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TheStreet Open House

It's Fishy: Salmon Says Mobile Payments Will Never Take Off

NEW YORK ( TheStreet) -- In a post uncharacteristically void of meaningful data, Reuters blogger Felix Salmon makes some startling proclamations.

Based on personal experience, Salmon claims "mobile payments are harder than paying with plastic," before climaxing with ...

mobile payments, although they are sometimes very cool, are going to remain a marginal technology in the US for the foreseeable future.

As Springsteen riffed: Someday we'll look back on this and it will all seem funny. With this prediction, Salmon will, ultimately, enter a group populated by the likes of Microsoft (MSFT) CEO Steve Ballmer and the former leader of the artist formerly known as RIM, James Balsillie. Funny thing is Salmon doesn't belong in that group; he generally does excellent work that wows me (e.g., his take on Tim Cook's sexuality).

Of course, Ballmer laughed at prospects of success for Apple's (AAPL) iPhone back in the day. More recently, he blurted out some rubbish about Apple being "a low-volume player" in everything but tablets. Blackberry's (BBRY) Balsillie contended, in days gone by, that you don't need an app to access the Web.

In this case, Salmon used singular personal experience that doesn't jibe with my own unscientific, anecdotal evidence.

Walk into a Starbucks (SBUX), particularly in large urban areas. The number of people paying with their smartphone is off the charts. And I have numbers to back that up. According to the company, mobile payments now represent greater than 10% of all U.S. transactions. In January, more than 7 million people used Starbucks' mobile app accounting for 2.1 million weekly transactions. As of April, those numbers jumped to more than 10 million and almost 4 million, respectively.

The absence of those numbers in Salmon's post makes an already weak argument incomplete. Instead he focuses on Square -- failing to mention the partnership Jack Dorsey's company has with Starbucks.

Salmon claims "clever" and "newfangled mobile payment technique(s)" make him "feel curiously self-conscious and embarrassed" whereas "Handing over a card is normal behavior: mobile payments are not." That belongs on the forthcoming re-release of Ballmer and Balsillie's greatest hits.

There's a problem with focusing on Square and ignoring Starbucks (and Apple, for that matter). Putting it in simple terms, Square has a scale/infrastructure problem. It has to pound the pavement to secure clients. Starbucks doesn't have to build infrastructure or scale as much as it has to convert its already loyal stable of customers. Sort of like Apple and other smartphone makers lead the revolution away from feature phones.

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