Visa’s endorsement of RIM’s SEM system is a big win for the company, and one that could make it a player in the mobile payments space. RIM has a great reputation for security, which will no doubt lend some appeal to its NFC platform. With the BlackBerry maker managing the back end and Visa vetting the payments itself, SEM could do much to bolster confidence in NFC payments, particularly in places like the U.S. that have been slow to embrace the technology.

That said, RIM’s NFC solution isn’t the only one on the market. There’s Google Wallet, which the search giant has been rolling out with the help of Mastercard Paypass. And soon Isis, the NFC platform conceived by AT&T, Verizon and T-Mobile USA, should be more widely available as well, assuming the first two trial deployments in Austin and Salt Lake City go well.

So RIM will have a battle to fight in the mobile payments space, just as it does in the smartphone space. But SEM is another selling point for its new BlackBerry 10 platform, and with carriers adding more and more NFC devices to their portfolios this year, it could prove a good one.

Many believe the future of tracking purchases and making payments lies with near field communication technology or smartphone applications, but this Kirkland, Wash.-based company is betting on something much lower tech: Text messaging.

“It’s not only because not everyone has a smartphone, but in a high-volume restaurant, or coffee shop, they don’t want someone fumbling around or holding up the line,” said James Sun, CEO of Pirq. “Text messaging is very fast, and it’s supported by all phones, including feature phones.”

Pirq became well-known this summer after announcing a partnership with Apple to bring an exclusive set of restaurant deals to all of its employees in Silicon Valley. But that was just a side deal to get the start-up some buzz. The company’s core business is in running loyalty programs for any small business. Many others are competing in the space, including Groupon, Belly and FiveStars.

Pirq takes a slightly different approach. For $50 a month, it gives each merchant an Android tablet to place on their counter. From there, consumers can scan a bar code using the Pirq application on their iOS or Android phone, or they can choose to send a text message to the short code displayed on the screen. Because they have a choice, consumers don’t have to take the time to download a new application, or even register — two big hurdles for adoption.

Merchants also have a choice on what to offer loyal customers. They can either reward consumers who hit a certain spending threshold, or they can send consumers a text message to promote a deal during off-peak hours, when business is slow. “There’s a big trend right now,” Sun said. “[Merchants] don’t want to discount the brand to the public. They are private deals for existing customers.”

Merchants pay $50 a month for the service, and from 50 cents to $6 for each reward redeemed. Costs vary depending on the service, ranging from cups of coffee on the low end to spa services on the high end.

The second round of funding was led by Rally Capital, and brings the company’s fundraising total to $3.2 million. The funding will go toward rolling out the company’s new text messaging program. Sun said that the service will be live in 70 stores in Seattle and San Francisco by the end of next week. The company plans to raise a larger round next year to hire sales people to expand nationwide.

The LG Spectrum 2 will be available exclusively from Verizon Wireless starting Oct. 30, and aims to do away with cords. The smartphone features a battery cover that allows for wireless charging, though you have to buy the charging pad separately. (No word on pricing yet.)

It also includes near field communication (NFC) technology, so you can wirelessly share information such as contacts and photos simply by tapping it with another NFC-enabled phone.

The rest of the handset is pretty standard fare. The 4G LTE smartphone will ship running Android 4.0 Ice Cream Sandwich, and has a 4.7-inch HD touchscreen, an eight-megapixel camera on back and a front-facing 1.3-megapixel camera and 16 gigabytes of internal storage.

Pricing for the LG Spectrum 2 is set at $99.99 with a two-year contract and after a $50 mail-in rebate.

Everyone is expecting change to happen in weeks or months, but it will take time, says Osama Bedier, Google’s VP of Wallet and payments. “We will have mobile payments,” Bedier said, speaking at the Global Mobile Internet Conference in San Jose on Friday.

There’s room for more than one player, Bedier said, but each has to solve an issue. “There’s a lot of ideas and not a lot of problems being solved,” Bedier said. “Credit cards already work pretty well if all you have to do is payments.”

