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April 24 (Bloomberg) - David Marcus, president of EBay Inc.'s PayPal unit, talks about mobile payment security and the prospects for virtual currency bitcoin. He speaks with Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)

The market for tools that help consumers buy goods using mobile phones is getting crowded, inundating small businesses, putting off venture capitalists and making it hard for many payment startups to make a buck.

Just ask Kristy Fassio, owner of a Fit4Mom exercise franchise near Seattle. She’s getting bombarded with pitches from mobile and web-payment companies pledging to provide low-cost, easy ways for her to accept payments for the mom-focused workout classes she teaches. Some don’t even charge fees.

“Generally they are like, ‘We can beat any price you are paying, ’” Fassio said. “They try to sell me on zero percent, but then they don’t make any money.”

Not making money - while fine for merchants - is rampant in a mobile-payments market that Crone Consulting LLC estimates has more than 100 competitors. Companies like Front Desk Inc., which Fassio uses, and Flint Mobile Inc. are going head-to-head with EBay Inc.’s (EBAY) PayPal and Square Inc. as well as traditional card-terminal providers, such as First Data Corp.

They’re all vying for a piece of a market projected to reach 5.4 billion in global transaction value this year, up 44 percent from 2012, according to researcher Gartner Inc. That includes money transfers, bill payments and merchandise purchases.

Photographer: Michael Nagle/Bloomberg

PayPal Inc. digital wallet payment options on a screen at the company's shopping showroom in New York, in this Nov. 1, 2011 file photo.

PayPal Inc. digital wallet payment options on a screen at the company's shopping...

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Open Photographer: Michael Nagle/Bloomberg

Seth Priebatsch is chief executive officer of SCVNGR Inc., maker of the LevelUp mobile-payment application. Even he says he’s in a “commodity business.”

VCs Bail

Cut-throat competition isn’t the only challenge posed by the mobile-payment boom. The newcomers are not all effectively screening their business customers, raising the risk of mounting losses, said Richard Crone of Crone Consulting, a specialist in mobile payments. Some are experiencing default rates two to three times the industry average of less than 1 percent for in-store purchases, he said.