Card companies such as Visa, MasterCard and American Express fear their access to information generated when a consumer swipes a credit or debit card is being blocked by some of the digital applications.

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The program builds on Foursquare’s partnership with American Express, which launched just under two years ago, which allows Foursquare users to redeem special discounts and deals by checking in to local businesses after linking their Foursquare accounts to their credit card. The idea was, according to Foursquare, to make the experience less awkward than pulling out a paper coupon or waving your phone in front of the cashier (a la some daily deals services).

So in theory, the easier and less clumsy the process, the more folks will want to do it. And that makes everyone happy — including Foursquare’s bottom line.

“When users are having a great experience and merchants earn more money, we earn more money in the process,” Foursquare product manager Noah Weiss told AllThingsD.

Which is something Foursquare needs to take more seriously as it begins to mature and think of itself as a growing, viable business. The company of course has its previously announced paid promoted updates pilot program to offer businesses more ways to lure in customers, but that’s still being fleshed out, and needs time before it scales widely.

That, combined with Foursquare’s added analytics dashboard that can help business owners see more information about the types of people spending money at their stores, could prove to be a fairly powerful tool set for understanding their customers.

For now, with any luck, the number of people using Visa, Mastercard and debit cards — which is pretty much everyone in the U.S. — will beef up Foursquare’s deals revenue. That is, if folks continue to check in.

The acquisition was reported by several media outlets, including The Wall Street Journal, which cited sources close to the transaction as saying that Chase paid $35 million for the San Francisco company.

Bloomspot’s roughly 100 employees are expected to be offered jobs at the lender and payment processor.

Together, the two should be a good fit.

In general, banks and card issuers are looking for new revenue streams after the Durbin Amendment capped the amount that they could charge merchants on debit card transactions. Additionally, many banks have already begun sending targeted ads or deals to consumers based on their spending habits.

In a recent story, I named financial companies, including Visa, MasterCard and American Express, as potential acquirers for Groupon. However, one impediment with Groupon is its price. Even though its stock is down around 80 percent since its IPO, it would still cost billions to acquire.

The purchase today by Chase shows that there is an interest, just at a lower price point.

In a release, Jeff Kinder, president of Chase Offers, said, “Merchant partners are continually looking for ways to engage the right customers, and consumers have shown a clear interest in receiving offers from their favorite merchants. We believe Chase has a unique set of assets to bring these customers together and deliver highly targeted, relevant merchant offers at scale.”

Over the past few years, Bloomspot, which was led by former Yahoo executive Jasper Malcolmson, has tried hard to disassociate itself from both Groupon and LivingSocial. Even though on the surface it seems as though Bloomspot distributed similar offers, Malcolmson said he was focused on bringing merchants profitable customers rather than just getting new people in the door.

The company’s motto was, “Great Offers. Great Customers.”

But this deal may not have been so great for investors.

Last summer, Bloomspot raised $35 million in a second round of funding just before Groupon’s public offering. Prior to that, it raised nearly $11 million, for a total of about $46 million. Investors include InterWest Partners, Columbia Capital, Menlo Ventures and True Ventures, among others.

Wall Street is certainly enthusiastic for such an outcome — even grabbing onto a specious rumor that perhaps Google was sniffing around the troubled Chicago-based social discount deals company, which is currently valued at just over $3 billion. On Friday, Groupon’s stock jumped 23 percent on takeover speculation after Tom Forte of Telsey Advisory Group was quoted as saying: “Where the stock is currently trading, it’s a takeout candidate.”

Actually, the stock has been trading at these levels for a very long time, so the sudden attention is decidedly overwrought. More to the point, sources close to Google — which had offered $6 billion for the company before it went public — said that Google has not been contemplating a second foray into acquiring Groupon.

The same is true for eBay, said sources, and Amazon is an unlikely buyer because it already owns a stake in LivingSocial, the second-largest daily deals provider. Additionally, there are lots of other problems that any purchaser would face in buying the company, which sells everything from bikini waxes to GPS devices at a discount.

In an onstage appearance this morning, CEO Andrew Mason declined to address the thinly sourced rumors of a takeover. “What I have said about Groupon is everything I will say about it,” he said. “I am focused on looking forward.”

Given the non-answer, it’s still prudent to ask, is there actually a buyer for Groupon?

First, let’s address the price. Two years ago, Google offered to purchase Groupon for $6 billion. A year later, it went public at $10 billion, and today, it is trading for $2.9 billion. The company has $1.2 billion in cash, and owes merchants about half of that, or around $573 million.

That said, it is still a relatively low price for a company that includes a customer base of 40 million people who bought something in the past year, a hodgepodge of local retailers and merchants that consider Groupon their online marketing channel, and — perhaps most importantly — a better-than-expected mobile business that now represents a third of its transactions.

But, while it costs much less than it once did, that doesn’t necessarily make Groupon a steal.

That’s because over the past year, the Chicago company has stumbled operationally. Europe is underperforming, the company’s main coupon business is slowing as the novelty of the business is wearing off and it has started investing heavily in selling products, a low-margin business that requires tons of logistics to package and ship items to people’s front doors. On top of that, the board recently discussed replacing Mason, who some directors fear may not be the right choice to continue leading the company. While they ultimately decided to keep him, it was a perceptual blow.

At least one big investor is betting something will happen: Tiger Global Management, which recently bought up close to 10 percent of Groupon. The well-regarded hedge fund and private equity firm may be betting it can’t get worse, and perhaps would even push for a sale.

In any case, here’s a look at some of the scenarios:

Google

When Google made the offer two years ago, the search engine was interested in entering the daily deals business as a way to gain a foothold into all things local, including commerce. Since Groupon rejected that $6 billion acquisition, Google has spent the past two years building Google Offers.

While Google Offers still has a very small piece of the market, it has been pivoting toward an integrated ads model, which is less complementary to Groupon’s approach. Google believes that merchants will pay Google only after a purchase has been made, and the sum will be determined by the consumer. The cost per acquisition model is very different from Groupon, which has the consumer paying up front for a heavily discounted coupon.

As one source with knowledge of the situation said: “The timing would be a bit wacky.”

That said, Nikesh Arora, Google’s SVP and chief business officer, had been a very strong advocate of the original deal and might still want more heft in Google’s corner in the competitive local scene. One major plus is that Groupon could also help build a local salesforce to push Google+ Local, which includes Zagat, the online reviews site that competes against Yelp. Groupon might also support its Google Wallet business, which has largely failed to gain traction among consumers.

Another source familiar with the two companies said running a daily deals business is “operationally intensive, and it’s a muscle that Google doesn’t have, so from a synergy standpoint it would be complementary.” But, “if they are still serious about local, is that the business model for local that they want to pursue?”

eBay

For the past two years, the e-commerce company has aggressively been going after the local commerce market by helping transactions occur online or at a nearby store. Additionally, its PayPal division is moving fast into the physical payments space. Strong merchant relationships, like the ones Groupon has, could go a long way toward making those things happen faster.

EBay recently raised $3 billion in debt financing and has $7.3 billion cash on its balance street. Its stock price also has gone up more than 65 percent in the past year, giving it plenty of fire power to make a big move.

It also has the stomach for acquisitions. However, many of its purchases over the past two years have been about buying technology and talent. It bought RedLaser, the barcode scanning technology for $10 million; Milo.com, a local inventory company, for $75 million; and Zong, a mobile payments company, for $240 million. Over the years, it has also made substantial purchases, including GSI last year for $2.4 billion, Bill Me Later for $1.2 billion and Skype for $2.6 billion.

