January 19, 2011

Drew Sievers believes Starbucks' rollout of an app-based mobile payments system to more than 7,500 locations nationwide could represent a tipping point toward mainstream acceptance of the phone as a means to make purchases. And, ultimately, that adoption could pave the way for future advances in mobile and Near Field Communications payments.

Sievers, the co-founder and CEO of mFoundry, the mobile banking and payments solutions provider behind the app, says that Starbucks saw the ability for its customers to make payments through their mobile phone as a game changer. "They wouldn’t have done this if they didn’t believe it wasn’t valuable to them," he adds.

The solution mFoundry deployed for Starbucks works by having customers load money onto a virtual Starbucks Card either through a credit card or PayPal account. That card displays on an iPhone, iPod Touch or BlackBerry screen as a bar code, which is then scanned at the point of sale (see Starbucks' demo video below). While Sievers says the technology is different from, say, NFC, it still shows proof of concept that, with the right factors falling into place, mobile payments on a widespread scale are something people want to use.

"At the end of the day, the technology is irrelevant," Sievers says. "It’s still a contactless payment solution."

A company with the clout of Starbucks validates the market, he adds.

And, an app as visible as that of Starbucks has brought banks who are interested in the potential for payments to mFoundry.

"I’ve seen banks come to mFoundry for a variety of reasons, and one of the reasons is we’re one of the only companies in the mobile payments space that actually has experience in mobile payments," Sievers says. "As NFC rolls out this year, we can be in a position where we can definitely benefit from it, because we’ve got credibility."

So if mobile payments are ready to go, and NFC is available widely at the point of sale and, soon, built into cell phones, what's holding it back?

"The lack of adoption of NFC has nothing to do with technology," Sievers answers. "It has everything to do with business. It’s not technology that’s the problem, it’s the business model that’s the problem."

That problem is rapidly being solved, as vendors, mobile carriers, device manufacturers and other stakeholders are all taking steps toward a future where mobile payments are the norm. Starbucks' move to make some form of mobile payments widely available is validating the market for everybody, Sievers says. "I think it made it a little easier for everyone to say to investors, 'If mobile payments wasn’t taking off, Starbucks wouldn’t be lighting it up at more than 7,000 stores.'"

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