Wednesday, April 6, 2011

Will your phone become your wallet?

Starbucks recently announced that 3 million customers have used their mobile payment system. While this system just allows you to add cash to gift cards it serves as another indication of continued interest in using your phone as an e-wallet.

I know there are a lot of technologies out there that we talk about that never even happen but expecting phones to serve as credit cards will likely be here sooner than you think. As a matter of fact Samsung’s Nexus S already has the technologies built in.

And there have been heavy rumors that Apple and Windows phones will soon become equipped with the technology. And RIM (Blackberry) has already confirmed future models will be on board as well. While this will take a while for mass adoption of handsets, the process and consumer understanding of the system could catch on fast as they will see others using it in checkouts - allowing for a “visual get it factor”.

The technology behind it.

The technology, known as NFC or Near Field Communication, is already popular in areas of Europe and Japan. It has gained major traction and interest in the US with carriers, handset manufacturers and credit card companies. The topic has been especially topical in the tech media over the last few weeks.

How the technology works.

Basically new handsets will have chips built in to their phone. There will also be a reader at the register. With a wave of your phone you can simply pay wirelessly upon checkout.

How it gets complicated.

T-Mobile, Verizon and AT&T are members of Isis, a joint venture working on their own NFC technologies. Recent news has them launching in “early to mid 2012” starting with Salt Lake City as the pilot.

Apple, PayPal and AmEx have reportedly already been working on mobile payments in their own separate fashions. Google is also partnering with Citibank and MasterCard on their own NFC technologies. (Google is really serious about the technology and recently became a principal member in the NFC Forum.) And notably Sprint has been working on the tech since 2007 and hopes to be first to the market with word of potentially executing a zero transaction fee for retailers (while others will likely use a low retailer fee). The problem with all these separate ventures? In an easy to understand language -- Whoa, that’s a lot of different companies creating 20 different kinds of the same thing. And for an average consumer, this could get real confusing, real fast. If each handset required separate apps and installs per payment method as opposed to a universal system, users may be not only confused but frustrated and annoyed. This could lead to one big idea fail and make using a plastic card, that has worked just fine for decades, seem simple all over again. Sprint claims a more open business model and if first out of the gate could move others in the direction of playing nice.

For now I’m going to hold on to my Nintendo controller wallet and watch how things play out.

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