Ultimately, the former PayPal exec said that mobile payments have to either save time, save money or both. Technology can do that, he added. On the technology front, Bedier said he remains a believer that near field communication technology (NFC) will be ubiquitous on both phones and payment terminals within five years. NFC will also find its way into many other places in the logistics chain. “NFC chips will replace bar codes,” Bedier said.

But many believe NFC will take a year or more to take off, especially now that Apple declined to embed the chips into its latest release, the iPhone 5. Other payment companies, like PayPal, have decided to find other avenues to enabling digital payments without it, and companies like Starbucks are relying on something as simple as a barcode.

Bedier said at least half of transactions will be mobile within five years, but remained short on details on how much volume Google Wallet is doing today. “The numbers are compelling,” he said, without revealing any of those compelling numbers.

A rival executive from Scvngr, which runs a payments service called LevelUp, recently tweeted somewhat hyperbolically that Google Wallet has five users.

“We have a lot more than five users,” Bedier said, though he wouldn’t say how many customers they have. He did say that the company doubled its transaction volume in the first few weeks after transitioning its Wallet transactions to the cloud back in August. Still, the company faces some obvious adoption hurdles because today Google Wallet is only available on NFC-capable Android phones through one U.S. carrier: Sprint.

“We’re seeing that trajectory continuing,” he said.

The other three carriers — AT&T, Verizon Wireless and T-Mobile — are backing ISIS, which is launching next week. Bedier acknowledged the lack of support from carriers for Google Wallet. “We haven’t yet seen eye to eye on a mobile wallet solution,” he said. “So far, they have said they want to do their own thing and we respect that.”

Those NFC phones are kind of really easy to use. So it just lowers the bar for people who want to commit fraud to a very, very low level.

– Postdoctoral researcher Collin Mulliner, on the hack used by two mobile security researchers to get free rides out of the San Francisco MUNI system

It baffles me why almost everyone uses the terms “mobile wallet” and “digital wallet” interchangeably, and why so many people further constrain the already-limited idea of a mobile wallet by equating it with Near Field Communication (NFC).

Let me be crystal clear on these two points:

• Your mobile phone won’t be the one device that will forever banish your leather wallet to the back of a drawer. It will, however, be an important access point to your digital wallet — which will live in the cloud and follow you wherever you go.
• NFC is a technology, not a strategy. It enables communication between two devices that are close to each other (hence the name). It is not the Holy Grail for mobile payments.

Why mobile wallets are not digital wallets
Simply put, the term “mobile wallet” refers to when the actual mobile phone, or other mobile device, becomes the wallet. All of your financial information, such as bank account and credit card numbers, are stored on the mobile device, and you need to have the device with you for the transaction to be possible.

Digital wallets exist in the cloud. They are not tethered to one specific device such as a mobile phone, but are accessible from a variety of devices (laptop, iPad, ultrabook, Xbox, etc.) and in a number of ways. Sensitive financial information is stored in the cloud, not on the actual device.

Already, at The Home Depot, you can pay without ever pulling anything out of your pocket at all. You can pay just using your phone number and PIN that directly connects to your digital wallet. But this is just the beginning of the revolution.

For example, let’s say you’re in your car and you want to drive through the local fast food joint. Instead of whipping out your wallet or looking for your phone, you “check in” to the fast food joint’s point-of-sale system (POS) using the digital wallet accessible from your car’s connected onboard computer. The restaurant immediately recognizes you from the image transmitted when you check in, and can look at what you’ve previously bought at that restaurant via your digital wallet. It’s able to not only ask if you want “the usual” but also to deliver special offers to thank you for your loyalty.

When you pull up and get your food, no money exchanges hands — you don’t even have to tap a device against a terminal. The meal is charged to your digital wallet. This is all technically possible today.

Why NFC does not equal mobile payments
Mobile payments break into two main camps — what we call “remote” and “proximity” payments. Remote payments happen when you don’t need to be in the same room as someone else to use your mobile phone to pay for something — buying an item on the eBay mobile app for example. This is huge today.

