Amex Grabs a Head Start in Mobile Payments with Payfone Investment

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April 14 2011
By the ZippyCart Content Team

more power to the cell phone

It’s been said before and it will be said again many times this year– the mobile payments market is heating up. With major credit card companies looking to set the standard with their own technology comes American Express, who led a $19 million investment round in mobile payments startup, Payfone.

Payfone’s technology has the potential in becoming a viable ecommerce solution and change the way traditional consumer to merchants transactions are made.

According to Payfone co-founder and CEO, Rodger Desai, “Mobile payments will form a major cornerstone in operator and merchant digital payment strategies moving forward. We look forward to enabling operators to participate in the transaction flow and benefit from an entirely new revenue source, while driving home our own mission to make the mobile phone number the accepted way to pay.”

Payfone leverages the security of cell phone networks to verify whether or not a consumer has the funds or the credit to make a payment, the same way networks determine if a person has the funds to make a roaming call on their cell. By doing so, the company can track transaction locations and user ID data, which reduces the likelihood of any fraudulent charges or identity theft that often plague merchants and their ecommerce solutions.

Formed in 2008, Payfone’s technology has immense potential to set the standard in mobile payments for ecommerce solutions of all kinds. So much so that Verizon Investments, Rogers Ventures, Opus Capital, BlackBerry Partners Fund and RRE Ventures, have joined Amex in strategically investing some serious cash into Payfone. The company will use its newly gained capital for product development and to further its reach in North America, Europe, Latin America and Asia.

As part of the deal, Payfone will integrate its technology into Amex’s own PayPal-like digital payment platform called Serve. The partnership comes at a time when Near Field Communications (NFC) technology is just on the verge of exploding in the market as more and more cell phones are coming standard with an NFC chip.

According to IE Market Research, the NFC market will account for a third of the $1.13 trillion in global mobile-payment by 2014. However, NFC will likely not prove to be a competitor to Payfone as their technology is designed to eventually accommodate NFC, evening out the playing field for the real competitors. Big names like Visa, Apple, Amazon, and the partnership between MasterCard and Google are all anticipated to get into the mobile payments game using NFC technology between 2011 and 2012.

For Amex, the company seems to be doubling its efforts to seal its own place in mobile payments. Payfone’s technology can help the company tap into the global network of cell phone users estimated at over 5 billion people, which is not a bad move at all for Amex who seems to be getting a head start in a highly lucrative and burgeoning market.