A few months back, the company entered the daily deals business with the launch of eBay Lifestyle Deals, which runs daily deals in a number of markets, including San Francisco, Seattle, Los Angeles and Washington, D.C. To do so, eBay teamed up with Signpost, which arranges the deals with local merchants. Interestingly, Signpost is backed by Google Ventures, and already provides deals for Google Offers.

The company is also experimenting with eBay Now, a service that allows consumers to buy something on their phone and have it delivered within an hour. “They continue to be interested in local, and they have this experiment going on right now with eBay Now, but they are still iterating and figuring out the local angle,” one source said.

Likewise, PayPal’s local strategy is under development. It is trying to roll out physical payments to big-box retailers like Home Depot while also offering a credit card reader for smaller retailers called PayPal Here.

The biggest argument against this deal is that eBay may not need Groupon, and that it already has the infrastructure to roll out deals through partnerships — which would cost a whole lot less and be a lot less painful.

Amazon

Simply put, Amazon already has its own troubles with its significant stake in LivingSocial, which just slashed 400 jobs. In the third quarter, Amazon took an impairment charge of $169 million, or 37 cents a share, related to its stake in LivingSocial, resulting in the company reporting an overall third-quarter net loss of $274 million, or 60 cents a share.

Any potential Amazon-Groupon tie-up would then be a merger between LivingSocial and Groupon, creating perhaps an even bigger black hole that would also result in a lot of ongoing integration problems. While together LivingSocial and Groupon would easily make Amazon the largest daily deals company and up its local commerce efforts, it’s still not clear if the online retail giant wants to double down here.

Separately, Amazon has entered the daily deals business on its own with a service called Amazon Local that competes directly with LivingSocial and Groupon. The offers became particularly interesting to the company after it started using them to discount the price of its Kindle e-readers and tablets. If owners don’t want to see the offers, the tablets can cost up to $40 more.

The company has said that it essentially doesn’t need help building the business – it thinks it can get to scale fast in the space because it already has 164 million active customer accounts worldwide (which are defined as people who have made a purchase in the past year).

Perhaps most importantly, though, Amazon has a history of building, not buying.

Visa, MasterCard, American Express

These three payment companies have huge market values, and should not be discounted as players in the local commerce space. In addition, a year ago, all of them started looking for new revenue streams after the Durbin Amendment capped the amount that banks and card networks charge merchants on debit card transactions.

Already, many banks are sending targeted ads or deals to consumers based on their spending habits. However, it’s unclear whether they need to be the actual deal makers, or just act as a distribution system for advertisements and coupons. For example, MasterCard recently partnered with Gilt City, the daily deals division of Gilt Groupe. Through the partnership, MasterCard will be able to offer its users deals for restaurants, concert tickets and travel, and at the same time, help Gilt City get in front of some of the card issuer’s millions of users.

MasterCard may be the frontrunner of the three as a potential suitor. Not only has it shown direct interest in the space, American Express is still absorbing its acquisition of Revolution Money, for which it paid $300 million cash in 2010, and Visa has been active with its purchase of CyberSource for $2 billion in 2010. More recently, it made an investment in Square, the hot mobile payments company.

Other Suspects

A number of other companies could be put on a Groupon acquisition list, such as Yahoo, Microsoft and Facebook.

Microsoft and Yahoo both have the money, but have not done much in the space so far. An acquisition would allow them to catch up quickly, but would be expensive and largely not complementary with what they are doing already — which is almost nothing. Facebook, in particular, tried once to enter the space and failed and might be focused on other lower-hanging revenue sources.

Groupon could also look to private equity firms for a buyout, which would allow it to have some space while it fixed some of its issues.

Internationally, there is Japan’s Rakuten, which owns Buy.com in the U.S., and China’s e-commerce giant Alibaba, which has been looking at ways to enter the U.S. market.

Of course, Groupon might simply keep stumbling forward and hope it can turn itself around. But, at some point, without improved revenue and cohesion at the top levels, something is sure to bring pressure to its options. 

In fact, in afternoon trading today, the rumors continued to keep the stock elevated. Shares closed 3.76 percent higher today at $4.41 a share.

Images of Money

Visa’s V.me service is similar to eBay’s PayPal and other e-wallet services under development by MasterCard and American Express. The consumer benefit for all of these is that checking out online or from a mobile phone will be easier because customers will only have to enter a username and password, which automatically populates dozens of fields, including credit card numbers and shipping addresses.

While V.me is operated by Visa, it is promising to be open, meaning that consumers can fund it using a variety of sources — including Visa, MasterCard, America Express and Discover cards.

Today, Visa is announcing the commercial launch of the service after unveiling V.me in beta a year ago.

In that time, it has signed up 23 online retailers, including Blue Nile, Buy.com, MovieTickets.com, 1-800-Flowers.com, Cooking.com and CozyBoots.com. And agreements have been secured with 50 of the top issuers and banks, including BB&T, CSCU, BBVA, U.S. Bank, dozens of credit unions and more.

Jennifer Schulz, Visa’s global head of e-commerce, said the company will be relying mostly on the banks to promote the digital wallet service. Some banks have committed to directing consumers to the V.me site, or to integrating the registration process directly on their own sites. Any consumer, regardless of whether their bank is participating, can sign up at V.me.

Visa still has a long way to go. It will reach 55 million consumers through the bank relationships, and it is working with only 25 of the top 250 Internet retailers, Schulz said.

The latest to enter the space is Bank of America’s Merchant Services, which today is unveiling Mobile Pay on Demand, a service that allows small business owners to accept customer payments over a cellphone.

“I hate to come out with a commodity product, but every bank should have one,” said Trevor Rubel, EVP of Strategy and Emerging Products for Bank of America Merchant Services.

Square is perhaps the most high-profile company in the market and is already processing $8 billion in payments annually. But its head start hasn’t deterred others from entering into the space, including eBay’s PayPal, Groupon, Intuit, Pay Anywhere and many others.

Bank of America’s nearly identical service will be available starting Dec. 3 and will be priced very competitively. The card reader (which is slightly more bulky than Square’s, and is more rectangular) will be free and payments will cost 2.7 percent per swiped transaction. The mobile application, available across both iOS and Android, is also free.

The rate is priced slightly below Square’s offering of 2.75 percent, but is slightly above Groupon’s 1.8 percent plus 15 cents fee (although Groupon also requires merchants to be active daily deal providers). Bank of America charges no monthly or annual fees.

Rubel says he believes that Bank of America has an advantage over the others because it has a very strong, trusted brand. Plus, it already has substantial relationships with retailers, including roughly two million small- to mid-sized businesses that don’t currently use its payment terminals because they don’t process enough transactions to justify it or because they work on the go. He imagines the new service appealing to the usual crowd of taxi cab drivers, participants at farmer’s markets and contractors.

Some of the perks provided by the service include next-day access to funds and customer service representatives available by phone. Additionally, retailers will be the merchant of record, meaning that the name of the business will appear on a consumer’s credit card statement instead of Bank of America’s or some other provider.

For those merchants that sign up by the end of the year, they will also receive a one-year subscription to Bank of America’s deals marketing platform, which normally costs $200. The platform allows business owners to create a Web site, and to distribute Groupon-like offers, coupons or loyalty programs. The offers are syndicated across several sites, including Facebook, Twitter or 8coupons.com. When offers are redeemed, Bank of America will charge merchants small fees, depending on the type of offer.