Proximity payments are when you need to be in the same room to make the payment. There are many technologies you could use to make a proximity payment. Bluetooth, RFID, even an audio signal could initiate a mobile payment from your phone — and yes, NFC could also do this. What most people don’t realize is that NFC is not a one-size-fits-all technology. It has different modes that do different things and have different levels of security. Let me tell you about two:

• P2P mode NFC: this is the simplest mode available and just allows a fast connection to be made between two devices. However, it just identifies and connects the two devices — the transaction happens “in the cloud” behind a secure firewall because P2P mode while easy, is not secure.
• Secure Element NFC: This is what most people equate with mobile payments. Secure element NFC puts a safety box in your phone, which stores all your financial information. One of the problems is that the safety box can be anywhere on the phone — the hardware, SIM card, you could in theory even pop it into the battery case. All the companies that touch the phone or the customer have potential access to the secure element but they all need to work together to make an NFC payment work. This is one of the many problems that is stifling fast adoption.

No retailer will have multiple NFC boxes to take payments from different networks, and the NFC terminals shipping today do little more than just transmit the card number and transaction size. They’re not equipped to automatically accept the complex coupons and offers that make the digital wallet so exciting. On the technology side, carriers are trying one solution, phone manufacturers another, and technology companies yet another. Meanwhile, the consumer is standing at the register thinking “really, how hard is it to pull out my credit card?”

Why would Apple want to step into that mess?

In spite of the technological advances that make digital payments possible, it will not be any one technology that wins the day for either the consumer or the retailer.

Sure, the technology needs to be great, and simple, and it should get out of the way of the user. The much more critical part of the equation will be what the digital wallet will offer beyond just another way to pay. It needs to remove complexity from your life, not add to it. Those digital wallets that are able to safely store your financial information — your credit cards, airline miles, balances, etc. — plus have the ability to receive relevant and real time coupons and offers that are tailored specifically to each user, will be the ones embraced by both consumers and the brands that want to reach them.

It’s inevitable that digital wallets will become an indispensable part of consumers’ everyday lives, and one that will save them time and money. The new iPhone 5 and its competitors will surely be one of the primary vehicles people will use to access their digital wallets while on the go, but when you ask the average person what is the underlying technology used to make that connection, the answer will be “who cares?”

Relevance to the consumer will be king, and the ability to act in a seamless and secure environment across any device or platform will be what matters most to that consumer. For this vision to be truly realized it will be digital wallets, not mobile wallets, that will rule the day.

Carey Kolaja is the head of product solutions for the Americas. In this regional role, she leads a team responsible for the creation of products and solutions that reflect the present and future needs of PayPal’s customers. Previously, Carey served as the chief of operations for global product, and prior to that, she held various roles at PayPal in product engineering, Information technology, and marketing.

Though some saw Apple’s Passbook feature as a perfect companion to NFC, Apple opted not to include the technology in the iPhone 5. Passbook is used to store loyalty cards and gift cards as well as things like boarding passes and baseball tickets.

In an interview, Apple Senior VP Phil Schiller said that Passbook alone does what most customers want and works without existing merchant payment systems.

It’s not clear that NFC is the solution to any current problem, Schiller said. “Passbook does the kinds of things customers need today.”

As for wireless charging, Schiller notes that the wireless charging systems still have to be plugged into the wall, so it’s not clear how much convenience they add. The widely-adopted USB cord, meanwhile, can charge in wall outlets, computers and even on airplanes, he said.

“Having to create another device you have to plug into the wall is actually, for most situations, more complicated,” Schiller said.

As for why the company is changing the dock connector that has been on nearly all iPhones and iPods since 2003, Schiller said it simply wasn’t possible to build products as thin as the new iPhones and iPods without changing the cord. Hence, the new “Lightning” connector.

That said, Schiller said that Apple doesn’t take changing the connector lightly.

“This is the new connector for many years to come,” he said.

