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Mobile Payments Set to Continue E-Commerce Growth

Customers Will Buy From Their Smartphones In Mass, From Mobile-Ready Vendors

The Internet has empowered businesses to dramatically increase online sales of their products around the globe. In a continuation of e-commerce innovation and empowerment, credit card processor MasterCard Worldwide unveiled a new program to release Open Application Programming Interfaces (APIs) that will allow software developers to build new e-commerce and mobile payment applications using MasterCard protocols that previously had been proprietary and not shared.

With the release of MasterCard's Open APIs and the creation of an online Open API Developer Portal, the global credit card processor will encourage independent software vendors and third-party software developers to create what the company expects will be "game changing payment applications," Josh Peirez, the company's Chief Innovation Officer, advised. "We feel this will unleash innovation within our industry especially in the burgeoning areas of e-commerce and mobile payments."

The potential effects on merchant e-commerce Web sites and mobile "instant purchase" applications are significant. Imagine making it ultra-easy for your customers to securely visit your Web site via their smartphones and click a button to make an instant purchase - without having to enter their account numbers, shipping address and personal information. Simple, fast, secure and oh yes -- revenue-building. What's not to like?

Gene Alvarez, an IT analyst with Stamford, Conn.-based Gartner, said the MasterCard move is big news for online retailers. "Mobile payment applications, and that's the key word," he said. "By opening up the payment process, it enables companies on their Web sites to get creative about the payment and transaction processes."

And with the growing popularity of smart phones and the volume of applications available to their users, the MasterCard Open API program will allow more businesses to build their own applications and permit their customers to buy more with a single click, Alvarez said. "You're going to see more and more commerce-enabled mobile applications. Customers will be able to easily find stuff, click and just buy it."

For online retailers like Amazon.com, which pioneered the "remember me" function for customer transactions, they'll be able to embed these APIs and better facilitate their customers sending transactions directly to the payment processor, he said. A key benefit for e-commerce companies is that they'll be able to leverage the MasterCard services and ensure that their payment processes are conducted through a secure credit card processor, Alvarez said.

Michael Dortch, director of research for San Francisco-based Focus Research, called the MasterCard release "laudable". At the same time, he cautioned there are still big questions that must be answered about the project. "It's too early to tell precisely what this might mean to MasterCard, its business partners and customers," Dortch wrote in an e-mail response. "After all, application developers are subject to limited resources, and it's not clear how many of them are or will be able to support multiple sets of payment-related APIs. And if a software developer is already supporting applications with, say, PayPal's APIs, that developer may not have the bandwidth to support MasterCard's APIs as well. So we may see some developers dump PayPal for MasterCard, others adopt MasterCard only and others support both API sets but in a staggered fashion. The dynamic is similar to that faced by developers attempting to support, for example, Macintosh and Windows PCs or Android, iPhone and Symbian smart phones."

What this could encourage are methods in the future toward standardization where developers could write code once and port it to APIs from a multitude of vendors, including PayPal, MasterCard and even other APIs, Dortch said.

Yet despite the optimism, a lingering concern will be ensuring the security of applications built with the MasterCard APIs, he added. "If there were ever a market almost guaranteed to attract many clever developers, including some with malicious intent, it's the market for online payment applications," Dortch advised. "After all, you're talking about coding software that can directly touch business and personal credit and debit accounts, and to paraphrase a quote widely but erroneously attributed to bank robber Willie Sutton, 'that's where the money is!'"

MasterCard, which processes more than 22 billion credit card transaction annually, planns to monitor the software developers signing up for the program. "All developers will be approved and registered by MasterCard to ensure that MasterCard payment and data services continue to be used appropriately and productively," the company advised.

The MasterCard program comes as the "mobile payments marketplace is heating up", according to several recent research advisories, including one posted ReadWriteWeb: "San Francisco-based startup Square has many people excited about its mobile application and dongle that allows credit cards to be scanned by various mobile devices; online payment staple PayPal recently teamed up with Bump Technologies to provide a mobile transaction service as well. Visa also recently announced its own foray into the mobile payments market. Earlier this month, the MasterCard competitor teamed with DeviceFidelity to launch special cases for Apple iPhones which allow users to take advantage of Visa's wireless and contact-less payment method, Visa payWave, straight from their phones."

 

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