been a false dawn, but light is starting to spread on the horizon.

One system that I mentioned back then did come to pass. The Starbucks system that lets you pay via iPhone is up and running and seems to work adequately, though as far as I can tell, it hasn't been a roaring success.

My observations are hardly scientific (and back in December, Starbucks claimed that 26 million transactions had been conducted using its mobile-payment app, making it the largest such program in the U.S.), but I rarely see other Starbucks customers using their iPhones to pay at Starbucks. It could be that people just don't want to go to the hassle of setting up an account -- you have to register a Starbucks account and tether it to your credit card. Whatever the reason, I hardly ever see anyone but me using the system at my local shop.

Regardless of whether people are clamoring to pay for their morning brew with their iPhones, the mobile-payment market is getting more crowded. One player, Square, is offering a mobile payment app that lets customers pay for goods at Square-using merchants with a minimum of fuss. This could be a success, since small merchants that have steered away from accepting credit cards are attracted to another Square offering, a miniature credit card reader and app that works on many varieties of smartphone. An attractive aspect of Square's mobile-payment app is that the merchant never sees the customer's credit card number, unlike with the Starbucks system. Actually, it's about to be just like the Starbucks system, since Starbucks has announced that it will be rolling out Square shortly to its stores. (It isn't clear whether that will replace Starbucks' existing payment system or augment it.) If I'm correct about why Starbucks' system hasn't been widely adopted, the Starbucks deal is sure to boost Square's position as a mobile-payment purveyor.

And just recently, a group of major retailers including Wal-mart, Best Buy, Lowe's and CVS announced a system called Merchant Customer Exchange (MCX). While the details of that system aren't yet clear, it should further increase the visibility of mobile-payment options. Of course, PayPal and Google Wallet are also part of the mobile-payment space. And if that doesn't sound like enough, here comes Apple, whose iOS 6 will feature Passbook, an app that could help bring multiple systems together for use with many merchants and can also handle things like sporting-event tickets, concert tickets and airline boarding passes.