Although advertised as a gift card, the ATMs are really distributing a Visa prepaid credit card.  It is similar to other prepaid cards, but varies a bit in its physical form.  Bank Technology News says the new cards “more closely resemble transit cards than credit cards.”

The main draw for consumers is the card’s convenience.  It allows a shopper to easily acquire a prepaid card, which is safer than carrying cash and more secure for making purchases.  And for the credit unions, they will be able to keep the money until it is spent.  That means the credit unions can continue earning interest from the money that is on the prepaid card, but has not been spent yet.

The Boston Consulting Group forecasts over $840 billion in prepaid card transactions by 2017.  ATM distributed cards could increase this number even more and also help expand the consumer and public sector markets, both of which were smaller than the corporate market according to BCG’s prediction.

For the consumer market, ATM kiosk companies like Cardtronics could have an entirely new market of users thanks to the card printing invention.  The public sector is also ripe with opportunity.  By contracting with the government, Visa and participating ATMs could improve and simplify the way that aid and welfare are distributed.

While many opportunities exist, it remains to be seen how Visa, Better ATM Services, and the credit unions will create a profitable business plan with the new prepaid cards.  It may be possible to profit just from the earned interest, but that will depend largely on the number of prepaid card users and how quickly they spend money from the card.

It will be vital to see how many ATM kiosks decide to adopt this service once Better ATM and Visa decide to scale up the program.  This will most likely make or break the technology, either opening doors to a large market, or severely hindering it with its inaccessibility.

The current pilot program offers no-fee $25 prepaid cards that are printed at the ATM.   No fee is the cards major advantage at this stage.  Better ATM Services owns the patented technology for printing the prepaid cards at ATM locations, and it is only being tested in Arizona.

The market for prepaid cards is clearly expanding rapidly, but it is difficult to judge whether ATM distributed prepaid cards will become popular.  The service’s biggest problem is the fact that people usually go to the ATM to get cash, rather than deposit cash.  Consumer adoption may require a shift in banking habits, or added incentives for using the ATM distributed prepaid cards.

Despite the challenges the prospect of ATMs distributing credit cards opens up a host of new opportunities, and it will be interesting to see how the technology will be fully implemented.

This is a big loss for PayPal, just months after PayPal lost key players Osama Bedier and Stephanie Tilenius to Google.  Yahoo has made no moves or announcements signifying a jump into the mobile wallet war, unlike rival Google, but PayPal still lost its biggest star in the mobile payment sector.

In 2011, PayPal has been trying hard to ramp up its efforts in mobile payments and point-of-sale (POS) technology.

Before going to Yahoo, Thompson was helping forge strategic partnerships for PayPal’s entry into the mobile payment sector.  He is frequently quoted on how PayPal will “really change the way people shop and pay,” but it is difficult to see how things will progress now that Thompson has gone to Yahoo.

Although Thompson’s departure has not stopped PayPal from rolling out their newest POS pilot program with Home Depot, it will be harder for PayPal to compete with the other powerhouses in the mobile payment sector.  Its POS payment system also does not appear to provide any significant improvements for the shopper’s experience yet.  It does not require a physical wallet anymore, but there are no apparent security improvements, and no incentives or rewards for customers.

Using PayPal’s pilot program, a customer can pay with the phone number linked to their PayPal account or with a PayPal card.  But, the phone payment does not use near-field communication (NFC) technology yet.  PayPal has developed apps using NFC technology, but the company does not appear overly interested in the idea of NFC payments.

In the mobile payments sector, they look as though they are playing catch-up with Google, Visa, American Express, and ISIS all having NFC wallets and programs in the works.  PayPal has said that it intends to focus more on “customer loyalty” programs using its mobile payments and stress service incentives over technological advances.  But Google Wallet has proven it can do that just as well, if not better.

Thompson was the most vocal, but certainly not the only person working on mobile payments at PayPal.  In the coming months, we will see how big a role he had in the project and if the mobile payment projects at PayPal can continue in a successful direction.

