Are Mobile Payments Destined to Be Dominated by Monopolies?

Alipay is dominating mobile payments in China, and Apple Pay is exploding in the US.

As these two giants face off against eBay, Square, and Amazon, one is tempted to think that the mobile payment economy is destined to be dominated by one or two giants, with little room for smaller players.

There’s precedence for this; in the US, Visa and MasterCard have dominated the credit card industry for decades, and recent growth of American Express usage has not helped startups directly compete. This is partly because the credit card companies controlled the protocols that submitted payments, and had special agreements with banks that made their services possible.

Mobile payments doesn’t necessarily require using the credit card infrastructure. They don’t even require a special agreement with banks. For instance, e-commerce specialist Dwolla allows online and mobile payments at a flat 25 cent per transaction fee, making mobile payments cheaper and more efficient for merchants and consumers alike.

Yet, in all honesty, Dwolla is a failure. Even though the company has been around since 2008 and has a lot of indie store partners, it’s far from a household name. Meanwhile, more expensive and inefficient Apple Pay, let alone Paypal and Amazon’s competing services, have already become much larger than Dwolla.

Other mobile payment startups are trying to compete, like Yoyo and Stripe, but they are focusing on e-commerce and m-commerce as their unique advantage.

While there are startups trying to take Apple Pay and Alipay head on with offline m-payment solutions, the challenge is going to be tremendous. Alibaba is creating its own bank and Apple Pay is being promoted by banks, who see them as a way to protect against a merchant-controlled mobile payment platform known as CurrentC, which could theoretically lower profits from transaction costs to bank and, credit card companies, while cutting Apple out of the picture entirely.

With the battleground being fought by such behemoths, there’s little room for smaller players to offer simple technology-based solutions. This is tragic, because the basic transaction of moving cash from one account to another could be as easy as sending an email, if the banks and payment giants didn’t already dominate the space.