The 2012 holiday shopping period is shaping up to be the biggest one yet for mobile, which is playing a key role in how consumers shop and make purchases, including using their phones to pay for in-store purchases. Mobile payments are also being embraced by retailers, who are looking for ways to enhance the customer experience and show that they are on top of the latest trends.

“Adoption of mobile payments, both on the consumer and merchant side, has been growing at a solid clip, but it needs to grow a lot- like, a lot more- before mobile payments hits the mainstream,” said Seth Priebatsch, founder of LevelUp, Boston. “The good news is it’s totally doable.

“The bad news is, it’s not all that easy,” he said. “Mobile payments replaces cash and credit cards, both of which are completely acceptable ways to pay.

“LevelUp- and everyone else in the space- has to prove that what we’re offering is not only at least as good, but also much better- both for merchants and consumers. We’ve done this by making our app as universal as possible, enabling merchants to create direct-to-consumer incentives for people who pay with LevelUp, and removing interchange fees (credit card swipe fees) for merchants.”

No interchange fee
There are a growing number of options when it comes to mobile payments, including Google Wallet, Isis Wallet, PayPal and others.

One of things that sets apart LevelUp from the competition is that it has eliminated the interchange fee, which is what retailers typically pay each time a credit card transaction is processed.

Instead, the company makes money on running loyalty programs for retailers.

LevelUp also recently introduced new point-of-sale hardware enabling users to pay via NFC as well as QR codes.

To use the free LevelUp app, consumers link a debit or credit card to the app, which generates a unique 2D bar code that can be scanned at the point-of-sale. The charge appears on the user’s credit or debit card account and users instantly receive an email receipt for each transaction.

The app is available for iPhone and Android phones.

Streamlining payments
LevelUp is also gaining traction with restaurants, retail stores and other merchants who are increasingly adopting mobile payments as a way to enhance the customer experience. Currently, users can pay for their purchases using a smartphone at more than 3,000 restaurants and shops.

This summer, burger chain Larkburger began accepting mobile payments via the LevelUp app at all seven of its locations in Colorado.

More recently, LevelUp teamed up with the KFC Yum! Center in Louisville, KY, enabling attendees of sports games and concerts at the venue to pay for food and merchandise via their mobile phones.

For restaurants, LevelUp can streamline the payment process so customers can relax and enjoy their meal.

“Right now, there are many big and small players in the space,” Mr. Priebatsch said. “By the end of 2013, we think the herd will have thinned quite a lot.

“We expect a bunch of the bigger players to realize they need to start providing more value and become more ubiquitous in order to stay the race, he said. “Like, for example, Google Wallet will probably start offering QR Codes as a payment mechanism and/or just buy Discover Card and go into the plastic business to get mainstream access.

“NFC, for all its greatness as a technology, was the wrong choice for Google Wallet to use exclusively. And for the smaller players, we expect many of them to either fold or get acquired, because their products just aren’t providing enough of a benefit to merchants or consumers.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York