Verizon’s move is quite controversial, and brings up issues of “network neutrality” as well as “anti-competitive behavior.” Does Verizon have the right to block Google Wallet, an application freely accessible over the internet?

Regardless of whether this is within Verizon’s rights, it could be a glimpse into the influence that service providers will try to wield over the mobile payment market.

Google Wallet is currently the most widely recognized NFC mobile payment system in the U.S. It’s backed by Sprint, Citi, and MasterCard.

Verizon, AT&T, and T-Mobile have all agreed to back the competing ISIS mobile wallet, and will promote that once it is released in 2012. Verizon is clearly making a statement and trying to shift the market in favor of its own ISIS wallet.

It wouldn’t be surprising if AT&T and T-Mobile also make moves to block Google Wallet from their NFC equipped smartphones in the near future to further promote the proprietary ISIS software.

This may be a roadblock for Google, whose product seems to be near the cusp of mainstream adoption. NFC technology, which makes the mobile payments possible, is already set to become a global standard.

The 45 major mobile operators that make up the GSM Association have committed to implementing SIM cards with embedded NFC technology. This includes major players like AT&T, China Mobile, China Unicom, Vodafone, and Verizon.

In addition, users are ready to adopt too. KPMG’s latest Consumers and Convergence Report found a profound increase in acceptance of mobile payment techniques. In its survey, 66 percent of respondents said they would be willing to use their mobile phone as a wallet.

Thus, Verizon’s blockade of Google Wallet comes at a critical moment in popularizing mobile payment technology. The question is: how will Google respond to regain a piece of the market?

For now, Google fans have already made it possible to use Google Wallet on the new Samsung Galaxy Nexus using hacks. Although unsupported by Google officially, it sends a message that the “early adopters” like Google Wallet.

Google may find a way to take the issues to court, but it would not be a quick and easy case. Ideally, Google and Verizon will come to an agreement behind the scenes without causing a large uproar over the issue in front of the public.

Currently, Google has advantages in technology and experience with mobile payments, whereas Verizon, AT&T, and T-Mobile collectively have access to many more mobile phone customers.

It also remains to be seen how Verizon and the other ISIS advocates will deal with the mobile wallets of PayPal and Visa.

Near field communication (NFC) mobile payment is quickly being pushed into the mainstream around the world.  It offers the convenience of paying using just your mobile phone, and has the potential to completely eliminate the need for wallets.  With NFC, people can make instantaneous payments and financial transfers just by tapping two devices together.

With over 5 billion mobile phones in use worldwide, and over 500 million in just North America and Europe, there is undoubtedly huge market potential for NFC payment services.

Over 1.2 billion NFC chips are expected to be shipped by 2015.  And, Juniper Research released a report this year, anticipating $50 billion in NFC payment transactions by 2014.  The U.S. and Europe are expected to spearhead the mobile payment movement with East Asia following closely behind.

Thus, card services, mobile device manufacturers, and wireless service providers should all consider entering the U.S. and European markets first both to have an edge over competing applications when expanding to other countries.  They will gain the experience of working with an NFC mobile payment system, as well as understand how to overcome the market barriers discussed here.

In the US, implementation of the NFC payment method has primarily been driven by Google, MasterCard, and Citibank.  Their NFC capable Google Wallet is accepted at over 300,000 merchants.  Other providers and card services are fighting to catch up with their pilot programs.

Visa has launched their own digital wallet, which they are piloting with Wells Fargo and a few other banks.

Verizon, AT&T, and T-Mobile have joined to form ISIS, which will directly compete with Google and Visa’s wallets.  HTC, LG, Motorola, RIM, Samsung, and Sony Ericsson have all agreed to implement ISIS in their phones, and Visa, MasterCard, Discover, and American Express have all signed on to be “cards in the wallet.”

There are many barriers and question marks preventing widespread entry of NFC into the market immediately.

