Wallet, Wallet Everywhere: Making Sense of the Mobile Payment Wars

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Jared Newman / TIME.com

There’s a cold war going on in the technology world. As smartphones become ubiquitous and online shopping grows, tech companies and payment companies are arming themselves for battle over how people pay for things.

Their shared goal is to take a hammer to the inconvenience of traditional paper and plastic payments. They want our smartphones to act as electronic credit cards using near-field communication technology. They want online stores to accept a login and password instead of full payment details. Eventually, even our computers may act as payment kiosks, so we can press a phone against a laptop to make purchases online.

Just one problem: So many companies want in on the digital payment revolution that they may have to duke it out with each other before it can happen.

(MORE: Mobile Payments Are Coming — But When?)

In one corner, we have the wireless carriers. Verizon Wireless, AT&T and T-Mobile have formed a joint effort called Isis, which will let people wave their phones at the cash register instead of swiping a credit card. Isis hasn’t launched yet–trials begin in Austin and Salt Lake City later this year–but when it does, it’ll be a powerhouse. Phone makers and wireless carriers typically work together on new devices, so you can expect Isis-supported phones to come out in force when the service is ready.

Sprint, meanwhile, has partnered with Google on a competing service called Google Wallet. So far, it’s the only NFC-based payment service available in the United States, but it only works on Sprint’s Galaxy Nexus and Galaxy S phones. Although Google has enlisted retailers in major U.S. cities and online to support Google Wallet, the lack of phones that support the service will be a problem in the long run.

Here’s where it gets tricky: Google Wallet and Isis rely on payment processors such as Visa, MasterCard, American Express and Discover. Google Wallet users, for instance, can pay with credit, debit or prepaid cards from any of those four companies, and during checkout, users can wave their phones in front of any terminal that supports MasterCard’s PayPass or Visa’s PayWave. Those are the same terminals that allow tap-and-go payments with certain credit cards.

(MORE: Google Wallet Hack Shows NFC Payments Still Aren’t Secure)

But even as payment companies work with Google Wallet and Isis, they’re planning their own efforts to provide essentially the same service.

This week, MasterCard announced PayPass Wallet, which will include the ability to pay with a phone in stores and to enter a password instead of full credit card details online. MasterCard, whose service will launch in the third quarter of this year, has a unique strategy: It’ll let financial institutions skin the service as their own, so for example Citibank can have its own digital wallet that works with PayPass terminals and the online PayPass button.

Visa, meanwhile, offers its own service, called V.me. So far, V.me has an online payment button at certain retailers, and Visa plans to add an NFC payment element for smartphones.

Of course, the unanswered question for both of these services is whether they’ll get any traction on smartphones. MasterCard announced a long list of partners for its PayPass Wallet service this week, including merchants, banks and Intel, but not a single phone maker or wireless carrier was on the list. The companies behind Isis and Google Wallet probably aren’t keen to support another company’s service, but the reality is that they all need each other.

(MORE: The End Of Cash)

That’s why I used the term “cold war” to describe what’s happening. No one wants to get bloody, but no one wants to be outgunned and trampled upon should a real war break out. The result is uneasy cooperation between wireless companies, tech companies and payment providers, and therefore lots of uncertainty for consumers who want to jump in. The tech world has been eagerly waiting for the “year of mobile payments,” but this one won’t be it.

UPDATE: Although MasterCard didn’t list any particular phone makers on its partner list, several NFC-equipped phones are certified for use with PayPass, including the Blackberry Bold 9900, HTC One X, LG Viper VG LTE and Samsung Galaxy Nexus, among others. But it’s still up to operators, banks and other service providers to actually enable mobile payments on the certified phones. “We are working with these members of the ecosystem to adopt their payment services onto smart devices,” a MasterCard spokesman said.

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