When Mobile-Phone Payments Go Social

In this cell-phone-centric age, your friends might learn that you’ve gone to see a movie when you arrive at the theater and check in on Facebook or Foursquare. But that’s probably too late to function as anything more than a boast. An iPhone app called Blaze Mobile Wallet tells them the instant you book a ticket in advance, giving them time to respond and meet you there.

When users pay for a reservation using the app, which debits funds from a prepaid account, a Facebook post lets friends know all the details: film, theater, and show time. “It makes it more likely that friends will join them at the movie,” says Michelle Fisher, CEO of Blaze Mobile, one of a slew of companies exploring how cell phones that act as wallets can encourage new connections between friends—and between businesses and their customers.

What makes it all possible is “contactless” payments, a technology that transfers funds when users wave a phone at card readers installed by retailers. In the case of Blaze Mobile Wallet, for example, RFID stickers featuring MasterCard’s PayPass protocol bring that capability to any smart phone that runs the app.

Home Depot, 7-Eleven, and many other large retailers have embraced contactless payment in recent years. Businesses are keen to make lines move faster and cut cash transactions, says James Anderson, global vice president of mobile for MasterCard. The company now has 83 million contactless cards and tags in circulation worldwide, and about 265,000 businesses are taking contactless payments. But those transactions are currently conducted with contactless versions of a regular credit card, or fobs that hang from the customer’s key chains.

Making it possible to pay through mobile phones will probably cause shoppers to behave differently, says Anderson. “People typically have their phone much closer to hand, so I think they are more ready to pay,” he explains. “For example, many women put their cards at the bottom of their purse for security, but keep their phone at the very top for easy access.”

The result is new opportunity for retailers, says Dave Wentker, head of mobile products at Visa International. “For retailers, mobile is a critical channel to reach their customers,” he says. “Paying with a phone is not just about payments; it’s about advertising, couponing, and loyalty.”

Bling Nation, a startup based in Palo Alto, California, is already demonstrating how businesses can use customers’ social ties. Like Blaze, the firm distributes stickers that make phones usable for contactless payment. It also taps features provided by Facebook to link each user’s account with his or her Facebook identity.

Thanks to that integration, retailers can use the social network to reach out to selected customers with offers and free gifts. When a person redeems such an offer, an update on Facebook lets friends know. “You can choose your most loyal customers, and those with the most friends, to target with coupons,” says Judy Balint, Bling’s head of business development. Bling transactions are the first of this type to draw money from a PayPal account.

Other startups are working on the receiving side of mobile payment. Jack Dorsey, the inventor and cofounder of Twitter, has founded a new company called Square, which has created a small white credit-card reader that plugs into the headphone socket of a smart phone or tablet. After a customer’s credit card gets swiped through the reader, an app on the device processes the transaction. For the cost of one conventional wireless credit-card reader—typically $900, says Dorsey—a business can buy a handful of iPod Touches that perform the same task when combined with a free Square readers.

Square makes money by collecting a fee of 2.75 percent plus 15 cents from every transaction, although it must still pass on a portion of that to the customer’s card provider.

For that money, Square offers retailers novel features such as a new kind of electronic receipt. Instead of just a scrap of paper, a Square receipt is sent by text or e-mail and can feature a picture of your purchase, information on how many times you’ve visited that store in the past, and a map showing where you made the transaction. Consumers may one day be able to share their receipts on Twitter or on a location-based service, says Dorsey. Interactive receipts could also serve up coupons or other promotions.

Whatever the mechanism, says Dorsey, using mobile phones to collect payment requires businesses to think differently. “Payments and receipts are really a publishing platform,” he says. “It’s just one that has never properly been looked at.”