In an interview, Mihir Shah, Groupon’s VP of Mobile and Merchant Products, confirmed to AllThingsD that Groupon Payments is available starting today in the U.S.

The launch follows a pilot program in the San Francisco area with more than 150 businesses. The service allows merchants to accept credit and debit cards by swiping them through a card reader attached to an iPhone or iPod touch.

While payments has become a very hot space over the past year, with many companies providing card readers for mobile devices, what stands out about its service is the price. At least, that’s what Groupon is hoping.

Shah said Groupon is guaranteeing it has the cheapest rates — and will beat a merchant’s current rates if it doesn’t. He said that merchants often don’t even know what they are paying because of complicated rate structures and monthly fees that make it hard to figure out.

“The whole industry has been looking for a landmark that says that all of this is really happening,” said Don Kingsborough, PayPal’s VP of Retail Services. “This is an important deal for us, because it gets us to over seven million locations pretty seamlessly.”

Groundbreaking deals such as this one are becoming commonplace in the industry, as businesses move quickly to make it possible for consumers to pay with their mobile phone or some other form of digital currency at the cash register.

Just two weeks ago, Square made a huge splash after announcing that Starbucks would use the start-up to process all of its credit and debit transactions.

Now, one of Square’s biggest rivals is making it clear that it is still in the game.

In ranking the two deals, Ken Paterson, VP of Research at Mercator Advisory Group, says he would guess that PayPal’s deal is potentially larger. ”It could bring PayPal to the majority of card-accepting merchants across the country,” he said. “The potential scale involved here is very significant.”

Discover may not hold the same cachet among consumers as Visa and MasterCard, but it reaches nearly as many merchants, roughly 95 percent of the two other payment networks combined. And when matched up with PayPal’s more than 50 million users in the U.S., the two could mark the first mobile payments network that spans both millions of users and millions of locations.

Starting in April, Kingsborough said, Discover’s merchants will be able to begin accepting PayPal’s charge cards. Or consumers may choose to pay by entering their mobile phone number and PIN at the terminal (which requires no wallet). The merchants will also have access to other PayPal features, such as the ability for consumers to order online and then pick up their purchase in the store.

In the future, PayPal could provide other features to participating retailers, such as location-based check-in capabilities and loyalty programs.

Kingsborough expects the rollout to be fairly easy, because no software upgrades will be necessary, given that PayPal already has partnerships with the necessary hardware partners. “We’ve been working on this for 18 months, and have the building blocks in place,” he said.

Separately, PayPal already has deals with 16 merchants and expects to have 20 signed up by the end of the year. Today, consumers can pay with PayPal in 3,000 stores, including all Home Depots and some Abercrombie & Fitch, Jos. A Bank and Jamba Juice locations.

Kingsborough said it will give the payment company a cut of each transaction for the right to run via Discover’s network, and added that the deal is not exclusive, but that it would be “highly unusual [for either party] to do a similar deal with someone else.”

Mercator Advisory Group’s Paterson said that the deal is mutually beneficial. “It’s a small fee on each transaction, but the numbers involved get pretty large pretty quick,” he said.

In a blog post, Google announced: “Today we’re releasing a new, cloud-based version of the Google Wallet app that supports all credit and debit cards from Visa, MasterCard, American Express, and Discover.”

But American Express spokesman Brad Minor told AllThingsD that no official agreement has been signed between the two companies, and “they haven’t gotten our approval for the additional use.”

In previous iterations of Google Wallet, including Google Checkout, American Express was an accepted form of payment.

UPDATE: In a statement, a Google spokesperson said, “For many years, we’ve accepted American Express, Visa, MasterCard and Discover for online and mobile transactions. The latest version of Google Wallet extends these same benefits to people who choose to use the Google Wallet app to make purchases in-store. We are in active discussions with American Express and look forward to working together as partners as the world embraces digital payments.”

While technically it is still possible for Google Wallet users to store their American Express card in the Wallet and make payments without an agreement in place, Minor said Amex could shut off the feature if necessary.

A Visa spokesperson confirmed that it does have an agreement with Google. Back in September, Google started licensing Visa’s payWave application to allow account holders to add their Visa credit, debit or prepaid accounts to the Google Wallet.

Likewise, Google has a long-standing relationship with MasterCard, and, in fact, it is MasterCard that is making it possible to store multiple card types in the cloud. When users add a credit or debit card to the Google Wallet mobile app, they will be issued a “virtual” MasterCard card number. As a result, the merchant will never receive your real credit or debit card credentials, but rather be presented with that number from MasterCard.

A Discover spokesperson did not immediately return calls seeking comment.

It is not entirely clear why American Express wouldn’t want to participate in the program; however, the mobile payments field is becoming increasingly competitive, and it has its own efforts under way.

Maybe it just wants it all in writing first.

Larry Page, can you please sign on the bottom line?

And Google Wallet has been one of the biggest offenders.

But starting today, the company is making a few key changes that will remove a lot of barriers to entry.

For instance, now users will be able to store multiple cards in the Google Wallet, whether they are issued by Visa, Discover, American Express or MasterCard. In addition, users will now also be able to use Google Wallet to pay online at thousands of participating merchants.

“When we launched, we only supported Citi MasterCard and our own prepaid card,” said Robin Dua, Google Wallet’s head of product management.

With this new approach, adding a new card will be easy. Before, he said, it took several months to a year of working with a bank to complete — a lifetime in the fast-moving technology space.

To make it work, Google explained in a blog post, it will now store the payment information in the cloud, rather than in the phone’s secure element. When users add a credit or debit card to the Google Wallet mobile app, they will be issued a “virtual” MasterCard card number. As a result, the merchant will never receive your real credit or debit card credentials, but rather be presented with that number, adding another layer of security.

As part of the announcement, Google also added new security features that will allow users to log in online and delete all of their information if they ever lost their phone.

So, is Google Wallet now perfect?

No, not really. For now, it is still limited to six NFC-enabled phones.

During a hefty restructuring earlier this year, the e-commerce company closed six regional offices and laid off dozens of staffers from its Gilt City division.

While the company made assurances that some of its markets would remain open, especially in New York where it is based, it appeared it was just a step away from becoming one of the many Groupon clones that couldn’t hack it.

But today, there are signs of life coming back into the brand.

MasterCard has told AllThingsD that, starting this quarter, it will begin offering Gilt City’s deals to its users through a program it calls Priceless Cities.

The nonexclusive partnership will allow MasterCard to offer its users more deals for restaurants, concert tickets and travel, and give Gilt City access to a new audience by getting in front of some of the card issuer’s millions of users.

The Priceless City program is now a year old and is live in a number of cities, including New York, Chicago, Beijing, London and Toronto.

“We’ve seen cardholders in New York and the other Priceless Cities enthusiastically embrace the access and offers delivered through the program,” said Cheryl Guerin, Mastercard’s SVP of Marketing, in a statement. “The Gilt City relationship is the new piece we’re highlighting today to bring even more travel, culinary and entertainment offers to our U.S. programs.”

Terms of the deal were not disclosed.

A $40 voucher to a restaurant? $20. Gilt City’s deal with MasterCard? Priceless.

InsideSocial

Based on one estimate, there are three million food trucks and more than five million food carts in the U.S. A reality-TV show called “The Great Food Truck Race” depicts the drama in setting up shop, and the challenges of making a profit.