• It is unclear who will get the most revenue and be in control of a NFC payment system, or “wallet.”  Will it be the wireless provider, the card service provider, the bank, or another party?
• Different “wallets” are competing to be an industry standard.  Will there ultimately be one standard or many different standards?  Each scenario comes with its own unique challenges.
  • With one standard, would a company or group of companies hold too much access and control over a person’s funds?
  • With multiple standards, how will interoperability between different “wallets,” carriers, cards, and phones all be managed?  Some wallets are also open, like Google Wallet, whereas others like ISIS are more proprietary.
• Finally, security with wireless data is always a concern.  Multiple levels of security will be necessary from the phone manufacturers, the application developers, and the customers themselves.

There are other barriers too, which do not pose as much of a problem.  They will naturally be overcome as the industry grows, and do not appear to be a major impediment.

• Consumer adoption should not be difficult.  Most consumers are open and like the idea of using the mobile phone as a form of payment.  It’s simpler, and it is one less item to carry normally.
• There are mixed responses from merchants, but based on our own experience merchant adoption should not be a problem.  NFC is more than a credit card replacement, and it offers merchants the opportunity to foster relationships with their customers.  Participating merchants are already offering special deals through Google Wallet and Google Offers.
• The technological infrastructure is readily available and only needs to be widely implemented.  Many smartphones are already manufactured with NFC capabilities.  The only requirement for POS devices is that they also need to be equipped with NFC hardware as well as an app for accepting payments.  This could even eliminate many cash register and card swiping systems further into the future.
  • There is also currently a debate over the best type of bridge device: SIM, embedded, or MicroSD.  China Unicom and UnionPay promoted RF-SIM cards in the mainland last year, however, the trend indicates that most devices will be fully capable of NFC in the near future, i.e. have an embedded bridge device.

The ISIS “wallet” also brings up the question of how management of an NFC mobile payment system should be regulated.  Most argue that it should be an organization separate from the wireless providers.

If wireless providers also regulate your wallet, it could lead to issues accessing the money.  The site “NFC Rumors”, brings up an apt point, “If [the mobile network operator] shut down service to your phone you would not be able to make payments for daily groceries.”  If such a dispute went on for an extended period of time, it could mean that you no longer have access to your funds until the situation was resolved.  This could be problematic in any number of ways.

By comparison, the Visa Digital Wallet as well as Google Wallet are open forms of software.  This means they are ready to be used on any network, with any phone, and any financial institution.

Also worth noting, the world’s largest card service payment provider, China UnionPay, has only focused on the Chinese market so far.  They have not made any public announcements concerning their goals for adopting NFC service in the west even though they are currently creating alliances with network providers to accept their debit cards.  They also have not joined the NFC Forum, a large collaborative group promoting and standardizing the use of NFC.

European Union finance chiefs last week agreed plans to ease cross-border payments by credit and debit cards as well as electronic bank transfers across the 27-member bloc. They also warned that economic recovery in the EU was threatened by internal economic imbalances in some member states.

Under the new payment rules, consumers will profit from “enormous savings” and would have to deal with less bureaucracy, said German Finance Minister Peer Steinbrueck, whose country currently holds the rotating EU presidency.

The new regulations would ensure legal certainty for consumers and payment service providers, Steinbrueck told reporters after the meeting with his EU counterparts.

EU Internal Market Commissioner Charlie McCreevy said that the new rules would increase competition in the financial services market which would result in a wide range of choices for consumers.

The EU expects that the move will result in 50-100 billion Euro a year in reduced transaction costs.

Each EU country currently has its own rules on payments. The annual cost of making payments between these fragmented systems is estimated at two-three percent of Gross Domestic Product (GDP).

The EU commission has said that a more efficient and competitive payments market will mean that individual Europeans pay less for basic banking services, the average yearly cost of which ranges from 34 Euro to as much as 252 Euro across the EU.

The new payment regulations will cover most types of cash payments, cash withdrawals and credit and debit card use. However, they do not cover payment by check.

European lawmakers next month are expected to give their backing to the new rules, the so-called single euro payments area (SEPA).