Commerce Weekly: As Square heats up, so too does its competition

BofA enters Square's arena, V.me exits beta, and plastic likely won't leave the payment space anytime soon.

Here are a few stories that caught my attention in the commerce space this week.

Square aims high, BofA enters mobile payment arena

Square’s partnership with Starbucks launched this month, catapulting the payment startup into a new tier of competition. Gerry Shih at Reuters writes that Square now is looking at processing $10 billion in payments per year and “has attracted a furious response from established or deep-pocketed rivals who are determined to crush the San Francisco-based upstart.” Rivals include PayPal, Groupon and Intuit, among many others.

Shih says Square needs to prove it can compete on this new level, moving beyond food trucks and taxis and into large retailers and big-box chains.

Square’s COO Keith Rabois told Shih that Square eventually plans to process payments for every business in the U.S. and argues that though it won’t happen today, the company is in a good position to make that a reality. Shih reports:

“Because Square acts like an aggregator for its thousands of merchants, Rabois added, Square will be able to negotiate better rates with banks and credit card companies and improve its margins. Square’s daily transaction volume already makes it the equivalent of the 20th largest retailer in the United States, larger than, say, Trader Joe’s or the Gap.”

Square’s competition heated up yet again this week as well, as Bank of America launched Mobile Pay on Demand, which will allow merchants to process payments on iPhones, iPads or Android devices. Tricia Duryee reports at All Things Digital that BofA’s service fees will run 2.7% per transaction (compared to Square’s 2.75%) and that the service will launch at the beginning of December.

In what may be a sign that competition in this space is only going to increase, Trevor Rubel, EVP of strategy and emerging products for Bank of America Merchant Services, told Duryee, “I hate to come out with a commodity product, but every bank should have one.”

Visa’s V.me exits beta

Another mobile wallet/payment service entered the payment fray this week — Visa brought its V.me service out of beta and officially announced signed partners. Tricia Duryee at All Things Digital reports that at launch, 23 retailers and 50 financial institutions are on board, noting consumers can sign up for the service regardless of whether or not their bank is participating.

Sarah Perez at TechCrunch reports that the wallet platform is designed for online and mobile commerce, but it may extend beyond cyberspace:

“‘In early 2013 — not necessarily in the U.S. — you’ll see physical implementations of V.me,’ says [Jennifer Schulz, Visa's global head of ecommerce], explaining that mobile has enabled new ways to shop beyond online checkout, but may also include things like mobile shopping combined with in-store pickup, for example. V.me’s mobile payments mechanism can take advantage of NFC, more popular overseas than here, but it can also support QR codes, barcode scanning or other methods.”

Schultz also told Perez that though the initial rollout in the U.S. will focus on the service’s online application, the service will rollout internationally and on point-of-sale terminals starting in early 2013.

Plastic may facilitate transition to mobile payments

Ryan Kim over at GigaOm took a look this week at the mobile payment space and concluded that plastic cards — the very objects mobile payments are hoping to replace — aren’t going anywhere anytime soon. In fact, not only are the cards not being relegated to the sidelines, he writes, mobile payment companies are starting to incorporate traditional plastic into their payment platforms.

Kim looks at PayPal’s announced partnership with Discover and a rumored similar partnership with Google to create a Google Wallet card. He notes that the cards are offering more functions and services than credit and debit cards do now, but that the real benefit to incorporating the cards is that they can serve as a bridge while the fragmented mobile payment ecosystem matures. Kim writes:

“With so many systems available, but all with limited reach, there’s no tool available currently that promises ubiquitous acceptance. Increasingly, competitors are realizing that a payment system that works everywhere, not just for early adopters but for mainstream consumers, has the inside track on in-store payments.”

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Commerce Weekly will return November 28.

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