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But that market today is very different from the one Apple upended in 2007. The innovation cycle is faster. And, above all, consumer expectations are higher. So how will Apple meet them?

We won’t know for certain until today’s invitation-only event, which AllThingsD will be covering live. But thanks to component leaks preceding it, we have a pretty good idea of what sort of device the iPhone 5 — or whatever Apple has chosen to call it — will be.

Sources familiar with the device say it’s “a big step up” from its predecessor, the iPhone 4S. The next-generation iPhone will feature a larger display, LTE support and a smaller dock connector port. It will be slightly thinner, and packed inside its reimagined chassis will be a faster processor and an improved battery.

Beyond that, it’s tough to say.

Improved camera hardware seems a likely bet — Apple has upgraded the iPhone’s photo abilities pretty consistently with each iteration. Support for near field communications (NFC), a short-range wireless standard used for payments, is another possibility, given the new Passbook app in iOS 6. That said, NFC may not yet be widespread enough throughout the retail world for Apple to build it into the device. Finally, we may see a new version of AirPlay that allows users to send audio and video to an AirPlay device without an intermediary wireless network.

Join us a few hours from now for live coverage of Apple’s event.

So why is now the time to shift consumer behavior to mobile payments? It would appear that we’re fixing a problem that doesn’t exist. Are we simply attempting to engineer a revolution?

Actually, no. There’s far more happening behind the scenes that must change — and change fast — for the economy’s sake, and for the sake of the consumers who fuel it.

Many people are speculating about how mobile payments can capture the mainstream’s interest, and their wallets. Here are a few of the things that will drive the mobile payments revolution.

Get Merchants by Crushing the Silent Economic Threat
One of the biggest invisible taxes on our economy (to the tune of $50 billion a year) is interchange, also known as “swipe fees” on credit cards and other forms of payment processing. Merchants pass along these fees to consumers simply because of the need to move money.

For the longest time, the only true zero interchange way of paying was cash (the oldest and arguably the least convenient). But prices for cash-toting customers are often exactly the same for credit- or mobile-paying customers. Up until last year’s passage of the Durbin Amendment, that price equality was actually mandated by federal law. This means that whenever you pay cash, you’re subsidizing the credit card-carrying masses. Credit cards are faster and more convenient, so why not jump on board? And the more people jump on board, the more fees the credit card companies can rake in. You get the picture.

The good news is that increased competition, and some helpful legislation, is already driving these fees down — slowly, but surely.

It’s this shift toward real savings that will motivate merchants to adopt a new payment infrastructure. Not the cool factor, not the desire to be on the leading edge, but cold, hard, economic facts. If mobile payment companies lead this shift (as many like Dwolla are), merchants will adopt them — and consumers will follow. If credit card companies were to lead this shift and price interchange competitively, mobile payment would stop in its tracks.

The good (and bad) news is that the existing players won’t cannibalize their own interchange-driven revenue streams. So it’s up to the new companies — mostly mobile in variety — to push the shift. This means that the opportunity for existing players to shift to mobile is open, but that it’ll take a lot longer because the big guys won’t structure their networks to fuel mass merchant adoption.

Get Widespread Acceptance by Making It Painless
Instead of trying to rebuild decades-old payment constructs or the point-of-sale systems that millions of businesses run on, build a payment ecosystem that’s as painless as possible for merchants to adopt. Entrenched players (Micros, Aloha, PosiTouch) won’t be going anywhere overnight, so it’s incredibly important to take a more open approach to support the systems merchants already have in place.

On the flip side, mobile payment apps have to be easy for any user with a phone to download and access. Everyone is speculating over whether an NFC-equipped iPhone will catapult mobile payments into the mainstream, and the answer to that question is: Probably not. NFC, QR codes, stating your name, swiping your finger, retina scans or the deposit of first-born children should all be acceptable ways to pay. It’s not the medium that matters.

What I’m getting at is simple: Make it as easy as possible for both merchants and consumers to adopt your mobile payment technology, and mobile payment technology will become more mainstream. We don’t need to have painfully long meetings about it. (Disclaimer: I didn’t get invited. I’m totally not cool enough.)