So it’s no wonder there’s now an iPad-based solution made specifically for the four-wheeled purveyors.

Revel Systems, a two-year-old San Francisco start-up, has created a point-of-sale system for food trucks and quick-service restaurants. It’s available today, to make accepting ordering and payments as simple as possible.

What’s special about this version is that it allows the trucks to accept orders and charge credit cards with little to no wiring, so kitchen crews in cramped quarters don’t accidentally stumble over or chop their lifeline to the Internet. It also enables them to continue taking orders, even when their Internet connection goes down — because that can happen when moving from one street corner to the next.

“Before, you’d have a router and cabling all around; it was one big mess,” said Revel Systems’ co-founder and CTO Chris Ciabarra. “If you want a printer and a display, where do all the cables go?”

Additionally, the software enables food truck owners to update their location, or offer specials via Twitter.

What’s different about this iPad solution from others, like Square, is that it’s focused on the enterprise customer, Ciabarra said.

As traditional brick-and-mortar restaurants like Popeye’s and In-N-Out Burger experiment with food trucks, they want a point-of-sales solutions that isn’t a one-off, but is able to support franchises, he said. ”The food truck industry is booming. All the brands are trying it out.”

Revel also allows merchants to integrate any payment solutions or rewards and gift card programs, including traditional providers like Visa, MasterCard and American Express, and also upstarts like LevelUp. The software also easily tracks what items are selling well, as well as the things that are the most profitable, so truck owners know which items on the menu to emphasize.

Revel, which was founded in September 2010, launched its first product in beta last summer, and has raised $3.7 million in capital.

The company is charging food trucks $2,000 for the package, which includes the iPad, the cash drawer, a printer, the software and the cabling. Each Internet-connected iPad also costs $30 a month. The enterprise version, which has additional features, costs $3,300, and $100 a month.

That’s a lot of tacos.

That’s because, for every transaction, they usually pay the payment processors 2 percent or more. On small purchases, that can often be the retailer’s profit.

But, starting today, LevelUp is providing merchants an alternative that will charge absolutely nothing. It is calling the program Interchange Zero, because when both merchants and consumers use LevelUp, it won’t cost a single cent to accept a payment.

On the consumer-facing side of LevelUp’s business, consumers must pay using a mobile application on their phone that is tied to their debit or credit card. This makes LevelUp one of dozens of companies also competing in the hotly contested mobile payments space.

LevelUp CEO Seth Priebatsch says he’s been talking about charging zero interchange fees for the past eight months, but only now has figured out a way to roll it out. ”Once you go to zero, you can’t go back,” he said, noting how confident he is in making the move.

But getting both merchants and consumers to adopt the mobile payments has been challenging for others, including Google Wallet, PayPal and Square, which are all arguably in the very early stages. Others, including Groupon and Apple, are also contenders, and, oh yeah, don’t forget about Visa, MasterCard and American Express, which all have healthy businesses based on charging interchange rates.

Crazy as it sounds, Priebatsch believes that his Boston start-up, which is a division of Scvngr and raised a modest $12 million in its most recent round, has an honest chance against them all.

That’s because he is leapfrogging everyone else by going directly to zero.

“It’s a commodity. Everyone is competing on price,” he said.

Up until now, LevelUp was charging about 2 percent per transaction. Under that model, it had signed up 3,000 merchants, and said that roughly 200,000 active users were spending about $2 million a month on its network. Going forward, rather than making money on interchange, it plans to sell services to merchants with the aim of getting new consumers in the door and keeping them coming back.

For instance, a common promotion that a merchant could offer would be offering $2 off a purchase. When redeeming the offer, LevelUp earns 35 cents for every dollar off. In this example, the merchant would have paid $2.70 to acquire the customer, which becomes a whole lot more economical if there’s no interchange. Priebatsch believes that by offering such promotions, they can sustainably bring interchange to zero. Currently, 98 percent of the businesses using LevelUp are running campaigns.

“We don’t need it [interchange] anymore. We’ve found ways to add value that can fully subsidize it,” he said.

It also helps that LevelUp is trying to come up with creative ways to limit the amount of interchange it pays.

Priebatsch didn’t go into details on how, but he said that the company has built proprietary algorithms to route money more intelligently, which saves it 50 percent compared to when LevelUp didn’t have the technology. The company also worked aggressively to reduce fraud in the system, and says it has 99 percent less fraud than a standard credit card because merchants never see a consumer’s 16-digit code, but instead scans a QR code.

But even if merchants like it, will consumers be willing to adopt mobile payments?

Priebatsch is insanely optimistic on that front, too, believing that merchants will do most of the legwork for LevelUp, because if they save money, they can ultimately pass it along to the consumer. So far, that’s penciled out, with LevelUp reporting that 85 percent of users are signing up for the app inside of a store.

LevelUp is not the only one moving fast on this front.

Dwolla is working hard to build its own network that limts interchange; Google Wallet plans to subsidize its network with advertising; and PayPal believes that it can continue to charge as long as it offers other perks and services to the merchant.

For more information, here’s the whole release:

LevelUp Becomes First Payments Solution to Achieve ‘Interchange Zero’
“Merchants Will Never Pay a Processing Fee Again,” says CEO Seth Priebatsch

Boston — July 12, 2012 — Accepting credit cards costs merchants a total of $50 billion every year. In fact, payment processing fees are the single largest ‘invisible tax’ on businesses in the American economy. This hurts consumers, too. That $50 billion comes out of your pocket in the form of higher prices anywhere you swipe your card.

Luckily, that fee is going away forever.

As of today, any merchant accepting LevelUp as a form of payment will join the Interchange Zero revolution and stop paying processing fees forever.

What is this “Interchange Zero” thing?
Interchange Zero is the revolutionary — and now, real — idea that it shouldn’t cost merchants a single cent to accept a payment. No ifs, ands, or buts. Instead of making money just for moving money, payment providers should add value above the transaction in ways that help businesses thrive and grow, such as customer acquisition and customer loyalty campaigns.

Priebatsch first broached Interchange Zero as a burgeoning shift in the payments industry last fall at Fast Company’s Innovation Uncensored conference. He’s written on the topic in Inc. Magazine and this spring at SXSW Interactive, Priebatsch addressed the crowd about this inevitable payment revolution.

And now it’s finally here.

OK, this is cool. But why is interchange a dying business?
Fifty years ago, interchange — the movement of money — had reason to be costly. For example, physical lines were laid to connect merchants to the network and large fraud risks had to be covered.
But this day in age, those lines are already laid and heavy-duty security innovations have lessened the real value of interchange. Yet, as these real costs went down, the interchange rate stuck around. What a swindle!

“The process of moving money is now becoming a commodity, a de facto service. We’re entering an era in which merchants should get — and will eventually only pay for — value above and beyond the transaction,” said Seth Priebatsch, Chief Ninja of LevelUp. “LevelUp is skipping this ‘race to the bottom’ happening between the major payments companies and leading the way by providing real value beyond the transaction.”

Today: 0% payment fee. Forever.
Today, LevelUp is taking the bold step of dropping its interchange to zero. Entirely. Forever. From here on out, LevelUp will only make money by providing value beyond the transaction.
LevelUp provides that value with campaigns. The first two are built to solve big problems:

Customer Acquisition campaign: On LevelUp, businesses easily create a compelling incentive to bring new customers in the door. LevelUp will promote it. By bringing in new customers, LevelUp is providing real value. The consumer saves. The merchant wins a new customer. No other payment processor does this!

