Mobile apps replace cash on campus

LOS ANGELES — Dillon Siler rarely walks around with cash in his pocket. He doesn't reach for a credit or debit card to pay his bills either.

The Loyola Marymount University student prefers to pay via smartphone apps — everything from checks at restaurants, the monthly rent or just splitting the bill with buddies at bars.

"It's changed the way that we go out," he says. "Even interacting with friends. It just makes life a lot easier."

The notion of "mobile payments" — leaving your wallet at home and using your phone to pay for everything — hasn't taken off as fast as analysts thought it would.

But here at LMU and many other campuses, students reach for the app Venmo, which links bank accounts and allows for easy payment among friends. It's not the only app targeting mobile payments. Google, most major banks, Square Register, Clinkle and PayPal — which owns Venmo and has several mobile options — are heavily investing in paying via the smartphone. None has yet to break out in a big way, but companies are hopeful one will click, says James Wester, an analyst with researcher IDC.

"Mobile payments has been the next big thing for the last few rounds of the next big thing," he adds.

Still, IDC projects mobile payments will hit $1 billion by 2017. And researcher Gartner says mobile payments generated $235 million in transactions in 2013.

Take a stroll on a college campus and you could get a glimpse into a future where wallets have disappeared, cash is so 20th century, and most transactions, if not all, operate through apps.

Just like Facebook and Snapchat, which began their lives on campuses, when these folks graduate they'll clearly be bringing their habits with them into the real world.

Paying via Venmo is "really convenient between me and my roommates, because nobody really carries cash around that much anymore," says LMU student Daralyn Kee Chong.

Sign up for the Venmo app (available for Apple and Android platforms), pair your bank or debit card, and payments are fee-free — similar to how such transactions work with apps from banks like Wells Fargo, Chase and Bank of America. Venmo charges 3% processing fee when used with a credit card, similar to services like PayPal or Square.

Unlike the bank apps, Venmo plays up the "social" aspect of campus life. It posts payment updates for friends to see within the app. For instance, payments of split lunches, car payments and bar hops are clearly visible in the social field.

Venmo launched in 2012, and was snapped up by mobile payments giant Braintree in August 2013. Braintree itself is part of eBay's PayPal, where it processes mobile payments for apps like Uber, AirBnb and Hotel Tonight.

While Venmo declined to reveal usage numbers, it reported sales of $314 million for the first quarter of 2014, which is up 62% over the previous quarter.

Wester says $300+ million is a "drop in the bucket" of the overall payments world, which operates in "billions and trillions" but a positive baby step in the right direction. "It will be five to seven years before mobile payments are mainstream," he adds.

Starbucks is the most prominent example of mobile payments working, says Wester. Folks download the app, pair it with their credit card, and beam their phone into a card reader device when it's time to pay for lattes. Starbucks says some 14% of its retail transactions occur via the app.

Burger King and Wendy's recently expanded into mobile payments, and McDonald's is testing the concept at 1,000 stores.

It's not that hard to whip out a credit or debit card to pay bills, but the smartphone seems safer to consumers at restaurants — where servers don't run off with your credit card when it's time to pay. And merchants get consumer contacts to market to.

The taxi alternative service Uber is also beloved on campus. Users download the app, pair it with a credit card, and then don't have to reach for cash or a credit card to pay. "It's so convenient," says LMU student Sarah "Bear" Sievers.

But not all students are sold. Kevin Halladay-Glynn tried Venmo but didn't like the social aspect. It's not that he prefers paying cash ("No one on campus uses cash anymore," he says), he just doesn't want his transactions so public. He does pay bills via his credit union app.

And student Allie Gallo has $60 in her pocket all the time, bucking the trend by preferring cash.

"It's easier for me to keep track of how much I have," she says. "If I'm using apps all the time, I think I would spend a lot more because you're not seeing what you actually have."

Readers: Do you use mobile apps to pay your bills? Let's chat about it on Twitter, where I'm @Jefferson Graham.