Put Something (Other Than a Phone) Into the Hands of the Consumer
The act of paying with your phone is only a fraction of what’s cool about mobile payments. In theory, paying with my credit card and paying with my phone will do the exact same thing (get me that sandwich or fully functional Iron Man suit I’ve been wanting). So why would I want to make an unnecessary change to the way I’ve always paid?

There has got to be some kind of larger benefit to the consumer to force this change. Just as credit card companies introduced rewards points and benefits to get people to use their cards, mobile payment companies need to do something to sweeten the deal for consumers.

Getting There Might Take Awhile
In conclusion, revolutions don’t happen every day, and for good reason. Change is never comfortable. Many technological shifts throughout history have started out awkward. Just think about how far we’ve come since we started downloading the interwebs through a CD we got in the mail. For now, mobile payments seem messy and fragmented, but a future in which everything just works (and works very much in favor of both the consumer and the merchant) is not all that far off.

At the age of 12, Seth Priebatsch founded his first web start-up. It failed gloriously, achieving profits several times those of Twitter. After completing his freshman year at Princeton (the official requirement to achieve the term dropout), Seth took a leave of absence to found SCVNGR, the parent company of payment network LevelUp.

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.

That’s the impression that analysts at the research house IHS iSuppli got when they did just that: They took a Nexus 7 apart in order to see what components are inside, and to estimate what each of them costs. The early verdict, shared exclusively with AllThingsD, is that the low-end eight gigabyte model of the Nexus 7, which sells for $199, costs $151.75 to build.

The higher-end 16GB model, which sells for $249, costs $159.25, the difference being the cost of the memory chips inside.

Andrew Rassweiler, who leads the teardown team at IHS iSuppli, reckons that Google will break even on the 8GB model, and will turn a tidy profit on the 16GB model. “Like Apple, Google realizes it can boost its profit margin by offering more memory at a stair-step price point. It’s getting $50 more at retail for only $7.50 more in hardware cost, which sends $42.50 per unit straight to the bottom line.”

The IHS iSuppli cost estimate is about $30 lower than an early estimate put out last month by another research firm, UBM TechInsights. However UBM’s estimate was made without having first obtained the hardware for analysis.

The Nexus 7 is similar to Amazon’s Kindle Fire tablet in many respects, but it has some better features. For one thing, the Nexus has the Nvidia-made Tegra 3 processor as its main computing engine. It’s a four-core chip, meaning it has four main processing brains. The Kindle Fire has a two-core OMAP 4430 processor from Texas Instruments. TI, however, supplied two chips for the Nexus 7, one a power-management chip, the other a low-voltage transmitter.

But the Nexus 7, manufactured by Asus for Google, also has a better display, with a resolution of 1,280 pixels high by 800 pixels wide, versus 1,024 by 600 for the Kindle Fire. Rassweiler said the display uses a technology known as in-plane switching, and added $38 to the hardware cost of the Nexus 7, versus $35 for the display in the Kindle Fire, Rassweiler said.

The Nexus also has a camera that added $2.50 in cost to the Nexus, and which the Kindle Fire lacks. The Nexus also has a chip from NXP that supports near field communications (NFC), a close-range wireless technology that’s intended for wireless commerce transactions. Broadcom supplied GPS receiver chips to support mapping functions.

One other part caught Rassweiler’s attention: A gyroscope and accelerometer from InvenSense. While it’s common to see InvenSense gyroscopes, it’s rare to see it combined with into the same chip with the accelerometer. Both are used to determine position and movement of the device. The only other combined gyro-accelerometer seen before, Rassweiler said, was seen in Samsung’s Galaxy S III smartphone, and was made by the European chipmaker STMicroelectronics.

All told, IHS iSuppli figures that the Nexus 7 costs about $18 more to make than the Kindle Fire. But that’s likely to change soon. A New Kindle Fire with a better display arrives this fall.

Image: Courtesy IHS iSuppli

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.

