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Social Payments: the Future is Unified

Physical credit cards will soon be a thing of the past. Is the rest of the US startup industry ready?

The next real-world cash-replacement could be powered by Facebook, Google, Apple, Square, Intuit, Paypal, or some other company hiding in the wings.  There are a few obvious names in there, and then there are a few left-field ones to some people. This post isn’t about how those left-field plays could happen. I simply wanted to explain how the landscape is changing.

There’s a convergence happening right now between social, payments, and e-commerce. Imagine this predictable future:

You buy some coffee at Starbucks. You take out your phone and swipe it at the terminal. Your [insert phone app name here] Bucks (from here forth known as: “Phone Bucks”) are deducted from your account. Your purchase is optionally posted on your Facebook/Twitter stream. You get highly-targeted Groupon-clone notice for a Starbucks coupon redeemable online immediately. You decide to buy it using your Phone-Bucks — no signing in, no additional authorizations — by clicking a button.

We’re talking about a future where your online wallet (today, known as Paypal, Facebook Credits, etc.) follows you into the real world and ties directly into your mobile phone. This represents a single unified wallet. And it makes sense. That’s the future. That’s where we are headed now. I’ve been watching this trend happen for the past few years, and it’s exciting to finally see some big players waking up to this reality. Which players are the closest to achieving this? In this order:

1. Facebook – Due to its large install base (virtually all smartphones) and an existing currency platform (Credits), they are best positioned to move into the real world. And they recently made a huge move indicating a desire to do exactly this (creating a subsidiary is the first step in buffering liabilities that come with real-world payments).
2. Square (or Intuit depending on how things play out) – They would solve this from the other direction: they have a stronger real-world presence, and moving into the digital space might be easier than vice-versa.
3. Google – They will approach this from the platform (Android) by opening it (Google Checkout 2.0) up to developers and creating an ecosystem. They also recently stole a key exec from Paypal, so you know they’re serious.

It’s my belief that any startup entering the e-commerce landscape right now needs to make sure they are thinking about this convergence. To get big valuations, I think a startup needs to not only understand these trends but be the first to market in the new paradigm that will be coming (really soon!). This convergence will create an opportunity for new players to emerge and destroy existing leaders. All mobile startups around commerce, Groupon, Paypal, and even the advertising arm of Google are probably already adjusting to these trends. Is your startup?

Think about it.