Bump Pay Nudges Mobile P-to-P Market

The apps provided by Bump Technologies, which let people share data and photos by touching their phones together, have proven popular — the app has attracted 80 million users in three years. While the technology's use as a payments enabler has been slowly developing for the past couple of years, Bump believes there's enough of a current opportunity to spin off a Bump app dedicated entirely to payments.

Bump Pay, which is currently available for the iPhone through a Bump Technologies subsidiary called Bump Labs, enables two smartphones using Bump apps to transfer card or account payments data by tapping against each other. The transactions require physical contact, rather than the near-field communication wireless technology that drives most tap-and-pay mobile phone payments and is the favored technology of large mobile payments initiatives such as the Google Wallet and the telecom-driven ISIS.

The use case for Bump's new product may be limited. The technology requires both parties to be at the same location and using the product. "It's a great new thing and it's novel, but that's not always the best way to pay someone," says Denee Carrington, a senior analyst at Forrester Research.

The new Bump payments app builds off of the existing Bump technology, which allows users to transfer contact information and photos. The sender types in how much money he wants to send and then bumps phones with the recipient. The software determines when and if the phones collide and provides security and authentication. Both users must have previously downloaded the Bump payment app and linked it to their PayPal account (PayPal processes the payments). Bump, which didn't make an executive available for an interview, is testing the payments app as a standalone and hasn't ruled out incorporating it into its broader product set.

The new Bump app attempts to reach a niche of the mobile payments market that resides outside of retail point of sale, which is dominated by NFC, and payments to small businesses or independent contractors that are increasingly being won over by apps such as Square and Intuit's GoPayment. Those apps allow phones to be used for payments by inserting readers that allow swipes by credit or debit cards. Square and Intuit's GoPayment are also expanding into collecting donations at charitable events and political rallies.

There are already a handful of person-to-person payment apps driven by Bump's technology or a similar model. PayPal, which didn't return calls seeking comment, used Bump in its own phone payment app (last month it removed Bump when it launched a new payment system, PayPal Here; it suggested the removal was temporary). Another firm, Venmo, offers phone-to-phone "contact" payments, offering a app that allows users to link the phone to their credit card or bank account. Among banks, ING Direct (ING) offers a similar app that's powered by Bump's technology.

But this flavor of mobile payments hasn't taken off in a big way industry-wide, and is usually included as part of a larger menu of mobile payments options.

"Unless you have your sights set on a much broader strategy, it's a somewhat limited use case," Carrington says.

Among competitors, an Intuit spokesperson says Intuit (INTU) does not offer a similar technology, while Square said it doesn't offer exactly the same thing as Bump, but has an alternative called Pay with Square.

Pay with Square works by leveraging GPS and Google Maps on iPhone or Android devices to allow consumers to locate participating Square merchants (there are about 40,000 nationwide). By tapping on the merchant's name on the smartphone, users can see information such as hours of operation, menus, and comments. Users can also pick favorite merchants, and make payments verbally at the point of sale at those merchant, without using a wallet or phone. The app uses geofencing (a location based technology that's sometimes used to track missing children or pets by notifying parents via text alert that the child or pet has left a pre-determined zone) through Apple's iOS5 operating system to connect the users with favorite merchants in their area — users register at the merchants and can make payments via a verbal identifier.