Customer Loyalty campaigns: Businesses create awesome loyalty campaigns on LevelUp. In doing so, LevelUp motivates customers to come back more often to unlock the loyalty incentives. More visits per week is real value. The consumer is rewarded. The merchant is busier than ever!

OK this is pretty sweet. But how does LevelUp make money?
When merchants choose to run a campaign on LevelUp, LevelUp earns 35 cents for every dollar of credit redeemed through that campaign. That means LevelUp is only making money when real value — which is determined by the merchant when they set up their campaign(s) — is created.

That’s it?
That’s it. So businesses, stop paying interchange! Like, now. Accepting your customers’ money should be free. And with LevelUp it is. Zero percent means zero percent.

Now, take that money, and reinvest it in campaigns that actually grow your business. If they don’t work, improve them. Or stop running them. All the data is yours, all in real-time.

And one last thing…
“Google gave away access to all the world’s information for free. They could have charged per search, but they didn’t. They chose to make money only when they added real value for an advertiser by driving a consumer to a website with a click,” added Priebatsch. “We’re doing the same thing with payments. We’re going enable the frictionless flow of money and only make money when we add real value for merchants — in this case, by driving a new customer to a business with a transaction.”

Britannica might not have liked Google giving away access to information for free. But consumers and businesses sure did. We don’t think everyone will like Interchange Zero. But businesses and consumers sure will.

To join the 3000+ brick-and-mortar merchants already on LevelUp, please visit TheLevelUp.com/business.

About LevelUp

LevelUp is a revolutionary new way to pay. Users pay with their phone, saving time and money. Businesses pay 0% payment processing fees and re-invest those savings into growing their businesses by attracting new customers and bringing them back.

LevelUp is a part of SCVNGR which is backed by Google Ventures, Balderton Capital, Continental Advisors, Highland Capital and Transmedia Capital.

During an all-day media event today, the company’s top executives provided a very broad overview of the privately held company.

It also gave us a tour of its six-story building in Washington, D.C., that it uses for hosting events, including art classes, pop-up restaurants and exercise classes. Later, it gave us an option of checking out a mixology class or trapeze lessons. (Personally, I opted to learn how to make refreshing beverages on this blistering 95-degree day!)

Dickson Chu, LivingSocial’s SVP of merchant services, said this summer it will test out at least three concepts with merchants in the payments and loyalty space. He declined to provide specifics, but LivingSocial’s CEO Tim O’Shaughnessy verified that it was not interested in competing directly with payment processors.

That’s sort of a novel comment given that so many companies have recently entered the space to compete against Visa, MasterCard and American Express, like PayPal or Square.

“We have a big business here, and we probably aren’t going to be a real active Square competitor,” the company’s chief said.

Over the past several months, critics have wondered if the daily deals business is sustainable and if it will be able to continue to attract consumers at the same rate. After all, the novelty of getting meals, spa treatments and other services at 50 percent off starts to wear thin. As a result, providers in the space have begun to cast a wider net by branching into other areas of local commerce.

In particular, Groupon, the industry leader, has been vocal about providing technology solutions to local merchants, including online scheduling software and rewards programs that track consumer spending. More recently, reports have surfaced that Groupon is testing out a mobile payments product, including an aggressively priced service that is much cheaper than the big payments processors like Visa and MasterCard, and even than the emerging players like Square and PayPal.

Over lunch at Kushi, a Washington, D.C., sushi restaurant that has run three LivingSocial deals, owner/chef Darren Norris said he spent $17,000 on his restaurant’s point of sales system, and it’s “the worst built machine in the restaurant.” In response, Chu said LivingSocial isn’t particularly interested in making hardware, but “we will solve that problem.”

Since joining the company in December from Citibank (and before that, PayPal), Chu has been investigating other services they could offer to merchants. One idea is to come up with a way for LivingSocial to automate a restaurant’s Facebook page or other social channels, which small business owners don’t typically have the time to keep up to date.

During the company’s update on the state of the business, the executives declined to comment on the private company’s financials. O’Shaughnessy also said it had no immediate plans to file to go public. Amazon continues to own roughly a third of the company, and reported as part of its financial results that the company had an operating loss of $92 million on revenues of $110 million in the first quarter.

Here are some of the figures that LivingSocial did provide:

• has 67 million subscribers
• operates in 600 markets in 20 countries
• has worked with 115,000 merchants
• employs 5,000 employees
• has raised $600 million in capital
• says 20 percent of purchases occur on mobile devices, and that its apps are being downloaded 100,000 times a week for a total of 11.5 million times
• says 25 percent of revenue now comes from non-core daily deals, such as travel, family, adventures, Amazon.com — many of which are full-priced.

I scan my phone to pay for a latte at Starbucks, I snap pictures of checks to make bank deposits. Once, I used it to buy a few screws at Home Depot without ever pulling out my credit card.

But this week, Apple officially announced its first steps into the payments space with Passbook, an application that electronically stores loyalty cards, gift cards, boarding passes, electronic movie tickets, coupons and more on the phone.

Passbook comes out this fall, and Apple hasn’t yet said if it will accept payments or store any credit card information. But based on several conversations I’ve had over the past week, nearly everyone expects that is where Apple is headed.

The truth, however, is that accepting payments is a lot trickier than it sounds. Transferring money responsibly between parties is extremely sensitive. Even for Apple, it could prove difficult to come up with a game changer that would be as elegant as they’d like it to be and make everyone happy.

Passbook

But, for now, Apple’s first step is Passbook.

The point of the application is to make it easier to keep track of gift cards, coupons, passes and tickets and other things that get lost in your wallet or on your phone.

Using Passbook, iPhone and iPod touch owners will be able to call up electronic bar codes on the screen to check in for a flight, get into a movie or redeem a coupon. They will also be able to see when coupons expire, pinpoint where their concert seats are or check the balance of a coffee loyalty card. The app uses location-based services too, so when a consumer is close to a movie theater or store, a ticket or relevant coupon will appear on the phone’s lock screen.

Several partners have already signed up for the program, including Target, Fandango, Starbucks, Amtrak, United Airlines and the W Hotel.

Ticket seller Fandango confirmed in a statement that, with Passbook, “moviegoers can bypass the box office at select theaters with their scannable ticket on their iPhone, and with location and time features, the Mobile Ticket will automatically be displayed for quick and convenient access as soon as the moviegoer arrives at the theater.”

As seamless as it sounds, both retailers and consumers will have to do some juggling to make it work.

Target and Starbucks, for example, have already upgraded their hardware at the point of sale to be able to read a bar code from the phone’s screen. And consumers will have to make a conscious effort to save their coupons and bar codes in the application, much like when they add an event to a calendar.

Already a payment provider

If Apple chooses to build more functionality into the app, it does have a few things going for it.

For instance, on Monday Apple said it has about 400 million iTunes accounts — meaning that the company has that many credit cards on file. To put that number in perspective, PayPal has about 100 million active accounts — a quarter of Apple’s reach.

Another benefit is that Apple owns the phone’s hardware and operating system, so if it needed to tweak something, such as integrating near field communication, it could easily do that in the next generation. NFC is often considered the linchpin to mobile payments because it would enable people to tap to pay at the register, without having to show a barcode.

Complexities abound

On the other hand, turning Passbook into a payments network will not be easy.