The company is launching TecTiles, inexpensive NFC tags that phone owners can use to automate various tasks. Via a free application, customers will be able to assign various commands to one of the stickers.

A tag outside a conference room could be set to silence phones or to join the Wi-Fi network.

Businesses could use a tag to allow customers to check in on Foursquare, or “Like” the company on Facebook.

Samsung will sell the stickers in a five-pack for $15 via the major cellphone carriers’ stores.

NFC technology is built into a number of Samsung phones, including the Nexus S, Galaxy Nexus, and its newest smartphone, the Galaxy S III, which is just about to go on sale in the U.S.

Tap and Go Is Ready to Go
Near Field Communications (NFC) technology is increasingly being embedded in smartphones, allowing devices to communicate by tapping. For example, tap your phone to a poster to buy a shirt; tap it to a kiosk to buy a ticket. The tap-and-go concept is intuitive, versatile and a great way to share data between mobile devices. NFC is highly versatile, standards-based, interoperable and security-ready. Its adoption in retail and supply is already starting.

Consider this: by 2016, 700 million NFC smartphones are projected to ship. Customers with digital wallets embedded in NFC-enabled phones don’t need a special app to make payments, nor do they need to carry dozens of debit, credit and loyalty cards. They simply touch their phone to the NFC-enabled payment device, sign and go.

Beyond payments, NFC has the potential to positively impact commerce in other ways, including:

• Quick and easy ticketing, much like a “Fast Pay” toll tag on a car.
• Sharing files, contact information and more by simply tapping NFC phones together.
• Tag reading via applications that enable identification, physical access, transportation, inventory, loyalty and marketing opportunities up and down the supply chain.

Who’s the Next Lady Gaga?
Big Data has the potential to unleash a new wave of innovation, responsiveness and service for companies that are able to harness its value. Many pioneering companies are already creating value and competitive differentiation by mining extremely large quantities of typically unstructured data for hidden patterns and insights. The potential impact is virtually unlimited. In retail, we’ve seen brands successfully gathering and analyzing consumer sentiment, then creating personalized recommendations for millions of customers.

Another example is music analytics leader, Next Big Sound, which is using unstructured data to figure out who the next Lady Gaga might be. It uses big data to scan all the different music and social networks (Spotify, iTunes, Facebook, YouTube), analyze likes, plays, downloads — and ultimately provide insight to music executives into how artists become stars.

A New Take on Reality
Augmented reality (AR) presents practically limitless applications. AR is used to superimpose computer-generated sensory input (sound, video, graphics, haptic feedback, etc.) to create a mediated reality overlaying and enhancing the live real-world environment. It’s already being used in navigation, manufacturing, logistics, military services, entertainment, sports, healthcare and numerous other industries.

In commerce, AR has the potential to be a significant driver of sales and conversions. Forward-thinking marketers are already taking advantage of AR to cleverly deliver useful information that adds value to the buying process.

One example of a brand cleverly using AR is Lego. In collaboration with AR technology company Metaio, Lego created an in-store AR system called the Lego Digital Box (LDB). The LDB allows customers to simply hold a Lego box up to a scanner, which recognizes exactly which Lego set it is, and then displays what the set looks like fully assembled on a video screen. You can tilt it up, down and around to see the set in 3-D interactive animation. The initial trial period of LDB in select stores was so successful in increasing customer satisfaction and product sales that Lego made the decision to roll it out in all 80 of its stores, displaying over 200 products.

The Power of the Crowd
Thanks to the Web, brands can tap the vast possibilities of crowdsourcing to shape a product or service. Examples are plenty, with undeniable results. Take, for example, the auto brand Fiat that, in partnership with Brazilian interactive agency AgenciaClick, launched a Web site inviting Brazilian consumers to invent a concept car that Fiat would exhibit at Sao Paulo’s 2010 annual auto show — the Fiat Mio. The challenge was a hit: The site’s 17,662 registrants submitted over 10,000 ideas.

