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The battle for walletless payments is heating up with the arrival of tightly integrated personal payments systems

What do you get when you combine a micropayments platform with a messaging service?  The answer is, arguably, a stroke of brilliance.

I. The Era of the Digital Wallet is Here

Last Tuesday Facebook Inc. (FB) pitched this new breed of mobile payments, announcing that it would be tightly integrating a payments system into the widely used Facebook Messenger. And this week, the storyline heated up when RE/Code reported that Google Inc. (GOOG) was developing a similar integrated personal payments solution into Gmail under the codename "Pony Express."

This double dose of payments news leads to some natural questions.  Are these payments schemes truly new?  And what's the different between a system like Apple, Inc.'s (AAPL) "Apple Pay" and the one Facebook unveiled?

To answer the latter question, Apple Pay and most other walletless mobile payment services have focused on the retail space.  Over the last couple years we've seen walletless retail payments creep a bit closer to ubiquity with platfroms like "Google Wallet", "Apple Pay", and Samsung Electronics Comp., Ltd.'s (KRX:005930) (KRX:005935) newly announced "Samsung Pay."

Apple Pay, Google Wallet, Smasung Pay

The answer to the latter question of whether these services are truly new hat is "no."  By the middle of the last decade cellphone-based payments were coming into vogue in the forward-looking nation of Japan.

But it's only been in the last few years that the world's largest devicemakers and platform providers in the West have intensified their efforts to push walletless retail payments towards ubiquity.  The new development in the retail payments space has been the arrival of tightly integrated solutions on platforms with hundreds of millions of customers, a development which has raised public awareness of this previously overlooked emerging technology.

Some industry resistance remains, but it's fast becoming apparent that trying to hold back digital payments is like trying to fight the tide -- you will lose.

II. Facebook Messenger Offers Tightly Integrated Personal Payments Solution

Now there's a new riff on the walletless payment concept -- microtransactions for your personal life.  Maybe you have to pay your roommate for concert tickets. Maybe you want to send your sibling a gift to congratulate them on a new job.  Maybe your neighbor is raising funds for a group outing.

In the old days when these kinds of needs arose you would give your personal acquaintances a gift card, check, or cold hard cash.  You might even send it by the snail mail.  

But the era of low-tech personal payments appears to be drawing to an end.  Last week Facebook -- the world's largest social network -- announced plans to integrate a payment UI element into its coveted Messenger messaging platform.

The service is initally being rolled out to U.S. Messenger users.  It may take a year to fully roll out the service to most of Facebook's key markets.  But once Facebook finishes its rollout it will have tapped into the Messenger platform's massive userbase of over 500 million active users to promote its new personal payments solution.

There are some strings attached.  The service does not support credit cards.  At present it only supports debit cards issued by U.S. banks.  And currently only two brands of debit card -- Visa Inc. (V) and Mastercard Inc. (MA) are supported.  You can only send money to Facebook friends.  And in order to be eligible your friend or loved one needs to have registered a bank account to receive the funds.

Facebook Messenger Pay

These hiccups will likely slow the rollout.  But the idea of a high-tech replacement to traditional payments is as compelling in the personal space as it is in the retail space; in fact it's too compelling to pass up.

Again, much like with wireless retail payments, the concept isn't overly new.  Paypal, the mobile payments service that currently in the process of spinning off from eBay Inc. (EBAY), has quietly supported sending personal funds to a friend or acquaintance, typically with no fees (unlike a standard retail Paypal payment, which carries a transanction fee).  And given that there were no strings attached in terms of having to belong to a social network, in a way, Paypal, along with SquarePay and other similar solutions, actually carries less hangups.

So why is the market in such a roar over Messenger Pay?  The answer is similar to why Google Wallet, Samsung Pay, and Apple Pay are hot items in the retail payments space -- tight integration.  Facebook's decision to bundle social payments with a social-minded messaging platform is a stroke of genius as it reduces the barriers that prevented these kinds of payments from achieving ubiquity in the past.

Facebook Messenger

Say something comes up in a conversation with a friend and you need to send them money for something.  With Messenger Pay you won't have to switch apps -- you will be able to pay in a couple of clicks.  Optionally you can protect your payments with a pin, and in a slick turn Facebook is even building support for Apple's TouchID fingerprint scan as a pin alternative for users of for the iPhone Messenger app.

TouchID
The Messenger Payment system supports both pin and TouchID authentication.

All of this is far easier and more fluid than having to go to an entirely different site (like Paypal) logging in, access and entirely different set of contacts, and using a whole different interface.  Paypal's is usable but it is also clumsy.  But contrast Facebook's solution is simple and eloquent.

III. Google Readies Rival Solution for Gmail Platform

But Facebook may not be the only messaging service with payments built in.  According to RE/Code's Jason Del Rey:

The company is currently working on a project that will allow Gmail users to more easily receive bills in their email inbox instead of their mailbox. Called Pony Express, the service also is designed to let people pay their bills within Gmail, rather than having to go to a telecom or utility company’s website to complete a payment.

Those details are outlined in a lengthy document viewed by Re/code. The new service is scheduled to start in the fourth quarter, according to the document. It’s not clear whether Pony Express is a code name or one that’ll be used if it comes to market. A Google spokeswoman declined to comment.
...
Once a user is authenticated, he or she can start receiving bills or other mail in Gmail or the Inbox app (Google’s new email app)... [They can] pay a bill right from within Pony Express, using a link with a bank account or a debit card...

Pony Express also allows users to share a bill with another Gmail user, with the added option of automating the process, a feature that appears to be catered to roommates who typically split utilities. Another feature pulls up customer service contact information for a given service provider. Then there’s one that appears to show the capability to take a photo of a piece of mail to have it archived in digital form in Pony Express.

RE/Code even has some shiny leaked screenshots of the signup process:

Google Gmail Pony Express

Google Gmail Pony Express
Signing up for Pony Express looks painless. [Image Source: Google via RE/Code]

...and a press render showing the platfrom in action on a mobile device.
Google Gmail Pony Express -- mobile
There will be mobile support out of the box. [Image Source: Google via RE/Code]

So it looks like Pony Express is very much real.  And that's a big deal because Gmail has over 425 million active users, making it one of the few messaging services ubiquitous enough to challenge Facebook in the arena of tightly-integrated mobile payments.  There's scores of veterans and small startups also looking to get a piece of this new payments market.  But it is arguably Facebook and Google who have the best opportunity to set forth a seamless solution -- a necessity to making high-tech personal payments as common as their low-tech predecessors.

While Facebook's rollout of the Messenger Payments is still pending and while Google has yet to make any official announcement about Pony Express, rest assured within the next year or two you will likely have at least two relatively ubiquitous and tightly integrated personal payments options.

If it wasn't already official, that development makes one thing clear -- the era of cloud computing and mobile devices is changing the way the average American uses money.  For regulators (especially tax collectors to mention an elephant in the room) these hard-to track new financial tools are a headache in smartphone.  But for a consumer, we're entering an exciting futurist age in which you soon won't have to worry about forgetting your wallet at home.

Sources: RE/Code, Facebook [press release], USA Today





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