The simplest route would be to enable users to charge everyday purchases like groceries and gas to their account with a tap of their NFC-enabled phone. The approach would be similar to PayPal’s business, which allows people to check out online using the credit card it has on file.

But that’s not the kind of game changer that everyone is looking for from Apple.

In our digital lives, today’s consumers want more capabilities, such as being able to make charges to a variety of cards, monitor their account balances, pay bills, make returns and save receipts. Coupons and offers should also be part of the mix, based on a person’s interests.

In building an application that does all that, Google has faced several setbacks with its Wallet app, especially when it comes to partnering with the carriers, banks, retailers and handset makers. In particular, NFC has been slow to get off the ground, and carriers — including Verizon, T-Mobile and AT&T — have blocked Google’s Wallet from appearing on Android phones.

PayPal has made slightly more progress, but it is still working out the kinks in the system. Currently, the company is focused on signing up lots of retailers so it can learn from real-life experiences, in order to make a big push in 2013.

Apple faces these same technology hurdles, and it would have to build a system that addresses the security needs of consumers while also complying with laws in every country in which it operated. The least of its problems may be figuring out a way to make money in payments — or at least not lose money.

Right now, Apple charges companies 30 percent each time they sell anything on iTunes.

That’s a much larger cut than what they could get away with if they extended it to retailers, who are used to paying around 2 percent. Of that much smaller percentage, Apple would still have to pay the processors, such as Visa and MasterCard.

There are other options, too

Since Apple clearly intends for the service to become one of its flagship applications — like Siri, FaceTime or Maps — how else might it address the payments business?

There are a few more options, based on what already exists in the market.

Instead of copying Google or PayPal, Apple could try to compete with Visa and MasterCard.

Better yet, it could steal a page from Square’s playbook. The San Francisco company, led by Twitter co-founder Jack Dorsey, has developed a mobile application called “Pay with Square.” The app allows users to pay by giving the clerk their name at the register — no credit card or fancy NFC-equipped phone required. In advance of the payment, consumers would have to store their account information in the app and take a picture of themselves to make identifying them easy.

In addition, the store must have an iPad at the counter, so the salesperson can correctly identify people from their pictures.

The whole experience is pretty slick — just how Apple likes it. Plus, it could generate additional iPad sales. But there’s a catch. Without a critical mass of retailers on board with the program, consumers would not be able to reliably leave their house without a physical wallet.

Should companies be afraid?

The problem with not knowing what Apple has in store makes it impossible for companies to gauge whether they should be excited about the possibilities of Passbook, or whether they should be scared.

Scvngr’s Seth Priebatsch said that it’s not clear to him, either, but he’s willing to take the risk. He plans to integrate his company’s LevelUp application into Passbook, which operates similarly to Square.

“My feeling is that Passbook is very much like [Apple's] Game Center, in that it’ll be a nice additional distribution channel for all mobile payment/loyalty app developers,” Priebatsch said. “Of course, that could come back to bite us all when — not if — Apple bakes in their own mobile payment solution.”

WhaleShark’s SVP of Mobile John Faith also said that his company would consider integrating RetailMeNot — a coupon app it launched this week on the iPhone — into Passbook.

“Our value for companies like Apple, Google, PayPal and Bing is a partnership where our coupon content can become a part of similar consumer offerings — making saving while shopping with a mobile phone a more seamless experience,” Faith said.

If you take the literal translation of the word “passbook,” it seems to be a play on two words: “Passport” and “checkbook.”

It may be inevitable that Apple enters the payments space, but whether it pulls it off is another thing entirely.

Additionally, it said it is partnering with four software providers to gain access to 50,000 small- to medium-sized merchants.

Meanwhile, tomorrow will be exactly a year since Google launched its mobile wallet.

So, you ask, which large technology company is winning the race to gain the hearts and wallets of consumers and retailers?

Pretty clearly, it’s neither.

Google may have gotten off the blocks first, but ever since, it has been plagued by execution issues and management departures. In contrast, PayPal has a lot of institutional advantages, but it still has a long way to go before it is synonymous with Visa or MasterCard.

Here’s just a snapshot of the two companies’ advantages and disadvantages:

Google:

Pros: It has relationships with 25 national retailers, totaling 140,000 locations.

Cons: It bet too early on using near field communication technology. Sprint, the third-largest U.S. wireless carrier, is the only provider so far that is backing it and it’s deployed on only six Android devices.

PayPal:

Pros: There are 110 million people using PayPal worldwide, who are on track to spend a record $7 billion in mobile payments this year using PayPal on the phone.

Cons: The company is expecting to deploy with 20 retailers by year’s end, but based on the 16 retailers announced yesterday, I calculated that it has access to about 16,000 U.S. locations (far fewer than Google Wallet). That does not include the thousands of locations that those 50,000 small- to medium-sized retailers would contribute if they signed up for it.

Clearly, it is still early days.

And when you look at the broader market opportunity, the race is not just between Google and PayPal. All of the incumbents, including American Express, MasterCard and Visa, have announced digital wallet strategies. And then there are the start-ups, such as Square, which is seeking a $4 billion valuation in its next funding round.

There are two points to be made on the debate between PayPal vs. Google Wallet that can’t be stressed enough: PayPal has the user base, and it has the technology with the lowest barriers to entry.

In theory, if a consumer has signed up for the service from their PayPal account, they will be able to conduct a transaction using their mobile phone number and PIN – without changing carriers or phones. Likewise, merchants won’t have to upgrade their point-of-sale hardware.

In an interview, PayPal President David Marcus acknowledged there’s a chicken and egg problem: Without a lot of locations, there won’t be a lot of consumers using it. But this year is about learning and testing, he said, and next year, “it will be about iterating and full-on execution.”

If you asked the folks at Google, I’m sure they would agree. A Google spokesperson declined to comment for this story, but already, there are signs that Google has learned a lot and has started to pivot.

Rick Oglesby, a senior analyst with Aite Group, believes that Google is distancing itself from NFC and from being the merchant of record.

“I think they will follow the path of least resistance, because for them, it’s not about payments — it’s about advertising,” he said. “It’s about pay-for-performance marketing. Just like how they get paid for a click-through on the Web, they want to get paid when you walk through the door — but no one is monitoring that.”

Last month, Google purchased TxVia, a little-known payments technology company, another sign that it’s changing directions.

Tony Felice, a senior digital strategist for Vladimir Jones, who worked with TxVia at his former job at Red Door Interactive, said TxVia and Google Wallet together can be very powerful. He said TxVia has all the banking relationships, which will help enable payments, gift cards and other services, and also has the ability to produce analytics about what consumers are doing and spending money on.

“Together, they will be able to get a 360-degree picture from the moment of truth to purchase,” he said. “In order to do that, you have to pull in disparate sources and synthesize it in a single place. The transactional data from TxVia is just one piece of a puzzle.”

Oglesby said despite Google’s hiccups, it’s not yet out of the race.

“It’s been a slow-growing situation, and there’s been big turnover on the executive team, but they are reassessing the situation and have made an acquisition,” he said. “I wouldn’t say they’ve screwed up because no one has run way ahead of them. They were leading the market, and tried an approach, and now there’s other approaches for them to try.”

So far, it has deployed at 2,000 Home Depots and has plans to be at 20 major retailers by the end of the year.

Stay tuned as we cover the announcements live.

10:10 am: “Midmarket businesses represent a third of the U.S. economy, and we looked at our capability and decided to partner rather than build,” explains PayPal president David Marcus.