The site was organized much like a social network displaying comments, photos and a Twitter-like sidebar feed. Ideas were divided into categories such as design, materials, safety and infotainment. All designs were shared online for a completely transparent process — turning the traditionally secretive model of auto production on its ear. Dozens of users’ ideas made it into production, contributing to the Mio’s final propulsion method, shape, infotainment, body materials, biometry and driving aids. Throughout the process, Fiat’s engineers reviewed ideas submitted, consolidated the technical design and published the results via open source software in early 2010 before then turning the discussion toward a branding and marketing campaign for the October car show.

Don’t Buy, Rent
According to the Ellen Macarthur Foundation, the circular economy is not a new technology but rather an innovative industrial model that is restorative or regenerative by design. Its key goals include replacing the “end-of-life” industrial concept with “cradle-to-cradle” restoration, shifting toward the use of renewable energy, eradicating toxic chemicals and eliminating waste.

In the world of commerce, collaborative consumerism aligns with the principles of circular economy by allowing consumers to pay for the use of a product, rather than buying and eventually discarding it. One prime example is Netflix. With over 23 million users, the video streaming and DVD rental company focuses not on selling to customers, but on loaning DVDs/streaming videos. Similarly, car-sharing company Zipcar provides automobile reservations to members who are then billed for the time spent using the cars. Another example is Rent the Runway, which rents dresses from top designers on a four- or eight-day basis.

Dave Bruno is marketing director for RedPrairie, a supply chain and retail technology company. As part of RedPrairie’s research into Commerce in Motion, the company conducts research and analysis of the ever-changing dynamics of global supply chains and the hyper-connected consumer. None of the companies mentioned in this post are clients of RedPrairie.

Iwata filmed the 30-minute video in a bare conference room in the company’s Japan headquarters, making it a very different stage from the one on which he will be presenting Tuesday at E3.

This week in Los Angeles, hardware and software makers will be throwing highly choreographed presentations in the hopes of impressing both the media and fans worldwide.

Nintendo’s pre-E3 video was something much different.

It provided a much more controlled environment for Iwata, who normally prefers to speak through a translator, to make the case for why the Wii U is better than everything from the Xbox to the Apple iPad. But it didn’t provide any of the fireworks that many people were likely expecting, so apologies to Nintendo fans, you’ll still have to wait until Nintendo’s “official” E3 press conference on Tuesday for that.

Within the confines of the quieter environment, Iwata didn’t just provide a rundown of the Wii U’s hardware specifications, including new details of the 6.4 inch touchscreen display called the GamePad, but also made a case for how Nintendo offers “unique” experiences that draw friends and families together.

He said the system is designed to create a sense of “empathy” among Wii U users that is much different from the war-torn, trash-talking environments found on Microsoft’s Xbox Live and Sony’s PlayStation 3. As a demonstration, Iwata played a video clip showing a teenager asking a grandpa over video chat how to more effectively kill zombies. (For dramatic effect, grandpa was sitting in a scooter.)

“It helps unite people rather than divide them, whether they are in the same room or great distances apart,” he said.

Nintendo expects to do this by having its own social network, Miiverse, which from what I can tell will be a proprietary network that will not link to already existing communities such as Facebook or Twitter. Eventually, Iwata said, Miiverse will be accessible online using any Web-enabled devices.

Iwata said people often ask him if the Wii U is a simple evolution or something that is entirely different.

“The best answer is both,” he said. “Today, Wii U does what we did only better, while at the same time it is also something entirely new. Not only can it connect people in the same living room, but it can also connect people living room to living room.”

Here are some of the more hardware-driven changes announced today, a year after the Wii U was first unveiled at E3:

• The Wii U controller is now called the GamePad, which has an updated set of controllers since last year. It now also has near field communication, or NFC, and supports infrared to control TVs and set-top boxes.
• Nintendo announced a secondary controller, called the Pro Controller, which is very similar to the controller for Microsoft’s Xbox.

Here’s the video, but also check back on Tuesday when Nintendo will reveal more details:

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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.”

