Mobile Payments: Paydiant Gets $7.6 Million; Square Drops Its Fees

It’s still very early days for mobile payments, but with operators, handset makers and Google (NSDQ: GOOG) jumping on the NFC bandwagon, the larger field is getting crowded with speculators looking to strike gold, in particular by pinning hopes (and investment) on to entrepreneurs with strong track records. Yesterday, Paydiant, a mobile payments company still in stealth mode, picked up $7.6 million in funding; and Square, Jack Dorsey’s payment venture, dropped its transaction fees in a bid to ramp up user numbers.

Just one small question first: Given that Apple (NSDQ: AAPL) has now imposed a new set of rules for in-app payments, it is still unclear how this will affect the roadmap for products like Paydiant and Square. Like so many other startups in this space, these companies are all about the iPhone for their earliest iterations.

Paydiant is picking up its a Series A round led by North Bridge Venture Partners and General Catalyst Partners. The company says that the investment will be used towards product development, sales and marketing.

And what is that product? Not entirely clear yet, except for a few clues you get from the company’s homepage. It looks like it will involve the ability to make payments for services via a Paydiant app with the touch of a button. It looks like it will integrate with a user’s bank account (with a screen on the homepage showing ATM machines — money transfers and bill payments, perhaps?).

Paydiant will push selected offers to users as well (hinting that it might use APIs from companies like Groupon, or develop another offer competitor itself). Paydiant says it will launch later this year.

The company has been started by Chris Gardner, Kevin Laracey and Joe Paratore, who are described in the <a href="release” title=”release”>release as “three proven entrepreneurs in the e-billing, payments and mobile space.”

They have also all worked together before online billing and payments company edocs, which was acquired by Siebel Systems (now part of Oracle); and Gardner and Paratore went on to work together at SMS mobile payments provider m-Qube (which then got acquired by Verisign).

Jim Moran, General Partner at North Bridge and John Simon, Managing Director at General Catalyst have also now joined Paydiant’s Board of Directors.

Square, meanwhile, is also looking to grow the number of people using its phone-based credit card transaction system by getting more competitive on its charges.

The startup, founded by Twitter co-founder Jack Dorsey, has now dropped its transaction fees so that merchants or anyone else taking card payments for services has to only pay a 2.75 percent fee for the transaction; previously those users would have had to pay a 15-cent fee on top of that. If users enter a card number manually (that is, not using Square’s own scanning dongle) then the commission is up to 3.5 percent, and they will still need to pay the additional 15 cents per transaction.

The move is designed to compete directly with other payments providers like Verifone and Intuit, which still charge per-transaction fees for similar services.

Square is significantly further along in its business than Paydiant. The company, which raised a $27.5 million round just in January (funny: the funding has the same numbers as Square’s commission) is expected to process $40 million of transactions in 2011, according to TechCrunch.

And in the landgrab for smaller merchants, it’s currently signing up 100,000 of them per month, compared to 30,000-50,000 last autumn.