So rather than ripping out their existing systems, the new stuff integrates with existing point-of-sale systems.

The POS software partners are: Vend, Erply, shopKeepPOS and Leapset.

That plugs PayPal into 50,000 merchants across the country, Marcus said. And that’s added to VeriFone and Equinox POS terminal manufacturers, announced this morning, in addition to an existing relationship with Ingenico.

Cue video of the owner of a PayPal-enabled shop full of cute dresses, who says she likes seeing her customers’ faces on the register, emailing them receipts and knowing their purchase history.

Next topic: large retailers. Don Kingsborough, VP of retail and prepaid, takes the stage.

Physical retail and offline retail is no longer about “location, location, location,” but instead about access to customers, Kingsborough posits.

Kingsborough pokes fun at Google’s mobile wallet pronouncement last year in New York (not by name, but it’s obvious), and other competitors’ tests, saying PayPal is much closer to ubiquity.

PayPal’s big partner so far has been Home Depot, so it trots out the company’s Dwaine Kimmet, treasurer and VP of financial services.

10:28 am: Kimmet says PayPal has been a good partner for 1) improving and speeding up checkout 2) combating bank card acceptance costs and 3) providing value to everyone.

That last one sounds really vague, but he’s elaborating. Kimmet gives the example of how text messaging around transactions gives both added security as well as convenience for customers.

Kingsborough is back to give a list of the first 15 retailers, and says some of them will be launching in the next few weeks. This is the meat of the announcement we were expecting. Office Depot, American Eagle Outfitters, Barnes & Noble, Jamba Juice, Foot Locker, J.C. Penney, Guitar Center, Jos. A. Bank, Aeropostale, Nine West, Advance Auto Parts and TigerDirect are the ones I could get before the slide changed.

Now for a string of video testimonials from people like J.C. Penney CTO Kristen Blum. But CEO of Jamba Juice James White is here in person.

White talks about the convergence of online and offline, customer satisfaction, incremental traffic and brand strengthening, while my mind wanders to flavors of smoothies.

Marcus is back to recap. His big theme is scale, and he says that word a bunch of times to describe PayPal’s different categories: online, mobile, different sizes of businesses.

The offline launch will enable PayPal to tap into a market that’s 17 times as large as what it has today, Marcus says.

That was short and sweet. PayPal had given a target of 20 major retailers by year’s end, so announcing 15 in May in addition to Home Depot is pretty far along.

10:55 am: Okay, got the full list of retailers. Here they are: Abercrombie & Fitch, Advance Auto Parts, Aéropostale, American Eagle Outfitters, Barnes & Noble, Foot Locker, Guitar Center, Jamba Juice, J.C. Penney, Jos. A. Bank Clothiers, Nine West, Office Depot, Rooms To Go, Tiger Direct and Toys “R” Us.

That list includes some overlap with Google Wallet, including American Eagle Outfitters, Foot Locker and Jamba Juice. It seems clear that retailers are willing to try multiple strategies to see what works best.

The global payments provider is making the announcement tonight at a special event tied to CTIA, the wireless industry’s annual conference in New Orleans.

MasterCard is the latest — but probably not the last — to unveil its plans for the future of credit card transactions.

To date, a host of other competitors, spanning Visa, American Express, PayPal, Google and the U.S. wireless carriers, have also made announcements.

While all of the payment companies are approaching the digital wallet space with a slightly different product, from the consumer’s perspective they all end up looking somewhat the same — like PayPal.

In the case of MasterCard, PayPass Wallet will allow consumers to buy things online without having to memorize a 16-digit card number or in person by tapping a payment terminal with their phone. The solution is similar to Visa’s V.me digital wallet and American Express’s Serve-branded wallet.

For example, when checking out online with retailers that support PayPass, consumers can choose to enter a username and password to access their wallet. The PayPass Wallet will support multiple accounts, including competing payment providers.

“We spent a lot of time on the underlying technology,” said Ed McLaughlin, MasterCard’s chief emerging payments officer, in an interview. “It is designed for our partners to make sure consumers have a great experience online or in-store on your app. The ability to use any device you have and any account you’d want to invoke is a different approach to the closed-loop accounts.”

MasterCard will allow consumers to sign up for the wallet on its site, but it is primarily relying on banks to get users interested. This summer, it will be going live with the help of a dozen or so banks worldwide, including Citibank. Other major merchants are committing to adding PayPass to their online checkout systems, including American Airlines, Barnes & Noble and Newegg.

Mark Hung, a research director at Gartner, said it’s natural for MasterCard, American Express and Visa to move from the physical world of payments to online because consumers are already entering their credit card number online to check out. “They would like to see the same user experience, whether they are transacting online or offline,” he said.

With banks and retailers on board, Rick Oglesby, a senior analyst with Aite Group, said the focus for MasterCard will have to be on getting consumers interested in signing up.

“There’s definitely going to be some risk of consumer confusion,” Oglesby said, given the dozen of digital wallet options. “They are going to have to invest quite a lot in branding. … Even though the traditional payment companies are entering the space, the brands are relatively unknown. There will be confusion for consumers and merchants alike, and therefore, will require a signficant investment in terms of investing in new brands.”

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In town for the annual CTIA trade show, the mood shifted back to business on Monday, at least until the evening parties kick off. The U.S. cellular trade association moved the convention from March to May (and to a party town) in hopes that the event can avoid being lost in the shadows of Mobile World Congress and the Consumer Electronics Show.

Although the main part of the show doesn’t begin until Tuesday, the first bits of product news were announced this morning. Verizon debuted the HTC Droid Incredible 4G LTE, while AT&T announced a $49 Samsung LTE Windows Phone as well as its plans to enter the home security business. This afternoon, MasterCard announced its new PayPass digital wallet.

AT&T is planning a press event later on Monday, with further news expected.

RELATED POSTS:

• With No Apple or Amazon at CTIA, iPad Rivals Free to Sling Arrows
• Sprint, Verizon, AT&T and T-Mobile CEOs Square Off in New Orleans
• Remember Carrier IQ? Well, It’s Still Around and Kicking.
• Sprint Product Exec: Launching LTE Devices Before Network Just Makes Sense
• FCC Chairman: Rejection of AT&T’s T-Mobile Deal Isn’t Causing Higher Prices
• Boingo Adds VPN and Crowdsource Hotspot Data to Its Wi-Fi Software
• T-Mobile CTO: Network Should be Ready for iPhone Users by Q4
• Interview: AT&T’s Glenn Lurie on Being the New Sheriff in Town
• Another Day, Another PayPal-esque Digital Wallet: Here’s MasterCard’s High-Tech Billfold
• CTIA Gets Down to Business in the Big Easy
• AT&T Aims to Break Into the Home-Security Business
• Interview: CTIA Boss Steve Largent Aims To Keep Conference From Being Lost in the Shuffle

Today, the San Francisco company says that Sprint is coming on board to join the three other major U.S. carriers: Verizon Wireless, AT&T and T-Mobile.

While the partnership provides additional momentum for Boku, the company still has a way to go before consumers are charging all sorts of purchases to their carrier bills. Today, the majority of Boku-paid purchases are for digital goods, such as in-game currency like Facebook Credits, or virtual goods in social games from companies like Zynga.