The partnerships are important because it makes rolling out PayPal’s in-store payments technology to retailers much easier.

PayPal is hosting an event at its San Jose headquarters later this morning to announce the next batch of retailers that are adopting the company’s in-store payments solution. AllThingsD’s Liz Gannes will be there to cover the announcements live, starting at 10 am PT.

To date, PayPal has deployed its service to all 2,000 Home Depots, but it has a long way to go in meeting its goal of having 20 major retailers by the end of the year.

One reason why PayPal is able to deploy its services to retailers so quickly is because it only requires sending out a software update to the retailers’ terminals — in other words, retailers won’t have to purchase all new hardware. This morning, PayPal confirmed it has signed up VeriFone and Equinox Payments, the largest and third-largest providers, respectively, which will handle those software updates. PayPal already had a relationship with Ingenico, the second-largest provider.

The relationships inked today are focused on solving back-end integration problems for merchants. But the front-end experience is all about the consumer.

At participating stores, consumers will be able to pay with PayPal by either using a PayPal-issued credit card or by entering a mobile phone number and PIN code into the terminal. Down the road, PayPal could also support near field communication technology.

All told, the three terminal providers manage about roughly 40 million terminals worldwide, representing a large majority of the terminals in existence.

In an invitation sent to All Things D, the company says: “Meet PayPal’s new president, David Marcus; be the first to speak to PayPal’s new, brand-name retail partners; and get an exclusive sneak peek at how PayPal plans to make payments easier than ever for tens of thousands of mid-size merchants.”

The two-and-a-half-hour event will take place on Thursday at the company’s San Jose campus.

It’s unclear which retailers will be on hand, but so far, the company has been working with major retailers, like Home Depot, and there have been other unconfirmed reports of a relationship with Office Depot.

To date, eBay’s CEO John Donahoe has been careful to characterize this year as an experimental period, where the company will be laying the groundwork for its entrance into the physical payments space with several deployments. It is not banking on scaling the operation until the following year.

Right now, PayPal has presented two solutions to retailers, including a plastic credit card that allows purchases to be charged to a PayPal account and a mobile payments solution, which allows customers to enter their mobile phone number and a PIN into the payment terminal without the need for the phone to be present at the time of purchase.

The approach is much different than what Google Wallet is pitching, which ironically launched its product exactly a year ago next week. Google’s deployments, which relied on near field communication technology, have been hindered by low adoption by both retailers and the carriers.

In a blog post, Google disclosed the purchase but did not reveal the terms. The New York-based company was working on a number of payment technologies, including prepaid and gift cards.

It is no secret that Google Wallet has had a difficult time since launching about a year ago.

Since then, any momentum it had created was squelched when it failed to secure partnerships with the four major wireless providers in the U.S. Today, it only works on a handful of Android smartphones sold by Sprint. Other carriers — most notably, Verizon Wireless — have refused to adopt the Wallet and instead are working on their own mobile payments strategy in a joint venture called ISIS.

Additionally, the Google Wallet technology relies on near field communication, or NFC, which is not available at all retailers or embedded in many phones.

In the meantime, other companies have had some successes. EBay’s PayPal has rolled out its payment technology in all 2,000 Home Depots, and other companies, like Square, are going after the small-to-medium-sized businesses.

Google has also faced a number of internal setbacks, including a couple of departures from the team, such as the resignation of Vikas Gupta, who was the head of consumer payments, and the reassignment of Stephanie Tilenius. Additionally, it was reported today that Google Wallet’s co-founding engineer Rob von Behren has joined Square, according to NFC Times.

Osama Bedier, Google wallet and payments VP, wrote in the blog post that TxVia has partnerships with some of the industry’s best-known brands and manages more than 100 million accounts.

“Their leadership team has played an instrumental role in defining the fast-growing prepaid card segment of emerging payments,” he said. “We’ve worked closely with TxVia over the last year, and they’re a forward-thinking team that will help us take the next steps in realizing the future of commerce. We welcome the TxVia team to Google.”