In an interview, Boku president Ron Hirson explained that it will still be another year or so before it starts seeing physical goods like clothing or electronics being charged to a carrier bill. For that to happen, carriers will have to drop the rates even lower than what they are charging today in order to be on par with Visa or MasterCard.

Over the past two years, Hirson said, prices already have dropped from roughly 40 percent to somewhere in the “teens.”

“We are proving ourselves out, and showing to the carrier that with each incremental drop, we are growing the pie,” he said.

The next likely product category to adopt carrier billing, he said, is digital content, including music, books, or physical tickets for public transportation or concerts. Those items have a big enough profit margin to make paying slightly higher transaction fees affordable.

Other companies in the carrier billing space include Mopay, BilltoMobile and Zong, which eBay’s PayPal acquired last year. Boku strengthened its position earlier this year when it raised $35 million in fresh capital.

While carrier billing has been slow to take off, Hirson said the company believes it will be a huge opportunity because of the convenience factor. To purchase something, users enter their phone number, and then authenticate that payment via text message.

Boku said today that it also signed up a carrier-billing partnership with Deutsche Telekom in Germany, meaning that it is now processing transactions with every major carrier in France, Germany, the U.K. and the U.S.

The company also announced that it has added two executives to its team: Jon Prideaux, the former EVP at Visa, is joining as chief business officer; and Stuart Neal, the former managing director of international development for Barclaycard, is joining as SVP of Business Development.

The credit card company, located in aptly named Purchase, New York, explained in a blog post today that cash is expensive and inefficient to use, and yet 85 percent of the world’s transactions still rely on it.

To say that cash is expensive or inefficient might be confusing to some. After all, if you use cash to buy something, the merchant doesn’t pay a dime; you can withdraw cash from an ATM for free (if it’s your own bank), and nearly everyone accepts it.

Meanwhile, companies like MasterCard, Visa and even alternative payment providers like Square or PayPal, will take a percentage of the transaction to process it electronically. In that scenario, the merchant pays, and, by proxy, so does the consumer.

But here are some of the inconveniences of cash:

• U.S. pennies and nickels cost twice as much to produce as they are worth.
• Cash leads to $1.5 trillion in underreported business income to the IRS.
• And it’s gross: Bacteria, including E. coli, are on 94 percent of U.S. bills.

If you agree, MasterCard is currently taking a poll on its blog to see what percentage of transactions you would like to conduct in cash.

And here’s a look at the infographic that MasterCard made to illustrate its point:

In a survey of technology experts and stakeholders, conducted by the Pew Research Center’s Internet & American Life Project and Elon University’s Imagining the Internet Center, 65 percent of people said they believe that mobile payment technology will be widespread by 2020.

Meanwhile, it found a dissenting view, with 33 percent of those same stakeholders believing it will take longer because people will resist technology that wants to learn everything about their personal purchasing habits.

Relatively few people believed that cash or credit cards will disappear entirely.

It’s unclear whether the 2020 date is optimistic or seems too far out given that so many companies are investing aggressively today. PayPal and Google are the two most notable technology companies going after the opportunity, but so are the incumbents, including Visa, MasterCard and American Express. Additionally, the U.S. wireless carriers are mapping out their own plans through a joint venture called Isis.

As part of the report, Pew published remarks from a few respondents:

Google’s Chief Economist Hal Varian said: “The 2020 date might be a bit optimistic, but I’m sure that this will happen. What is in your wallet now? Identification, payment, and personal items. All this will easily fit in your mobile device and will inevitably do so.”

Susan Crawford, professor at Harvard’s Kennedy School of Government, put it more practically: “There is nothing more imaginary than a monetary system. … Of course we’ll move to even more abstract representations of value. Other countries are already content to use their phones; we’ll catch up eventually.”

Called Serve, it is competing head-on with eBay’s own PayPal, as American Express attempts to expand its audience beyond briefcase-toting corporate users.

At eBay, Sample was the CTO of X.commerce, the open commerce platform the company unveiled late last year that gives technology tools to retailers at no cost. Prior to eBay, Sample was a senior executive at Yahoo, where he led the open, social and participation platforms. He left Yahoo in August 2010.

Sample’s technical expertise is focused on developing and building platforms and products for emerging technologies.

Serve is a complex platform that allows consumers to make purchases, take cash withdrawals from ATMs and make person-to-person payments from their computer or their phone.

The offering is fairly complex because it can be funded by a user’s bank account or credit or debit card — even from one of the company’s major competitors, like Visa or MasterCard.

In the future, American Express envisions expanding the platform to mobile phones, using near field communication or other technology.

Given eBay and PayPal’s extensive knowledge in the digital payments arena, many of its executives have left the company to explore the endless number of opportunities sprouting up.

Recently, Alyssa Cutright, a 12-year veteran of PayPal, left to join Square, a payments company in San Francisco; and of course, PayPal President Scott Thompson left at the end of last year to join Yahoo as CEO. Last week, eBay named David Marcus as his replacement.

True to his word, the entrepreneur has done a lot in the past eight months.

He sold his start-up to eBay for $240 million; became PayPal’s VP of Mobile; and launched PayPal’s mobile payments service, called Here. Now, he’s been named president of PayPal. The position opened up in January, after Scott Thompson stepped down to become CEO of Yahoo.

Now, with his appointment, Marcus’s list of things to do grows a lot longer.

In an interview, eBay CEO John Donohoe emphasized that what PayPal needs more than ever is an entrepreneur at the helm, one who can take advantage of all the opportunities that lie ahead.

“It’s the right time for PayPal to combine the global scale and reach with a product guy and entrepreneur like David, who is going to take PayPal to the next level,” he said.

PayPal, which is eBay’s fastest-growing division, is pushing into two new hot areas: Mobile payment and point-of-sale.

Mobile payments are taking off as people shop online from their phones and tablets, while offline is a massive opportunity dominated by the Visas and MasterCards of the world.

It’s hard to put a dollar figure on the market opportunity, but PayPal tries putting it in perspective.

In mobile alone, it expects payment volume to hit $7 billion this year, up from $150 million in 2009. For point-of-sale, it will double PayPal’s $70 billion business if it captures 2 percent of all sales. If it captures 4 percent, it will triple it.

Before joining PayPal, Marcus was the founder and CEO of Zong, a mobile payments company that was building a platform that allowed users to charge purchases to their carrier bill. Today, PayPal uses Zong’s platform for mobile payments, and is also leveraging it for its offline payments business. For instance, when using PayPal to pay at the register, users don’t need to have their wallet or phone with them. They can simply enter a phone number and PIN to pay. That technology is live today at more than 2,000 Home Depots.

Donahoe said he was impressed by Marcus when eBay was still in talks to acquire Zong.

“He really felt deeply that if he could get Zong to PayPal’s scale that we could do extraordinary things,” Donohoe said. “From the moment he joined, it’s been fun to watch an innovator who’s been recognizing that he can innovate at scale.”

Over the past seven months, Marcus has been charged with the launch of PayPal Here, which allows small-to-medium-size merchants to accept payments using a small dongle plugged into a smartphone. The service, which launched earlier this month, is nearly identical to a service offered by Square, a start-up founded by Twitter’s Jack Dorsey.

Marcus said he was really impressed with how fast it was to launch such a complicated product that required encryption and compliance on a global scale. In the first 24 hours, the company signed up more than 1,000 businesses an hour for Here.

“The organization came together, and we built it really quickly,” he said. “I’m excited in this new capacity. If we innovate at scale, we can change the world in a meaningful way.”